UNDERWRITING AGREEMENT between KIPS BAY MEDICAL, INC. and RODMAN & RENSHAW, LLC as Representative
Exhibit 1.1
between
and
XXXXXX & XXXXXXX, LLC
as Representative
___________ __, 20__
Xxxxxx & Xxxxxxx, LLC
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned, Kips Bay Medical, Inc., a company formed under the laws of Delaware (the
“Company”), hereby confirms its agreement with Xxxxxx & Xxxxxxx, LLC (hereinafter referred to as
“you” (including its correlatives) or the “Representative”) and with the other underwriters named
on Schedule 1 hereto for which the Representative is acting as representative (the Representative
and such other underwriters being collectively called the “Underwriters” or, individually, an
“Underwriter”) as follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1. Nature and Purchase of Firm Securities.
(i) On the basis of the representations and warranties herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to issue and sell, severally and
not jointly, to the several Underwriters, an aggregate of _____________ shares of common stock
(“Firm Shares”), par value $0.01 per share (the “Shares”).
(ii) The Underwriters, severally and not jointly, agree to purchase from the Company
the number of Firm Shares set forth opposite their respective names on Schedule 1 attached hereto
and made a part hereof at a purchase price (net of discounts and commissions) of [___] per Share
(93% of the per Share offering price). The Firm Shares are to be offered initially to the public
(the “Offering”) at the offering price set forth on the cover page of the Prospectus (as defined in
Section 2.1.1 hereof).
1.1.2. Shares Payment and Delivery.
(i) Delivery and payment for the Firm Shares shall be made at 10:00 a.m., Eastern
time, on the third (3rd) Business Day following the effective date (the “Effective
Date”) of the Registration Statement (as defined in Section 2.1.2 below) (or the fourth
(4th) Business Day following the Effective Date, if the Registration Statement is
declared effective after 4:30 p.m.) or at such earlier time as shall be agreed upon by the
Representative and the Company at the offices of Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, counsel to
the Underwriters (“Xxxxxx Xxxxx”), or at such other place (or remotely by facsimile or other
electronic transmission) as shall be agreed upon by the Representative and the Company. The hour
and date of delivery and payment for the Firm Shares is called the “Closing Date.”
(ii) Payment for the Firm Shares shall be made on the Closing Date by wire transfer
in Federal (same day) funds, payable to the order of the Company upon delivery of the
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certificates (in form and substance satisfactory to the Underwriters) representing the Firm
Shares (or through the facilities of the Depository Trust Company (“DTC”)) for the account of the
Underwriters. The Firm Shares shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two (2) full Business Days
prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares
except upon tender of payment by the Representative for all the Firm Shares. The term “Business
Day” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking
institutions are authorized or obligated by law to close in New York City.
1.2 Over-allotment Option.
1.2.1. Option Shares. For the purposes of covering any over-allotments in
connection with the distribution and sale of the Firm Shares, the Underwriters are hereby granted,
an option to purchase up to [_______] Shares representing fifteen (15%) percent of the Firm Shares
sold in the offering from the Company (the “Over-allotment Option”). Such additional [
] Shares, the net proceeds of which will be deposited with the Company’s account, are
hereinafter referred to as “Option Shares.” The purchase price to be paid for the Option Shares
will be the same price per Option Share as the price per Firm Shares set forth in Section 1.1.1
hereof. The Firm Shares and the Option Shares are hereinafter referred to collectively as the
“Public Securities.”
1.2.2. Exercise of Option. The Over-allotment Option granted pursuant to
Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part
(from time to time) of the Option Shares within 45 days after the Effective Date. The Underwriters
will not be under any obligation to purchase any Option Shares prior to the exercise of the
Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of
oral notice to the Company from the Representative, which must be confirmed in writing by overnight
mail or facsimile or other electronic transmission setting forth the number of Option Shares to be
purchased and the date and time for delivery of and payment for the Option Shares (the “Option
Closing Date”), which will not be later than five (5) full Business Days after the date of the
notice or such other time as shall be agreed upon by the Company and the Representative, at the
offices of Xxxxxx Xxxxx or at such other place (including remotely by facsimile or other electronic
transmission) as shall be agreed upon by the Company and the Representative. If such delivery and
payment for the Option Shares does not occur on the Closing Date, the Option Closing Date will be
as set forth in the notice. Upon exercise of the Over-allotment Option, the Company will become
obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein,
the Underwriters will become obligated to purchase, the number of Option Shares specified in such
notice.
1.2.3. Payment and Delivery. Payment for the Option Shares will be made on
the Option Closing Date by wire transfer in Federal (same day) funds as follows: $[ ] per
Option Share, 93% of the per Option Share offering price, payable to the order of the Company upon
delivery to you of certificates (in form and substance satisfactory to the Underwriters)
representing the Option Shares (or through the facilities of DTC) for the account of the
Underwriters. The Option Shares shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two (2) full Business Days
prior to the Option Closing Date. The Company shall not be obligated to sell or deliver the Option
Shares except upon tender of payment by the Representative for applicable Option Shares.
1.3 Representative’s Option.
1.3.1. Purchase Option. The Company hereby agrees to issue and sell to the
Representative (and/or its designees) on the Closing Date an option (“Representative’s Option”) for
the purchase of an aggregate of [________] Shares equal to 5% of the Firm Shares (excluding the
Over-
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Allotment Option) for an aggregate purchase price of $[__________]. The Representative’s
Option Agreement in the form attached hereto as Exhibit A shall be exercisable, in whole or in
part, commencing on a date which is one year from the Applicable Time and expiring on the five-year
anniversary of the Applicable Time at an initial exercise price per Share of $[__________], which
is equal to 125% of the initial public offering price of the Firm Shares. The Representative’s
Option agreement and the Shares issuable upon exercise thereof are sometimes hereinafter referred
to collectively as the “Representative’s Securities,” and together with the Public Securities, the
“Securities.” The Representative understands and agrees that there are significant restrictions
pursuant to FINRA Rule 5110 against transferring the Representative’s Option Agreement and the
underlying Shares during the first year after the Effective Date and by its acceptance thereof
shall agree that it will not, sell, transfer, assign, pledge or hypothecate the Representative’s
Option Agreement, or any portion thereof, or be the subject of any hedging, short sale, derivative,
put or call transaction that would result in the effective economic disposition of such securities
for a period of one year following the Effective Date to anyone other than (i) an Underwriter or a
selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the
Representative or of any such Underwriter or selected dealer; and only if any such transferee
agrees to the foregoing lock-up restrictions.
1.3.2. Delivery. Delivery for the Representative’s Option Agreement shall be
made on the Closing Date and shall be issued in the name or names and in such authorized
denominations as the Representative may request.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriters as of the Applicable Time (as defined below), as of the Closing Date
and as of the Option Closing Date, if any, as follows:
2.1 Filing of Registration Statement.
2.1.1. Pursuant to the Act. The Company has filed with the Securities and
Exchange Commission (the “Commission”) a registration statement and an amendment or amendments
thereto, on Form S-1 (File No. 333-165940), including any related prospectus or prospectuses, for
the registration of the Public Securities under the Securities Act of 1933, as amended (the “Act”),
which registration statement and amendment or amendments have been prepared by the Company in all
material respects in conformity with the requirements of the Act and the rules and regulations of
the Commission under the Act (the “Regulations”). Except as the context may otherwise require, such
registration statement on file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein and all information deemed to be a part
thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Regulations), is
referred to herein as the “Registration Statement.” The final prospectus in the form first
furnished to the Underwriters for use in the Offering, is hereinafter called the “Prospectus.” The
Registration Statement has been declared effective by the Commission on the date hereof.
“Applicable Time” means [___ am/pm on _________________, 20__], on the Effective Date or such other
time as agreed to by the Company and the Representative.
2.1.2. Pursuant to the Exchange Act. The Company has filed with the
Commission a Form 8-A (File Number 000-___) providing for the registration under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), of the Firm Shares, and the Option Shares.
The registration of the Firm Shares and the Option Shares under the Exchange Act has been declared
effective by the Commission on the date hereof.
2.1.3. Registration under the Exchange Act and Stock Exchange Listing. The
Shares are registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) and are listed on the NASDAQ Global Market (“NASDAQ”), and the Company has
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taken no action designed to, or likely to have the effect of, terminating the registration of
the Shares under the Exchange Act or delisting the common stock from NASDAQ, nor has the Company
received any notification that the Commission or NASDAQ is contemplating terminating such
registration or listing except as described in the Registration Statement and Prospectus.
2.2 No Stop Orders, etc. Neither the Commission nor, to the Company’s
knowledge, any state regulatory authority has issued any order preventing or suspending the use of
the Prospectus or the Registration Statement or has instituted or, to the Company’s knowledge,
threatened to institute any proceedings with respect to such an order.
2.3 Disclosures in Registration Statement.
2.3.1. 10b-5 Representation. At the respective times the Registration
Statement, the Prospectus and any post-effective amendments thereto become effective (and at the
Closing Date and the Option Closing Date, if any):
(i) The Registration Statement, the Prospectus and any post-effective amendments
thereto did and will contain all material statements that are required to be stated therein in
accordance with the Act and the Regulations, and will in all material respects conform to the
requirements of the Act and the Regulations;
(ii) Neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, on such dates, do or will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading. The
representation and warranty made in this Section 2.3.1(ii) does not apply to statements made or
statements omitted in reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriters by the Representative expressly for use in the
Registration Statement or Prospectus or any amendment thereof or supplement thereto. The parties
acknowledge and agree that such information provided by or on behalf of any Underwriter consists
solely of the following disclosures contained in the “Underwriting” section of the Prospectus: the
tables reflecting (i) the number of shares allocated to each underwriter and (ii) the per share and
total underwriting discounts and commissions to be paid to the underwriters, the paragraphs under
the heading “Stabilization” and under the heading “Foreign Regulatory Restrictions on Purchase of
the Common Stock,” (the “Underwriters’ Information”).
2.3.2. Disclosure of Agreements. The agreements and documents described in
the Prospectus and the Registration Statement conform to the descriptions thereof contained therein
and there are no agreements or other documents required by the Act and the Regulations to be
described in the Prospectus, the Registration Statement or to be filed with the Commission as
exhibits to the Registration Statement, that have not been so described or filed. Each agreement or
other instrument (however characterized or described) to which the Company is a party or by which
it is or may be bound or affected and (i) that is referred to in the Prospectus, or (ii) is
material to the Company’s business, has been duly authorized and validly executed by the Company,
is in full force and effect in all material respects and is enforceable against the Company and, to
the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (z) that the remedy of
specific performance and injunctive and other forms of equitable relief may be subject to the
equitable defenses and to the discretion of the court before which any proceeding therefore may be
brought. None of such agreements or instruments has been assigned by the Company, and neither the
Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the
Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or
both,
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would constitute a default thereunder. To the Company’s knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in a violation of any
existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or
court, domestic or foreign, having jurisdiction over the Company or any of its assets or
businesses, including, without limitation, those relating to environmental laws and regulations
that would reasonably be expected to have a material adverse change in the condition, financial or
otherwise, or business prospects of the Company (a “Material Adverse Change”).
2.3.3. Prior Securities Transactions. No securities of the Company have
been sold by the Company or by or on behalf of, or for the benefit of, any person or persons
controlling, controlled by, or under common control with the Company, except as disclosed in the
Registration Statement and the Prospectus.
2.3.4. Regulations. The disclosures in the Registration Statement
concerning the effects of Federal, State, local and all foreign regulation (other than the
disclosure in the Underwriting section under the heading “Foreign Regulatory Restrictions on
Purchase of the Common Stock”) on this Offering and the Company’s business as currently
contemplated are correct in all material respects.
2.4 Changes After Dates in Registration Statement.
2.4.1. No Material Adverse Change. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as otherwise
specifically stated therein: (i) there has been no material adverse change in the condition,
financial or otherwise, or business prospects of the Company (a “Material Adverse Change”); (ii)
there have been no material transactions entered into by the Company, other than as contemplated
pursuant to this Agreement; and (iii) no officer or director of the Company has resigned from any
position with the Company.
2.4.2. Recent Securities Transactions, etc. Subsequent to the respective
dates as of which information is given in the Registration Statement and the Prospectus, and except
as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement and
the Prospectus, the Company has not: (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made
any other distribution on or in respect to its capital stock.
2.5 Disclosures in Commission Filings. Xxxxx Xxxxx 00, 0000, (x) xxxx of
the Company’s filings with the Commission contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading; and (ii) the Company has made all filings
with the Commission required under the Exchange Act.
2.6 Independent Accountants. To the knowledge of the Company, Ernst & Young
LLP, whose report is filed with the Commission as part of the Registration Statement, are
independent registered public accountants as required by the Act and the Regulations. Ernst & Young
LLP has not, during the periods covered by the financial statements included in the Prospectus,
provided to the Company any non-audit services, as such term is used in Section 10A(g) of the
Exchange Act.
2.7 Financial Statements, etc. The financial statements, including the
notes thereto and supporting schedules included in the Registration Statement and Prospectus fairly
present the financial position and the results of operations of the Company at the dates and for
the periods to which they apply; and such financial statements have been prepared in conformity
with generally accepted accounting principles (“GAAP”), consistently applied throughout the periods
involved (provided that unaudited interim financial statements are subject to year end audit
adjustments that are not expected to be material
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in the aggregate and do not contain all footnotes required by GAAP); and the supporting
schedules included in the Registration Statement present fairly the information required to be
stated therein. The Registration Statement discloses all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other relationships of the
Company with unconsolidated entities or other persons that may have a material current or future
effect on the Company’s financial condition, changes in financial condition, results of operations,
liquidity, capital expenditures, capital resources, or significant components of revenues or
expenses. Except as disclosed in or as contemplated by the Registration Statement and the
Prospectus, (a) the Company has not incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions other than in the ordinary course of
business, (b) the Company has not declared or paid any dividends or made any distribution of any
kind with respect to its capital stock, (c) there has not been any change in the capital stock of
the Company or any of its Subsidiaries or any grants under any stock compensation plan and (d)
there has not been any material adverse change in the Company’s long-term or short-term debt.
2.8 Authorized Capital; Options, etc. The Company had, at the date or dates
indicated in the Prospectus, the duly authorized, issued and outstanding capitalization as set
forth in the Registration Statement and the Prospectus. Based on the assumptions stated in the
Registration Statement and the Prospectus, the Company will have on the Closing Date the adjusted
stock capitalization set forth therein. Except as set forth in, or contemplated by, the
Registration Statement and the Prospectus, on the Effective Date and on the Closing Date, there
will be no options, warrants, or other rights to purchase or otherwise acquire any authorized, but
unissued Shares of the Company or any security convertible into Shares of the Company, or any
contracts or commitments to issue or sell Shares or any such options, warrants, rights or
convertible securities.
2.9 Valid Issuance of Securities, etc.
2.9.1. Outstanding Securities. All issued and outstanding securities of the
Company issued prior to the transactions contemplated by this Agreement have been duly authorized
and validly issued and are fully paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by the Company. The
authorized Shares conform in all material respects to all statements relating thereto contained in
the Registration Statement and the Prospectus. The offers and sales of the outstanding Shares were
at all relevant times either registered under the Act and the applicable state securities or Blue
Sky laws or, based in part on the representations and warranties of the purchasers of such Shares,
exempt from such registration requirements.
2.9.2. Securities Sold Pursuant to this Agreement. The Public Securities
and Representative’s Securities have been duly authorized for issuance and sale and, when issued
and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not
and will not be subject to personal liability by reason of being such holders; the Public
Securities and Representative’s Securities are not and will not be subject to the preemptive rights
of any holders of any security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance and sale of the
Securities has been duly and validly taken. The Public Securities and Representative’s Securities
conform in all material respects to all statements with respect thereto contained in the
Registration Statement. When paid for and issued in accordance with the Representative’s Option
Agreement, the underlying Shares will be validly issued, fully paid and non-assessable; the holders
thereof are not and will not be subject to personal liability by reason of being such holders; the
underlying Shares are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company; and all corporate
action required to be taken for the authorization, issuance and sale of the Representative’s Option
Agreement has been duly and validly taken.
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2.10 Registration Rights of Third Parties. Except as set forth in the
Registration Statement and the Prospectus, no holders of any securities of the Company or any
rights exercisable for or convertible or exchangeable into securities of the Company have the right
to require the Company to register any such securities of the Company under the Act or to include
any such securities in a registration statement to be filed by the Company.
2.11 Validity and Binding Effect of Agreements. This Agreement and the
Representative’s Option Agreement have been duly and validly authorized by the Company, and, when
executed and delivered, will constitute, the valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms, except: (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors’ rights generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws; and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be subject to the
equitable defenses and to the discretion of the court before which any proceeding therefore may be
brought.
2.12 No Conflicts, etc. The execution, delivery, and performance by the
Company of this Agreement, the Representative’s Option Agreement and all ancillary documents, the
consummation by the Company of the transactions herein and therein contemplated and the compliance
by the Company with the terms hereof and thereof do not and will not, with or without the giving of
notice or the lapse of time or both: (i) result in any violation of the provisions of the
Certificate of Incorporation (as the same may be amended form time to time, the “Certificate of
Incorporation”); (ii) result in a material breach of, or conflict with any of the terms and
provisions of, or constitute a material default under, or result in the creation, modification,
termination or imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to the terms of any agreement or instrument to which the Company is a party; or
(iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of
its properties or business constituted as of the date hereof, except, with respect to the preceding
clauses (ii) and (iii), for any breach, conflict, default, lien, charge, encumbrance, consent or
violation as would not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Change.
2.13 No Defaults; Violations. No material default exists in the due
performance and observance of any term, covenant or condition of any material license, contract,
indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material agreement or
instrument to which the Company is a party or by which the Company may be bound or to which any of
the properties or assets of the Company is subject, except for such defaults that would not,
individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.
The Company is not in violation of any term or provision of its Certificate of Incorporation, or in
violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree
of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or businesses.
2.14 Corporate Power; Licenses; Consents.
2.14.1. Conduct of Business. Except as described in the Registration
Statement and the Prospectus, the Company has all requisite corporate power and authority, and has
all necessary authorizations, approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies that it needs as of the date hereof to conduct its
business purpose as described in the Prospectus.
2.14.2. Transactions Contemplated Herein. The Company has all corporate
power and authority to enter into this Agreement and to carry out the provisions and conditions
hereof, and all
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consents, authorizations, approvals and orders required in connection therewith have been
obtained. No consent, authorization or order of, and no filing with, any court, government agency
or other body is required for the valid issuance, sale and delivery of the Securities and the
consummation of the transactions and agreements contemplated by this Agreement and the
Representative’s Option Agreement and as contemplated by the Prospectus, except with respect to
applicable federal and state securities laws and the rules and regulations of the Financial
Industry Regulatory Authority, Inc. (“FINRA”).
2.15 D&O Questionnaires. To the Company’s knowledge, all information
contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors
and officers immediately prior to the Offering (the “Insiders”) as well as in the Lock-Up Agreement
provided to the Underwriters is true and correct in all respects and the Company has not become
aware of any information which would cause the information disclosed in the questionnaires
completed by each Insider to become inaccurate and incorrect.
2.16 Litigation; Governmental Proceedings. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or,
to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s
knowledge, any executive officer or director which has not been disclosed in the Registration
Statement and the Prospectus or in connection with the Company’s listing application for the
listing of the Shares on the NASDAQ.
2.17 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the State of Delaware as of the
date hereof, and is duly qualified to do business and is in good standing in each jurisdiction in
which its ownership or lease of property or the conduct of business requires such qualification,
except where the failure to qualify would not reasonably be expected to result in a Material
Adverse Change on the assets, business or operations of the Company.
2.18 Stop Orders. The Commission has not issued any order preventing or
suspending the use of any preliminary Prospectus or Prospectus or any part thereof.
2.19 Transactions Affecting Disclosure to FINRA.
2.19.1. Finder’s Fees. Except as described in the Registration Statement
and the Prospectus, there are no claims, payments, arrangements, agreements or understandings
relating to the payment of a finder’s, consulting or origination fee by the Company or any Insider
with respect to the sale of the Securities hereunder or any other arrangements, agreements or
understandings of the Company or, to the Company’s knowledge, any of its shareholders that may
affect the Underwriters’ compensation, as determined by FINRA.
2.19.2. Payments Within Twelve Months. Except as described in the
Registration Statement and the Prospectus, the Company has not made any direct or indirect payments
(in cash, securities or otherwise) to: (i) any person, as a finder’s fee, consulting fee or
otherwise, in consideration of such person raising capital for the Company or introducing to the
Company persons who raised or provided capital to the Company; (ii) to any FINRA member; or (iii)
to any person or entity that has any direct or indirect affiliation or association with any FINRA
member, within the twelve months prior to the Effective Date, other than (i) the prior payment of
$15,000 to Xxxxxx & Xxxxxxx LLC, the Representative, and payment to the Underwriters as provided
hereunder in connection with the Offering and (ii) private placement agency commissions of $43,407
paid to Xxxxxxx XxXxxxxx.
2.19.3. Use of Proceeds. None of the net proceeds of the Offering will be
paid by the Company to any participating FINRA member or its affiliates, except as specifically
authorized herein.
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2.19.4. FINRA Affiliation. No officer, director or any beneficial owner of
at least 5% of the Company’s unregistered securities has any direct or indirect affiliation or
association with any FINRA member (as determined in accordance with the rules and regulations of
FINRA). The Company will advise the Representative and Xxxxxx Xxxxx if it learns that any officer,
director or owner of at least 5% of the Company’s outstanding Shares (or securities convertible
into Shares) is or becomes an affiliate or associated person of a FINRA member participating in the
Offering.
| 2.20 | Foreign Corrupt Practices Act. Neither the Company nor any of the directors , employees or officers of the Company or any other person acting on behalf of the Company has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a material adverse effect on the assets, business or operations of the Company as reflected in any of the financial statements contained in the Prospectus or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended. | ||
| 2.21 | Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to you or to Xxxxxx Xxxxx shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby. | ||
| 2.22 | Lock-Up Period. |
2.22.1. Each of the Company’s officers and directors holding Shares (or securities
convertible into Shares) and each owner of at least 10% of the Company outstanding Shares (or
securities convertible into Shares) (together with the Company’s officers and directors the
“Lock-Up Parties”) have agreed pursuant to executed Lock-Up Agreements in the form attached hereto
as Exhibit B-1, that for a period of 180 days from the effective date of the Prospectus (the
“Lock-Up Period”), such persons and their affiliated parties shall not offer, pledge, sell,
contract to sell, grant, lend or otherwise transfer or dispose of, directly or indirectly, any
Shares, or any securities convertible into or exercisable or exchangeable for Shares, without the
consent of the Underwriter. The Underwriter may consent to an early release from the applicable
Lock-Up Period if, in its opinion, the market for the Shares would not be adversely impacted by
sales and in cases of financial emergency of an officer, director or other stockholder. The Company
has caused each of the Lock-Up Parties to deliver to the Underwriter the agreements of each of the
Lock-Up Parties to the foregoing effect prior to the date that the Company requests that the
Commission declare the Registration Statement effective under the Act.
2.22.2. The Company, on behalf of itself and any successor entity, has agreed that,
without the prior written consent of the Underwriter, it will not, for a period of 180 days from
the effective date of the Registration Statement, (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly,
any shares of capital stock of the Company or any securities convertible into or exercisable or
exchangeable for shares of capital stock of the Company (other than the issuance of options to
purchase Shares, or issuance of Shares upon exercise of options, pursuant to any stock option,
stock bonus or other stock plan or arrangement described in the Prospectus); (ii) file or caused to
be filed any registration statement with the Commission relating to the offering of any shares of
capital stock of the Company or any securities convertible into or exercisable or
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exchangeable for shares of capital stock of the Company (other than on Form S-8 relating to
the Company’s stock option, stock bonus or other stock plans or arrangements in effect on the date
of this Agreement and as disclosed in the Prospectus) or (iii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic consequences of
ownership of capital stock of the Company, whether any such transaction described in clause (i),
(ii) or (iii) above is to be settled by delivery of shares of capital stock of the Company or such
other securities, in cash or otherwise.
The restrictions contained in this paragraph 2.22.2 shall not apply to (i) the Shares to be
sold hereunder, (ii) the issuance by the Company of shares of common stock upon the exercise of an
option or warrant or the conversion of a security outstanding on the date hereof of which the
Representative has been advised in writing or (iii) the issuance by the Company of option or shares
of capital stock of the Company under any stock compensation plan of the Company.
2.22.3. Notwithstanding the foregoing, if (i) the Company issues an earnings release
or material news, or a material event relating to the Company occurs, during the last 17 days of
the Lock-Up Period, or (ii) prior to the expiration of the Lock-Up Period, the Company announces
that it will release earnings results during the 16-day period beginning on the last day of the
Lock-Up Period, the restrictions imposed by paragraph 2.22 shall continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence
of the material news or material event, unless the Representative waives such extension.
2.23 Subsidiaries. The Company does not own or control, directly or
indirectly, any corporation, association or other entity and the Company has no subsidiaries.
2.24 Related Party Transactions. Except as disclosed in the Registration
Statement and the Prospectus, there are no business relationships or related party transactions
involving the Company or any other person required to be described in the Prospectus that have not
been described as required.
2.25 Board of Directors. Upon the closing of the Offering, the Board of
Directors of the Company will be comprised of the persons set forth under the heading of the
Prospectus captioned “Management.” The qualifications of the persons who will serve as board
members and the overall composition of the board will comply with the Xxxxxxxx-Xxxxx Act of 2002
and the rules promulgated thereunder applicable to the Company and the rules of NASDAQ. The Board
of Directors will include at least one member of the Board of Directors of the Company who
qualifies as a “financial expert” as such term is defined under the Xxxxxxxx-Xxxxx Act of 2002 and
the rules promulgated thereunder and the rules of NASDAQ. In addition, at least a majority of the
persons who will serve on the Board of Directors qualify as “independent” as defined under the
rules of NASDAQ.
2.26 Xxxxxxxx-Xxxxx Compliance.
2.26.1. Disclosure Controls. The Company has developed and currently
maintains disclosure controls and procedures that will comply with Rule 13a-15 or 15d-15 of the
Exchange Act, and such controls and procedures are effective to ensure that all material
information concerning the Company will be made known on a timely basis to the individuals
responsible for the preparation of the Company’s Exchange Act filings and other public disclosure
documents.
2.26.2. Compliance. The Company is, or on the Effective Date will be, in
material compliance with the provisions of the Xxxxxxxx-Xxxxx Act of 2002 applicable to it, and has
implemented or will implement such programs and taken reasonable steps to ensure the Company’s
future compliance (not later than the relevant statutory and regulatory deadlines therefor) with
all the material provisions of the Xxxxxxxx-Xxxxx Act of 2002. The Company is not aware of (i) any
significant deficiencies or material weaknesses in the design or operation of internal control over
financial reporting which are reasonably
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likely to adversely affect the Company’s ability to record, process, summarize and report
financial information or (ii) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal control over financial reporting.
The Company is not aware of any change in its internal control over financial reporting that has
occurred during its most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.
2.27 No Investment Company Status. The Company is not and, after giving
effect to the Offering and sale of the Firm Shares and the application of the proceeds thereof as
described in the Registration Statement and the Prospectus, will not be, an “investment company” as
defined in the Investment Company Act of 1940, as amended.
2.28 No Labor Disputes. No labor dispute with the employees of the Company
or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent.
2.29 Intellectual Property Rights. The Company owns or possesses or has
valid right to use all patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service xxxx registrations, copyrights, licenses, inventions, trade
secrets and similar rights (“Intellectual Property Rights”) necessary for the conduct of its
business as currently carried on and as described in the Registration Statement and the Prospectus.
To the knowledge of the Company, no action or use by the Company necessary for the conduct of its
business as currently carried on and as described in the Registration Statement and the Prospectus
will involve or give rise to any infringement of, or license or similar fees for, any Intellectual
Property Rights of others. The Company has not received any notice alleging any such infringement,
fee or conflict with asserted Intellectual Property Rights of others. Except as would not
reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change
(A) to the knowledge of the Company, there is no infringement, misappropriation or violation by
third parties of any of the Intellectual Property Rights owned by the Company; (B) there is no
pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others
challenging the rights of the Company in or to any such Intellectual Property Rights, and the
Company is unaware of any facts which would form a reasonable basis for any such claim, that would,
individually or in the aggregate, together with any other claims in this section (p), reasonably be
expected to result in a Material Adverse Change; (C) the Intellectual Property Rights owned by the
Company and, to the knowledge of the Company, the Intellectual Property Rights licensed to the
Company have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in
whole or in part, and there is no pending or, to the Company’s knowledge, threatened action, suit,
proceeding or claim by others challenging the validity or scope of any such Intellectual Property
Rights, and the Company is unaware of any facts which would form a reasonable basis for any such
claim that would, individually or in the aggregate, together with any other claims in this section
2.29, reasonably be expected to result in a Material Adverse Change; (D) there is no pending or, to
the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company
infringes, misappropriates or otherwise violates any Intellectual Property Rights or other
proprietary rights of others, the Company has not received any written notice of such claim and the
Company is unaware of any other facts which would form a reasonable basis for any such claim that
would, individually or in the aggregate, together with any other claims in this section (p),
reasonably be expected to result in a Material Adverse Change; and (E) to the Company’s knowledge,
no employee of the Company is in or has ever been in violation in any material respect of any term
of any employment contract, patent disclosure agreement, invention assignment agreement,
non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive
covenant to or with a former employer where the basis of such violation relates to such employee’s
employment with the Company, or actions undertaken by the employee while employed with the Company
and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse
Change. To the Company’s knowledge, all material technical information developed by and belonging
to the Company which has not been patented has been kept confidential. The Company is not a
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party to or bound by any options, licenses or agreements with respect to the Intellectual
Property Rights of any other person or entity that are required to be set forth in the Prospectus
and are not described therein. The Prospectus contains in all material respects the same
description of the matters set forth in the preceding sentence. None of the technology employed by
the Company has been obtained or is being used by the Company in violation of any contractual
obligation binding on the Company or, to the Company’s knowledge, any of its officers, directors or
employees, or otherwise in violation of the rights of any persons.
2.30 Taxes. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has duly obtained
extensions of time for the filing thereof. The Company has paid all taxes (as hereinafter defined)
shown as due on such returns that were filed and has paid all taxes imposed on or assessed against
the Company. The provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes,
whether or not disputed, and for all periods to and including the dates of such consolidated
financial statements. Except as disclosed in writing to the Underwriters, (i) no issues have been
raised (and are currently pending) by any taxing authority in connection with any of the returns or
taxes asserted as due from the Company, and (ii) no waivers of statutes of limitation with respect
to the returns or collection of taxes have been given by or requested from the Company. The term
“taxes” mean all federal, state, local, foreign, and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees, assessments, or charges of any kind
whatever, together with any interest and any penalties, additions to tax, or additional amounts
with respect thereto. The term “returns” means all returns, declarations, reports,
statements, and other documents required to be filed in respect to taxes.
2.31 Compliance with Environmental Laws. Except as described in each
Prospectus and except as would not, singly or in the aggregate, reasonably be expected to result in
a Material Adverse Change, (i) the Company is not in violation of any material federal, state,
local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or
any judicial or administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to
the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively, “Hazardous Materials”) or to
the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials (collectively, “Environmental Laws”), (ii) the Company has all material
permits, authorizations and approvals required under any applicable Environmental Laws and is in
compliance with their requirements, (iii) there are no pending or, to the Company’s knowledge,
threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company and (iv) to the Company’s knowledge, there are no events or
circumstances that might reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or governmental body or agency,
against or affecting the Company relating to Hazardous Materials or any Environmental Laws.
2.32 ERISA Compliance. The Company and any “employee benefit plan” (as
defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations
and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the
Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects
with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of
organizations described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations thereunder (the “Code”) of which the
Company is a member. No “reportable
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event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect
to any “employee benefit plan” established or maintained by the Company or any of its ERISA
Affiliates. No “employee benefit plan” established or maintained by the Company or any of its
ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of
unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA
Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii)
Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or
maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has
occurred, whether by action or failure to act, which would cause the loss of such qualification.
2.33 Compliance with Laws. The Company: (A) is and at all times has been in
compliance with all statutes, rules, or regulations applicable to the ownership, testing,
development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion,
sale, offer for sale, storage, import, export or disposal of any product manufactured or
distributed by the Company (“Applicable Laws”), except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Change; (B) has not received any FDA
Form 483, notice of adverse finding, warning letter, untitled letter or other correspondence or
notice from the U.S. Food and Drug Administration or any other governmental authority alleging or
asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals,
clearances, authorizations, permits and supplements or amendments thereto required by any such
Applicable Laws (“Authorizations”); (C) possesses all material Authorizations and such
Authorizations are valid and in full force and effect and are not in material violation of any term
of any such Authorizations; (D) has not received notice of any claim, action, suit, proceeding,
hearing, enforcement, investigation, arbitration or other action from any governmental authority or
third party alleging that any product operation or activity is in violation of any Applicable Laws
or Authorizations and has no knowledge that any such governmental authority or third party is
considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (E)
has not received notice that any governmental authority has taken, is taking or intends to take
action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such
governmental authority is considering such action; (F) has filed, obtained, maintained or submitted
all material reports, documents, forms, notices, applications, records, claims, submissions and
supplements or amendments as required by any Applicable Laws or Authorizations and that all such
reports, documents, forms, notices, applications, records, claims, submissions and supplements or
amendments were complete and correct on the date filed (or were corrected or supplemented by a
subsequent submission); and (G) has not, either voluntarily or involuntarily, initiated, conducted,
or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or
replacement, safety alert, post sale warning, “dear doctor” letter, or other notice or action
relating to the alleged lack of safety or efficacy of any product or any alleged product defect or
violation and, to the Company’s knowledge, no third party has initiated, conducted or intends to
initiate any such notice or action.
2.34 Clinical Trials. The studies, tests and preclinical and clinical
trials conducted by or on behalf of the Company were and, if still pending, are being conducted in
all material respects in accordance with experimental protocols, procedures and controls pursuant
to accepted professional scientific standards and all Applicable Laws and Authorizations,
including, without limitation, the Federal Food, Drug and Cosmetic Act and the rules and
regulations promulgated thereunder (collectively, “FFDCA”); the descriptions of the results of such
studies, tests and trials contained in the Preliminary Prospectus are accurate and complete in all
material respects and fairly present the data derived from such studies, tests and trials; except
to the extent disclosed in the preliminary prospectus, the Company is not aware of any studies,
tests or trials, the results of which the Company believes reasonably call into question the study,
test, or trial results described or referred to in the preliminary prospectus when viewed in the
context in which such results are described and the clinical state of development; and the Company
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has not received any notices or correspondence from any Governmental Authority requiring the
termination, suspension or material modification of any studies, tests or preclinical or clinical
trials conducted by or on behalf of the Company.
2.35 Money Laundering Laws. The operations of the Company are, and have
been conducted at all times, in compliance with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any
related or similar applicable rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or
proceeding by or before any court or governmental agency, authority or body or any arbitrator
involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of
the Company, threatened.
2.36 OFAC. Neither the Company nor, to the knowledge of the Company, any
director, officer, agent, employee, affiliate or person acting on behalf of the Company is
currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the
U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds
of this offering, or lend, contribute or otherwise make available such proceeds to any subsidiary,
joint venture partner or other person or entity, for the purpose of financing the activities of any
person currently subject to any U.S. sanctions administered by OFAC.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver to the
Representative, prior to filing, any amendment or supplement to the Registration Statement or
Prospectus proposed to be filed after the Effective Date and not file any such amendment or
supplement to which the Representative shall reasonably object in writing.
3.2 Federal Securities Laws.
3.2.1. Compliance. During the time when a Prospectus is required to be
delivered under the Act, the Company will use its best efforts to comply with all requirements
imposed upon it by the Act, the Regulations and the Exchange Act and by the regulations under the
Exchange Act, as from time to time in force, so far as necessary to permit the continuance of sales
of or dealings in the Public Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a Prospectus relating to the Public Securities is required to be
delivered under the Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or counsel for the Underwriters, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Company will notify the Representative promptly
and prepare and file with the Commission, subject to Section 3.1 hereof, an appropriate amendment
or supplement in accordance with Section 10 of the Act.
3.2.2. Filing of Final Prospectus. The Company will file the Prospectus (in
form and substance satisfactory to the Representative) with the Commission pursuant to the
requirements of Rule 424 of the Regulations.
3.2.3. Exchange Act Registration. For a period of three years from the
Effective Date, the Company will use its commercially reasonable efforts to maintain the
registration of the Shares. The Company will not deregister the Shares under the Exchange Act
without the prior written consent of the Representative, which consent will not be unreasonably
withheld.
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3.2.4. Free Writing Prospectuses. The Company represents and agrees that it
has not made and will not make any offer relating to the Public Securities that would constitute an
issuer free writing prospectus, as defined in Rule 433 of the 1933 Act, without the prior consent
of the Representative. Any such free writing prospectus consented to by the Representative is
hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company represents that its
will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus” as defined
in Rule 433, and has complied and will comply with the applicable requirements of Rule 433 of the
1933 Act, including timely Commission filing where required, legending and record keeping.
3.3 Delivery to the Underwriters of Prospectuses. The Company will deliver
to each of the Underwriters, without charge, from time to time during the period when the
Prospectus is required to be delivered under the Act or the Exchange Act such number of copies of
each Prospectus as such Underwriters may reasonably request and, as soon as the Registration
Statement or any amendment or supplement thereto becomes effective, deliver to you two original
executed Registration Statements, including exhibits, and all post-effective amendments thereto and
copies of all exhibits filed therewith or incorporated therein by reference and all original
executed consents of certified experts.
3.4 Effectiveness and Events Requiring Notice to the Representative. The
Company will use its best efforts to cause the Registration Statement to remain effective with a
current prospectus for at least nine (9) months from the Applicable Time. and will notify the
Representative immediately and confirm the notice in writing: (i) of the effectiveness of the
Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any
stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of
the issuance by any state securities commission of any proceedings for the suspension of the
qualification of the Securities for offering or sale in any jurisdiction or of the initiation, or
the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the
Commission for filing of any amendment or supplement to the Registration Statement or Prospectus;
(v) of the receipt of any comments or request for any additional information from the Commission;
and (vi) of the happening of any event during the period described in this Section 3.4 hereof that,
in the judgment of the Company, makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or that requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. If the Commission or any state securities commission
shall enter a stop order or suspend such qualification at any time, the Company will make every
reasonable effort to obtain promptly the lifting of such order.
3.5 Intentionally Omitted.
3.6 Intentionally Omitted.
3.7 Intentionally Omitted.
3.8 Reports to the Representative.
3.8.1 Periodic Reports, etc. For a period of three years from the Effective Date, the
Company will furnish to the Representative copies of such financial statements and other periodic
and special reports as the Company from time to time furnishes generally to holders of any class of
its securities and also promptly furnish to the Representative: (i) a copy of each periodic report
the Company shall be required to file with the Commission; (ii) a copy of each Form 8-K prepared
and filed by the Company; and (iii) five copies of each registration statement filed by the Company
under the Act. Documents filed with the Commission pursuant to its XXXXX system shall be deemed to
have been delivered to the Representative pursuant to this Section.
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3.8.2. Intentionally Omitted.
3.8.3. Intentionally Omitted.
3.9 Payment of Expenses.
3.9.1. General Expenses Related to the Offering. The Company hereby agrees
to pay on each of the Closing Date and the Option Closing Date, if any, to the extent not paid at
the Closing Date, all expenses incident to the performance of the obligations of the Company under
this Agreement, including, but not limited to: (a) all filing fees and communication expenses
relating to the registration of the Shares to be sold in the Offering (including the Over-allotment
Shares) with the Commission; (b) all COBRADesk filing fees associated with the review of the
Offering by FINRA; all fees and expenses relating to the listing of such Shares on the NASDAQ and
such other stock exchanges as the Company and the Representative together determine; (c) all fees,
expenses and disbursements relating to background checks of the Company’s officers and directors
in an amount not to exceed $5,000 per individual; (d) all fees, expenses and disbursements relating
to the registration or qualification of such Shares under the “blue sky” securities laws of such
states and other jurisdictions as the Company and the Representative shall together designate
(including, without limitation, all filing and registration fees, and the reasonable fees and
disbursements of the “blue sky” counsel, it being agreed that (i) if the Offering is commenced on
the Nasdaq Global Market or the NYSE Amex, the Company will make a payment of $5,000 to such
counsel on the Closing Date, or (ii) if the Offering is commenced on the Nasdaq Capital Market or
on the Over the Counter Bulletin Board, the Company will make a payment of $10,000 to such counsel
upon the commencement of “blue sky” work by such counsel and an additional $5,000 at Closing); (e)
all fees, expenses and disbursements relating to the registration, qualification or exemption of
such Shares under the securities laws of such foreign jurisdictions as the Representative and the
Company shall together designate; (f) the costs of all mailing and printing of the underwriting
documents (including, without limitation, the Underwriting Agreement, any Blue Sky Surveys and, if
appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’
Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments,
supplements and exhibits thereto and as many preliminary and final Prospectuses as the
Representative may reasonably deem necessary, (g) the costs of preparing, printing and delivering
certificates representing the Shares; (h) fees and expenses of the transfer agent for the Shares;
(i) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the
Company to the Underwriters; (j) the fees and expenses of the Company’s accountants; (k) the fees
and expenses of the Company’s legal counsel and other agents and representatives; (l) the $16,000
cost associated with the Underwriters’ use of i-Deal’s book-building, prospectus tracking and
compliance software for the Offering; and (m) the Underwriter’s actual “road show” expenses for the
Offering up to but no more than $10,000, the remaining balance will be borne by the Underwriter.
The Underwriter may also deduct from the net proceeds of the Offering payable to the Company on the
Closing Date, or the Option Closing Date, if any, the expenses set forth herein to be paid by the
Company to the Underwriter.
3.9.2. Non-accountable Expenses. The Company further agrees that, in
addition to the expenses payable pursuant to Section 3.9.1, on the Closing Date it will pay to the
Representative a non-accountable expense allowance equal to one percent (1.0%) of the gross
proceeds received by the Company from the sale of the Firm Shares by deduction from the proceeds of
the Offering contemplated herein.
3.10 Application of Net Proceeds. The Company will apply the net proceeds
from the Offering received by it in a manner consistent with the application described under the
caption “Use Of Proceeds” in the Prospectus.
3.11 Delivery of Earnings Statements to Security Holders. The Company will
make generally available to its security holders as soon as practicable, but not later than the
first day of the fifteenth full
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calendar month following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants unless required by the
Act or the Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a)
of the Act) covering a period of at least twelve consecutive months beginning after the Effective
Date.
3.12 Stabilization. Neither the Company, nor, to its knowledge, any of its
employees, directors or shareholders (without the consent of the Representative) has taken or will
take, directly or indirectly, any action designed to or that has constituted or that might
reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization
or manipulation of the price of any security of the Company to facilitate the sale or resale of the
Shares.
3.13 Internal Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed
in accordance with management’s general or specific authorization; (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in accordance with GAAP and to
maintain accountability for assets; (iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is taken with respect
to any differences.
3.14 Accountants. As of the Effective Date, the Company shall retain an
independent public accountants reasonably acceptable to the Representative. The Representative
acknowledges that Ernst & Young LLP is acceptable to the Representative.
3.15 FINRA. The Company shall advise the Representative (who shall make an
appropriate filing with FINRA) if it is aware at any time prior to the Closing Date and the Option
Closing Date, if any, that any 5% or greater shareholder of the Company becomes an affiliate or
associated person of an FINRA member participating in the distribution of the Company’s Public
Securities.
3.16 No Fiduciary Duties. The Company acknowledges and agrees that the
Underwriters’ responsibility to the Company is solely contractual in nature and that none of the
Underwriters or their affiliates or any Selling Agent shall be deemed to be acting in a fiduciary
capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in
connection with the Offering and the other transactions contemplated by this Agreement.
4. Conditions of Underwriters’ Obligations. The obligations of the Underwriter
to purchase and pay for the Shares, as provided herein, shall be subject to (i) the continuing
accuracy of the representations and warranties of the Company as of the date hereof and as of each
of the Closing Date and the Option Closing Date, if any; (ii) the accuracy of the statements of
officers of the Company made pursuant to the provisions hereof; (iii) the performance by the
Company of its obligations hereunder and (iv) the following conditions:
4.1 Regulatory Matters.
4.1.1. Effectiveness of Registration Statement. The Registration Statement
shall have become effective not later than 5:00 P.M., Eastern time, on the date of this Agreement
or such later date and time as shall be consented to in writing by you, and, at each of the Closing
Date and the Option Closing Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have been instituted or
shall be pending or contemplated by the Commission and any request on the part of the Commission
for additional information shall have been complied with to the reasonable satisfaction of Xxxxxx
Xxxxx.
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4.1.2. FINRA Clearance. By the Effective Date, the Representative shall
have received clearance from FINRA as to the amount of compensation allowable or payable to the
Underwriters as described in the Registration Statement.
4.1.3. NASDAQ Stock Market Clearance. On the Closing Date, the
Company’s Shares, including the Firm Shares shall have been approved for listing on NASDAQ.
4.1.4. Free Writing Prospectuses. The Representative covenants with the
Company that the Underwriters will not use, authorize the use of, refer to, or participate in the
planning for the use of a “free writing prospectus” as defined in Rule 405 under the 1933 Act,
which term includes use of any written information furnished by the Commission to the Company and
not incorporated by reference into the Registration Statement, without the prior written consent of
the Company. Any such free writing prospectus consented to by the Company is hereinafter referred
to as an “Underwriter Free Writing Prospectus.”
4.2 Company Counsel Matters.
4.2.1. Closing Date Opinion of Counsel. On the Closing Date, the
Representative shall have received the opinion of Xxxxxxxxxx & Xxxxx, P.A. (“Xxxxxxxxxx”), counsel
to the Company, dated the Closing Date, addressed to the Representative substantially in the form
of Exhibit __ attached hereto.
4.2.2. Opinion of Special Intellectual Property Counsel for the Company. On
the Closing Date, the Representative shall have received the opinion of Xxxxxx Law Firm, PLLP
(“Xxxxxx”), special intellectual property counsel for the Company, dated the Closing Date,
addressed to the Representative substantially in the form of Exhibit __ attached hereto.
4.2.3. Intentionally Omitted.
4.2.4. Intentionally Omitted.
4.2.5. Option Closing Date Opinions of Counsel. On the Option Closing Date,
if any, the Representative shall have received the favorable opinions of each counsel listed in
Sections 4.2.1 through 4.2.3, dated the Option Closing Date, addressed to the Representative and in
form and substance reasonably satisfactory to the Representative, confirming as of the Option
Closing Date, the statements made by such counsels in their respective opinions delivered on the
Closing Date.
4.2.6. Reliance. In rendering such opinions, such counsel may rely: (i) as
to matters involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably
satisfactory to the Representative) of other counsel reasonably acceptable to the Representative,
familiar with the applicable laws; and (ii) as to matters of fact, to the extent they deem proper,
on certificates or other written statements of officers of the Company and officers of departments
of various jurisdiction having custody of documents respecting the corporate existence or good
standing of the Company, provided that copies of any such statements or certificates shall be
delivered to Xxxxxx Xxxxx if requested. The opinions of Xxxxxxxxxx and any opinion relied upon by
Xxxxxx Xxxxx shall include a statement to the effect that it may be relied upon by counsel for the
Underwriters in its opinion delivered to the Underwriters.
4.3 Cold Comfort Letter. At the time this Agreement is executed, and at
each of the Closing Date and the Option Closing Date, if any, you shall have received a cold
comfort letter, addressed to the Representative and in form and substance satisfactory in all
respects to you and to Xxxxxx Xxxxx from
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Ernst & Young LLP dated, respectively, as of the date of this Agreement and as of the Closing
Date and the Option Closing Date, if any.
4.4 Officers’ Certificates.
4.4.1. Officers’ Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received a certificate of the Company signed by
the Chairman of the Board and Chief Executive Officer of the Company, dated the Closing Date or the
Option Closing Date, as the case may be, respectively, to the effect that the Company has performed
all covenants and complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to and as of the Closing Date, or the Option Closing Date, as
the case may be, and that the conditions set forth in Section 4.5 hereof have been satisfied as of
such date and that, as of the Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2 hereof are true and correct.
In addition, the Representative will have received such other and further certificates of officers
of the Company as the Representative may reasonably request.
4.4.2. Secretary’s Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received a certificate of the Company signed by
the Secretary or Assistant Secretary of the Company, dated the Closing Date or the Option Date, as
the case may be, respectively, certifying: (i) that the Certificate of Incorporation is true and
complete, has not been modified and is in full force and effect; (ii) that the resolutions of the
Company’s Board of Directors relating to the public offering contemplated by this Agreement are in
full force and effect and have not been modified; (iii) as to the accuracy and completeness of all
correspondence between the Company or its counsel and the Commission that has been delivered to the
Representative or its counsel; and (iv) as to the incumbency of the officers of the Company. The
documents referred to in such certificate shall be attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date and the
Option Closing Date, if any: (i) there shall have been no material adverse change or development
involving a prospective material adverse change in the condition or prospects or the business
activities, financial or otherwise, of the Company from the latest dates as of which such condition
is set forth in the Registration Statement and Prospectus; (ii) no action suit or proceeding, at
law or in equity, shall have been pending or threatened against the Company or any Insider before
or by any court or federal or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect the business, operations,
prospects or financial condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; (iii) no stop order shall have been issued under the Act and no
proceedings therefore shall have been initiated or threatened by the Commission; and (iv) the
Registration Statement and the Prospectus and any amendments or supplements thereto shall contain
all material statements which are required to be stated therein in accordance with the Act and the
Regulations and shall conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto shall contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
4.6 Delivery of Agreements.
4.6.1. Effective Date Deliveries. On the Effective Date, the Company shall
have delivered to the Representative executed copies of this Agreement and the Lock-Up Agreements.
4.6.2. Closing Date Deliveries. On the Closing Date, the Company shall have
delivered to the Representative executed copies of the Representative’s Option Agreement.
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5. Indemnification.
5.1 Indemnification of the Underwriters.
5.1.1. General. Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless each of the Underwriters, and each dealer selected by the
Representative that participates in the offer and sale of the Securities (each a “Selected Dealer”)
and each of their respective directors, officers and employees and each person, if any, who
controls any such Underwriter (“Controlling Person”) within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or threatened, or any claim
whatsoever, whether arising out of any action between any of the Underwriters and the Company or
between any of the Underwriters and any third party or otherwise) to which they or any of them may
become subject under the Act, the Exchange Act or any other statute or at common law or otherwise
or under the laws of foreign countries, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in (i) any preliminary prospectus, the
Registration Statement or the Prospectus (as from time to time each may be amended and
supplemented); (ii) any materials or information provided to investors by, or with the approval of,
the Company in connection with the marketing of the offering of the Securities, including any “road
show” or investor presentations made to investors by the Company (whether in person or
electronically); or (iii) any application or other document or written communication (in this
Section 5, collectively called “application”) executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the Public Securities
and Representative’s Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, NASDAQ or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company with respect to an Underwriter by or on behalf of such
Underwriter expressly for use in any preliminary prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in any application, as the case may be..
With respect to any untrue statement or omission or alleged untrue statement or omission made in
the preliminary prospectus, the indemnity agreement contained in this Section 5.1.1 shall not inure
to the benefit of any Underwriter to the extent that any loss, liability, claim, damage or expense
of such Underwriter results from the fact that a copy of the Prospectus was not given or sent to
the person asserting any such loss, liability, claim or damage at or prior to the written
confirmation of sale of the Securities to such person as required by the Act and the Regulations,
and if the untrue statement or omission has been corrected in the Prospectus, unless such failure
to deliver the Prospectus was a result of non-compliance by the Company with its obligations under
Section 3.3 hereof. The Company agrees promptly to notify the Representative of the commencement of
any litigation or proceedings against the Company or any of its officers, directors or Controlling
Persons in connection with the issue and sale of the Public Securities or in connection with the
Registration Statement or Prospectus.
5.1.2. Procedure. If any action is brought against an Underwriter, a
Selected Dealer or a Controlling Person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, such Underwriter, such Selected Dealer or Controlling Person, as
the case may be, shall promptly notify the Company in writing of the institution of such action and
the Company shall assume the defense of such action, including the employment and fees of counsel
(subject to the reasonable approval of such Underwriter or such Selected Dealer, as the case may
be) and payment of actual expenses. Such Underwriter, such Selected Dealer or Controlling Person
shall have the right to employ its or their own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such Underwriter, such Selected Dealer or Controlling
Person unless (i) the employment of such counsel at the expense of the Company shall have been
authorized in writing by the Company in connection with
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the defense of such action, or (ii) the Company shall not have employed counsel to have charge
of the defense of such action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different from or additional
to those available to the Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of which events the
reasonable fees and expenses of not more than one additional firm of attorneys selected by the
Underwriter (in addition to local counsel), Selected Dealer and/or Controlling Person shall be
borne by the Company. Notwithstanding anything to the contrary contained herein, if any
Underwriter, Selected Dealer or Controlling Person shall assume the defense of such action as
provided above, the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
5.2 Indemnification of the Company. Each Underwriter, severally and not
jointly, agrees to indemnify and hold harmless the Company, its directors, officers and employees
and agents who control the Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any and all loss, liability, claim, damage and expense described in the
foregoing indemnity from the Company to the several Underwriters, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements or omissions made in any
preliminary prospectus, the Registration Statement or Prospectus or any amendment or supplement
thereto or in any application, in reliance upon, and in strict conformity with, written information
furnished to the Company by or on behalf of the Underwriter expressly for use in such preliminary
prospectus, the Registration Statement or Prospectus or any amendment or supplement thereto or in
any such application. In case any action shall be brought against the Company or any other person
so indemnified based on any preliminary prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which indemnity may be sought
against any Underwriter, such Underwriter shall have the rights and duties given to the Company,
and the Company and each other person so indemnified shall have the rights and duties given to the
several Underwriters by the provisions of Section 5.1.2.
5.3 Contribution.
5.3.1. Contribution Rights. In order to provide for just and equitable
contribution under the Act in any case in which (i) any person entitled to indemnification under
this Section 5 makes claim for indemnification pursuant hereto but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for indemnification in
such case, or (ii) contribution under the Act, the Exchange Act or otherwise may be required on the
part of any such person in circumstances for which indemnification is provided under this Section
5, then, and in each such case, the Company and the Underwriters shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity
agreement incurred by the Company and the Underwriters, as incurred, in such proportions that the
Underwriters are responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial offering price
appearing thereon and the Company is responsible for the balance; provided, that, no person guilty
of a fraudulent misrepresentation (within the meaning of Section 11 (f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
Notwithstanding the provisions of this Section 5.3.1, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriter has otherwise been required to pay in respect of such losses,
liabilities, claims, damages and expenses. For purposes of this Section, each director, officer and
employee of an Underwriter or the Company, as applicable, and each person, if any, who controls an
Underwriter or the Company, as applicable, within the meaning of Section 15 of the Act shall have
the same rights to contribution as such Underwriter or the Company, as applicable.
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5.3.2. Contribution Procedure. Within fifteen days after receipt by any
party to this Agreement (or its representative) of notice of the commencement of any action, suit
or proceeding, such party will, if a claim for contribution in respect thereof is to be made
against another party (“contributing party”), notify the contributing party of the commencement
thereof, but the failure to so notify the contributing party will not relieve it from any liability
which it may have to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies a contributing
party or its representative of the commencement thereof within the aforesaid fifteen days, the
contributing party will be entitled to participate therein with the notifying party and any other
contributing party similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or proceeding affected by
such party seeking contribution on account of any settlement of any claim, action or proceeding
affected by such party seeking contribution without the written consent of such contributing party.
The contribution provisions contained in this Section 5.3.2 are intended to supersede, to the
extent permitted by law, any right to contribution under the Act, the Exchange Act or otherwise
available. Each Underwriter’s obligations to contribute pursuant to this Section 5.3 are several
and not joint.
6. Default by an Underwriter.
6.1 Default Not Exceeding 10% of Firm Shares or Option Shares. If any
Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Shares
or the Option Shares, if the Over-allotment Option is exercised, hereunder, and if the number of
the Firm Shares or Option Shares with respect to which such default relates does not exceed in the
aggregate 10% of the number of Firm Shares or Option Shares that all Underwriters have agreed to
purchase hereunder, then such Firm Shares or Option Shares to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to their respective commitments
hereunder.
6.2 Default Exceeding 10% of Firm Shares or Option Shares. In the event that
the default addressed in Section 6.1 relates to more than 10% of the Firm Shares or Option Shares,
you may in your discretion arrange for yourself or for another party or parties to purchase such
Firm Shares or Option Shares to which such default relates on the terms contained herein. If,
within one (1) Business Day after such default relating to more than 10% of the Firm Shares or
Option Shares, you do not arrange for the purchase of such Firm Shares or Option Shares, then the
Company shall be entitled to a further period of one (1) Business Day within which to procure
another party or parties satisfactory to you to purchase said Firm Shares or Option Shares on such
terms. In the event that neither you nor the Company arrange for the purchase of the Firm Shares or
Option Shares to which a default relates as provided in this Section 6, this Agreement will
automatically be terminated by you or the Company without liability on the part of the Company
(except as provided in Sections 3.10 and 5 hereof) or the several Underwriters (except as provided
in Section 5 hereof); provided, however, that if such default occurs with respect to the Option
Shares, this Agreement will not terminate as to the Firm Shares; and provided further that nothing
herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters
and to the Company for damages occasioned by its default hereunder.
6.3 Postponement of Closing Date. In the event that the Firm Shares or
Option Shares to which the default relates are to be purchased by the non-defaulting Underwriters,
or are to be purchased by another party or parties as aforesaid, you or the Company shall have the
right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any
event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment to the Registration Statement
or the Prospectus that in the opinion of counsel for the Underwriter may thereby be made necessary.
The term “Underwriter” as used in this Agreement shall include any party substituted under this
Section 6 with like effect as if it had originally been a party to this Agreement with respect to
such Securities.
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7. Additional Covenants.
7.1 Board Composition and Board Designations. The Company shall ensure that
as of the Closing Date: (i) the qualifications of the persons serving as board members and the
overall composition of the board comply with the Xxxxxxxx-Xxxxx Act of 2002 and the rules
promulgated thereunder and with the listing requirements of, NASDAQ or any other national
securities exchange or national securities association, as the case may be, in the event the
Company seeks to have its Public Securities listed on another exchange or quoted on an automated
quotation system, and (ii) if applicable, at least one member of the board of directors qualifies
as an “audit committee financial expert” as such term is defined under Regulation S-K and the rules
promulgated thereunder.
7.2 Intentionally Omitted.
7.3 Prohibition on Press Releases and Public Announcements. The Company
will not issue press releases or engage in any other publicity, without the Representative’s prior
written consent, which consent will not be unreasonably withheld, for a period ending at 5:00 p.m.
Eastern time on the first business day following the 40th day following the Closing Date, other
than normal and customary releases issued in the ordinary course of the Company’s business or
releases required to be issued by law.
8. Effective Date of this Agreement and Termination Thereof.
8.1 Effective Date. This Agreement shall become effective when both the
Company and the Representative have executed the same and delivered counterparts of such signatures
to the other party.
8.2 Termination. You shall have the right to terminate this Agreement at
any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence
has materially disrupted, or in your opinion will in the immediate future materially disrupt,
general securities markets in the United States; or (ii) if trading on the New York Stock Exchange,
the NASDAQ, the NASDAQ Global Market or the NASDAQ Capital Market shall have been suspended or
materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum
ranges for prices for securities shall have been required by FINRA or by order of the Commission or
any other government authority having jurisdiction, or (iii) if the United States shall have become
involved in a new war or an increase in major hostilities, or (iv) if a banking moratorium has been
declared by a New York State or federal authority, or (v) if a moratorium on foreign exchange
trading has been declared which materially adversely impacts the United States securities markets,
or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss
shall have been insured, will, in your opinion, make it inadvisable to proceed with the delivery of
the Firm Shares or Option Shares, or (vii) if the Company is in material breach of any of its
representations, warranties or covenants hereunder, or (viii) if the Representative shall have
become aware after the date hereof of such a material adverse change in the conditions or prospects
of the Company, or such adverse material change in general market conditions as in the
Representative’s judgment would make it impracticable to proceed with the offering, sale and/or
delivery of the securities or to enforce contracts made by the Underwriters for the sale of the
securities.
8.3 Expenses. Except in the case of a default by the Underwriters, pursuant
to Section 6.2 above, in the event that this Agreement shall not be carried out for any reason
whatsoever, within the time specified herein or any extensions thereof pursuant to the terms
herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out
of pocket expenses related to the transactions contemplated herein then due and payable up to
$25,000 (including the fees and disbursements of Xxxxxx Xxxxx); provided, however, that such
expense cap in no way limits or impairs the indemnification and contribution provisions of this
Agreement).
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8.4 Indemnification. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and whether or not
this Agreement is otherwise carried out, the provisions of Section 5 shall not be in any way
affected by, such election or termination or failure to carry out the terms of this Agreement or
any part hereof.
9. Miscellaneous.
9.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed (registered or certified mail,
return receipt requested), personally delivered or sent by facsimile transmission and confirmed and
shall be deemed given when so delivered or faxed and confirmed or if mailed, two days after such
mailing.
If to the Representative:
Xxxxxx & Xxxxxxx, LLC
0000 Xxxxxx xx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
Fax No.: 000-000-0000
0000 Xxxxxx xx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
Fax No.: 000-000-0000
Copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxxxxxx
Fax No.: 000-000-0000
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxxxxxx
Fax No.: 000-000-0000
If to the Company:
Kips Bay Medical, Inc.
0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
Fax No.:
0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
Fax No.:
Copy to:
Xxxxxxxxxx & Xxxxx, P.A.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxx
Fax No.: 000-000-0000
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxx
Fax No.: 000-000-0000
9.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning or interpretation of
any of the terms or provisions of this Agreement.
9.3 Amendment. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
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9.4 Entire Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement) constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and
supersedes all prior agreements and understandings of the parties, oral and written, with respect
to the subject matter hereof.
9.5 Binding Effect. This Agreement shall inure solely to the benefit of and
shall be binding upon the Representative, the Underwriters, the Company and the Controlling
Persons, directors and officers referred to in Section 5 hereof, and their respective successors,
legal representatives and assigns, and no other person shall have or be construed to have any legal
or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. The term “successors and assigns” shall not include a purchaser, in
its capacity as such, of securities from any of the Underwriters.
9.6 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving effect to conflict of
laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it
arising out of, or relating in any way to this Agreement shall be brought and enforced in the New
York Supreme Court, County of New York, or in the United States District Court for the Southern
District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such
courts represent an inconvenient forum. Any such process or summons to be served upon the Company
may be served by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the Company in any
action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action
shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and
expenses relating to such action or proceeding and/or incurred in connection with the preparation
therefore.
9.7 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts, each of which
shall be deemed to be an original, but all of which taken together shall constitute one and the
same agreement, and shall become effective when one or more counterparts has been signed by each of
the parties hereto and delivered to each of the other parties hereto. Delivery of a signed
counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and
sufficient delivery thereof.
9.8 Waiver, etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of
any such provision, nor to in any way effect the validity of this Agreement or any provision hereof
or the right of any of the parties hereto to thereafter enforce each and every provision of this
Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of
this Agreement shall be effective unless set forth in a written instrument executed by the party or
parties against whom or which enforcement of such waiver is sought; and no waiver of any such
breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other
or subsequent breach, non-compliance or non-fulfillment.
[SIGNATURE PAGE FOLLOWS]
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If the foregoing correctly sets forth the understanding between the Underwriters and the
Company, please so indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between us.
| . Very truly yours, KIPS BAY MEDICAL, INC. |
||||
| By: | ||||
| Name: | Xxxxx Xxxxxxxxx | |||
| Title: | Chairman and Chief Executive Officer | |||
| Accepted on the date first above written. XXXXXX & XXXXXXX, LLC |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
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SCHEDULE I
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[EXHIBIT A
Form of Representative’s Option Agreement]
THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL
NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN PROVIDED AND THE REGISTERED
HOLDER OF THIS PURCHASE OPTION AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR
HYPOTHECATE THIS PURCHASE OPTION FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE EFFECTIVE
DATE OF THE REGISTRATION STATEMENT (DEFINED BELOW) TO ANYONE OTHER THAN (I) XXXXXX & XXXXXXX, LLC
OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER
OR PARTNER OF XXXXXX & XXXXXXX, LLC OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.
THIS PURCHASE OPTION IS NOT EXERCISABLE PRIOR TO ________________ [DATE THAT IS ONE YEAR FROM
THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT]. VOID AFTER 5:00 P.M. EASTERN TIME,
___________________ [DATE THAT IS FIVE YEARS FROM THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
COMMON STOCK PURCHASE OPTION
1. Purchase Option. THIS CERTIFIES THAT, in consideration of funds duly paid by or on
behalf of [ ](“Holder”), as registered owner of this Purchase Option, to Kips Bay Medical, Inc.
(the “Company”), Holder is entitled, at any time or from time to time commencing one year from the
effective date of the registration statement (the “Effective Date”), or ________________ [DATE THAT
IS ONE YEAR FROM THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT] (the “Commencement Date”), and
at or before 5:00 p.m., Eastern Time, ___________________ [DATE THAT IS FIVE YEARS FROM THE
EFFECTIVE DATE OF THE REGISTRATION STATEMENT] (the “Expiration Date”), but not thereafter, to
subscribe for, purchase and receive, in whole or in part, up to [____] shares of common stock of
the Company, par value $[______] per share (the “Shares”) subject to adjustment as provided in
Section 6 hereof. If the Expiration Date is a day on which banking institutions are authorized by
law to close, then this Purchase Option may be exercised on the next succeeding day which is not
such a day in accordance with the terms herein. During the period ending on the Expiration Date,
the Company agrees not to take any action that would terminate the Purchase Option. This Purchase
Option is initially exercisable at $[________] per Share (_____% of the price of the Shares sold in
the Offering); provided, however, that upon the occurrence of any of the events specified in
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Section 6 hereof, the rights granted by this Purchase Option, including the exercise price per
Share and the number of Shares to be received upon such exercise, shall be adjusted as therein
specified. The term “Exercise Price” shall mean the initial exercise price or the adjusted exercise
price, depending on the context.
2. Exercise.
2.1 Exercise Form. In order to exercise this Purchase Option, the exercise form
attached hereto must be duly executed and completed and delivered to the Company, together with
this Purchase Option and payment of the Exercise Price for the Shares being purchased payable in
cash by wire transfer of immediately available funds to an account designated by the Company or by
certified check or official bank check. If the subscription rights represented hereby shall not be
exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Option shall
become and be void without further force or effect, and all rights represented hereby shall cease
and expire.
2.2 Cashless Exercise. In lieu of exercising this Purchase Option by payment of
cash or certified check or official bank check payable to the order of the Company pursuant to
Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of this
Purchase Option (or the portion thereof being exercised), by surrender of this Purchase Option to
the Company, together with the exercise form attached hereto, in which event the issue to
Holder, Shares in accordance with the following formula:
| Y(A-B) | ||||||||||||
X
|
= | A | ||||||||||
| Where, | X | = | The number of Shares to be issued to Holder; | |||||||||
| Y | = | The number of Shares for which the Purchase Option is being exercised; | ||||||||||
| A | = | The fair market value of one Share; and | ||||||||||
| B | = | The Exercise Price. |
For purposes of this Section 2.2, the fair market value of a Share is defined as follows:
(i) if the Company’s common stock is traded on a securities exchange, the value shall be
deemed to be the average of the closing prices on such exchange or market over the thirty (30)
calendar day period ending three (3) days prior to the date of the exercise form being submitted in
connection with the exercise of the Purchase Option; or
(ii) if the Company’s common stock is actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the thirty (30) calendar day period ending
three (3) days prior to the date of the exercise form being submitted in connection with the
exercise of the Purchase Option; if there is no active public market, the value shall be the fair
market value thereof, as determined in good faith by the Company’s Board of Directors.
2.3 Legend. Each certificate for the securities purchased under this Purchase
Option shall bear a legend as follows unless such securities have been registered under the
Securities Act of 1933, as amended (the “Act”):
“The securities represented by this certificate have not been registered under the
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Securities Act of 1933, as amended (the “Act”) or applicable state law. Neither the securities
nor any interest therein may be offered for sale, sold or otherwise transferred except pursuant to
an effective registration statement under the Act, or pursuant to an exemption from registration
under the Act and applicable state law which, in the opinion of counsel to the Company, is
available.”
3. Transfer.
3.1 General Restrictions. The registered Holder of this Purchase Option agrees by his,
her or its acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or
hypothecate this Purchase Option for a period of one hundred eighty (180) days following the
Effective Date to anyone other than: (i) Xxxxxx & Xxxxxxx, LLC (“Xxxxxx & Xxxxxxx”) or an
underwriter or a selected dealer participating in the Offering, or (ii) a bona fide officer or
partner of Xxxxxx & Xxxxxxx or of any such underwriter or selected dealer, in each case in
accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Option or the securities
issuable hereunder to be the subject of any hedging, short sale, derivative, put or call
transaction that would result in the effective economic disposition of this Purchase Option or the
securities hereunder, except as provided for in FINRA Rule 5110(g)(2). On and after 180 days from
the Effective Date, transfers to others may be made subject to compliance with or exemptions from
applicable securities laws. In order to make any permitted assignment, the Holder must deliver to
the Company the assignment form attached hereto duly executed and completed, together with the
Purchase Option and payment of all transfer taxes, if any, payable in connection therewith. The
Company shall within ten (10) business days transfer this Purchase Option on the books of the
Company and shall execute and deliver a new Purchase Option or Purchase Options of like tenor to
the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of
Shares purchasable hereunder or such portion of such number as shall be contemplated by any such
assignment.
3.2 Restrictions Imposed by the Act. The securities evidenced by this Purchase Option
shall not be transferred unless and until: (i) the Company has received the opinion of counsel for
the Holder that the securities may be transferred pursuant to an exemption from registration under
the Act and applicable state securities laws, the availability of which is established to the
reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Xxxxxx
Xxxxx shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a
registration statement or a post-effective amendment to the Registration Statement relating to the
offer and sale of such securities has been filed by the Company and declared effective by the
Securities and Exchange Commission (the “Commission”) and compliance with applicable state
securities law has been established.
4. Registration Rights.
4.1 Demand Registration.
4.1.1 Grant of Right. The Company, upon written demand (a “Demand Notice”) of the
Holder(s) of at least 51% of the Purchase Options and/or the underlying Shares (“Majority
Holders”), agrees to register, on one occasion, all or any portion of the Shares underlying the
Purchase Options (collectively the “Registrable Securities”). On such occasion, the Company will
file a registration statement with the SEC covering the Registrable Securities within sixty (60)
days after receipt of a Demand Notice and use its reasonable best efforts to have the registration
statement declared effective promptly thereafter, subject to compliance with
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review by the SEC; provided, however, that the Company shall not be required to comply with a
Demand Notice if the Company has filed a registration statement with respect to which the Holder is
entitled to piggyback registration rights pursuant to Section 4.2 hereof and such registration
statement relates to an underwritten primary offering of securities of the Company, until the
offering covered by such registration statement has been withdrawn or until thirty (30) days after
such offering is consummated. The demand for registration may be made at any time during a period
of four (4) years beginning one (1) year from the Effective Date. The Company covenants and agrees
to give written notice of its receipt of any Demand Notice by any Holder(s) to all other registered
Holders of the Purchase Options and/or the Registrable Securities within ten (10) days from the
date of the receipt of any such Demand Notice.
4.1.2 Terms. The Company shall bear all fees and expenses attendant to the
registration of the Registrable Securities pursuant to Section 4.1.1, but the Holders shall pay any
and all underwriting commissions and the expenses of any legal counsel selected by the Holders to
represent them in connection with the sale of the Registrable Securities. The Company agrees to use
its reasonable best efforts to cause the filing required herein to become effective promptly and to
qualify or register the Registrable Securities in such States as are reasonably requested by the
Holder(s); provided, however, that in no event shall the Company be required to register the
Registrable Securities in a State in which such registration would cause: (i) the Company to be
obligated to register or license to do business in such State or submit to general service of
process in such State, or (ii) the principal shareholders of the Company to be obligated to escrow
their shares of capital stock of the Company. The Company shall cause any registration statement
filed pursuant to the demand right granted under Section 4.1.1 to remain effective for a period of
at least twelve consecutive months from the date that the Holders of the Registrable Securities
covered by such registration statement are first given the opportunity to sell all of such
securities. The Holders shall only use the prospectuses provided by the Company to sell the shares
covered by such registration statement, and will immediately cease to use any prospectus furnished
by the Company if the Company advises the Holder that such prospectus may no longer be used due to
a material misstatement or omission.
4.2 “Piggy-Back” Registration.
4.2.1 Grant of Right. In addition to the demand right of registration, described in
Section 4.1 hereof the Holder shall have the right, for a period of four (4) years commencing
one(1) year from the Effective Date, to include the Registrable Securities as part of any other
registration of securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145 (a) promulgated under the Act or pursuant to Form S-8 or any equivalent
form); provided, however, that if, solely in connection with any primary underwritten public
offering for the account of the Company, the managing underwriter(s) thereof shall, in its
reasonable discretion, impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or
other factors dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such limited portion of
the Registrable Securities with respect to which the Holder requested inclusion hereunder as the
underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata
among the Holders seeking to include Registrable Securities in proportion to the number of
Registrable Securities sought to be included by such Holders; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such securities in such
Registration Statement
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or are not entitled to pro rata inclusion with the Registrable Securities.
4.2.2 Terms. The Company shall bear all fees and expenses attendant to registering the
Registrable Securities pursuant to Section 4.2.1 hereof, but the Holders shall pay any and all
underwriting commissions and the expenses of any legal counsel selected by the Holders to represent
them in connection with the sale of the Registrable Securities. In the event of such a proposed
registration, the Company shall furnish the then Holders of outstanding Registrable Securities with
not less than thirty (30) days written notice prior to the proposed date of filing of such
registration statement. Such notice to the Holders shall continue to be given for each registration
statement filed by the Company until such time as all of the Registrable Securities have been sold
by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights
provided for herein by giving written. notice, within ten (10) days of the receipt of the Company’s
notice of its intention to file a registration statement.
4.3 General Terms.
4.3.1 Indemnification. The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement hereunder and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section 20 (a) of the
Securities Exchange Act of 1934, as amended (“Exchange Act”), against all loss, claim, damage,
expense or liability (including all reasonable attorneys’ fees and other expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever) to which any of
them may become subject under the Act, the Exchange Act or otherwise, arising from such
registration statement but only to the same extent and with the same effect as the provisions
pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5.1 of
the Underwriting Agreement between the Underwriters and the Company, dated as of
[_________________]. The Holder(s) of the Registrable Securities to be sold pursuant to such
registration statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, against all loss, claim, damage, expense or liability (including all
reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or
their successors or assigns, in writing, for specific inclusion in such registration statement to
the same extent and with the same effect as the provisions contained in Section 5.2 of the
Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.
4.3.2 Exercise of Purchase Options. Nothing contained in this Purchase Option shall be
construed as requiring the Holder(s) to exercise their Purchase Options prior to or after the
initial filing of any registration statement or the effectiveness thereof.
4.3.3 Documents Delivered to Holders. The Company shall furnish to each underwriter of
any of the foregoing offerings, if any, a signed counterpart, addressed to such underwriter, of (i)
an opinion of counsel to the Company, dated the effective date of such registration statement (and,
if such registration includes an underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated
the effective date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the underwriting
agreement) signed by the independent public accountants who have issued a report on the Company’s
financial statements included in such registration statement,
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in each case covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such accountants’ letter, with
respect to events subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in
underwritten public offerings of securities. The Company shall also deliver promptly to the
managing underwriter, if any, copies of all correspondence between the SEC and the Company, its
counsel or auditors and all memoranda relating to discussions with the SEC or its staff with
respect to the registration statement and permit the managing underwriter to do such investigation,
upon reasonable advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with applicable securities laws
or rules of FINRA. Such investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and independent auditors,
all to such reasonable extent and at such reasonable times as the managing underwriter shall
reasonably request.
4.3.4 Underwriting Agreement. If the Company has not selected an underwriter and has
no plans to engage an underwriter in connection with a registration that includes Registrable
Securities pursuant to Section 4, the Company shall enter into an underwriting agreement with the
managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being
registered pursuant to this Section 4, which managing underwriter shall be reasonably satisfactory
to the Company. Such agreement shall be reasonably satisfactory in form and substance to the
Company, each Holder and such managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are customarily contained in
agreements of that type used by the managing underwriter. The Holders shall be parties to any
underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at
their option, require that any or all the representations, warranties and covenants of the Company
to or for the benefit of such underwriters shall also be made to and for the benefit of such
Holders. Such Holders shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters except as they may relate to such Holders, their
Shares and their intended methods of distribution.
4.3.5 Documents to be Delivered by Holder(s). Each of the Holder(s) participating in
any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire
provided by the Company requesting information customarily sought of selling security holders.
4.3.6 Damages. Should the registration or the effectiveness thereof required by
Sections 4.1 and 4.2 hereof be unreasonably delayed by the Company or the Company otherwise fails
to comply with such provisions, the Holder(s) shall, in addition to any other legal or other relief
available to the Holder(s), be entitled to obtain specific performance or other equitable
(including injunctive) relief against the threatened breach of such provisions or the continuation
of any such breach, without the necessity of proving actual damages and without the necessity of
posting bond or other security.
5. New Purchase Options to be Issued.
5.1 Partial Exercise or Transfer. Subject to the restrictions in Section 3 hereof,
this Purchase Option may be exercised or assigned in whole or in part. In the event of the exercise
or assignment hereof in part only, upon surrender of this Purchase Option for cancellation,
together with the duly executed exercise or assignment form and funds sufficient to pay any
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Exercise Price and/or transfer tax if exercised pursuant to Section 2.1 hereto, the Company
shall cause to be delivered to the Holder without charge a new Purchase Option of like tenor to
this Purchase Option in the name of the Holder evidencing the right of the Holder to purchase the
number of Shares purchasable hereunder as to which this Purchase Option has not been exercised or
assigned.
5.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of this Purchase Option and of reasonably satisfactory
indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase
Option of like tenor and date. Any such new Purchase Option executed and delivered as a result of
such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on
the part of the Company.
6. Adjustments.
6.1 Adjustments to Exercise Price and Number of Securities. The Exercise Price and the
number of Shares underlying the Purchase Option shall be subject to adjustment from time to time as
hereinafter set forth:
6.1.1 Share Dividends; Split Ups. If after the date hereof, and subject to the
provisions of Section 6.3 below, the number of outstanding Shares is increased by a stock dividend
payable in Shares or by a split up of Shares or other similar event, then, on the effective day
thereof, the number of Shares purchasable hereunder shall be increased in proportion to such
increase in outstanding shares, and the Exercise Price shall be proportionately decreased.
6.1.2 Aggregation of Shares. If after the date hereof, and subject to the provisions
of Section 6.3, the number of outstanding Shares is decreased by a consolidation, combination or
reclassification of Shares or other similar event, then, on the effective date thereof, the number
of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding
shares, and the Exercise Price shall proportionately increased.
6.1.3 Replacement of Securities upon Reorganization, etc. In case of any
reclassification or reorganization of the outstanding Shares other than a change covered by Section
6.1.1 or 6.1.2 hereof or that solely affects the par value of such Shares, or in the case of any
share reconstruction or amalgamation or consolidation of the Company with or into another
corporation (other than a consolidation or share reconstruction or amalgamation in which the
Company is the continuing corporation and that does not result in any reclassification or
reorganization of the outstanding Shares), or in the case of any sale or conveyance to another
corporation or entity of the property of the Company as an entirety or substantially as an entirety
in connection with which the Company is dissolved, the Holder of this Purchase Option shall have
the right thereafter (until the expiration of the right of exercise of this Purchase Option) to
receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other securities or
property (including cash) receivable upon such reclassification, reorganization, share
reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or
transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this
Purchase Option immediately prior to such event; and if any reclassification also results in a
change in Shares covered by Section 6.1.1 or 6.1.2, then such adjustment shall be made pursuant to
Sections 6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall similarly
apply to successive reclassifications,
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reorganizations, share reconstructions or amalgamations, or consolidations, sales or other
transfers.
6.1.4 Changes in Form of Purchase Option. This form of Purchase Option need not be
changed because of any change pursuant to this Section 6.1, and Purchase Options issued after such
change may state the same Exercise Price and the same number of Shares as are stated in the
Purchase Options initially issued pursuant to this Agreement. The acceptance by any Holder of the
issuance of new Purchase Options reflecting a required or permissive change shall not be deemed to
waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.
6.2 Substitute Purchase Option. In case of any consolidation of the Company with, or
share reconstruction or amalgamation of the Company with or into, another corporation (other than a
consolidation or share reconstruction or amalgamation which does not result in any reclassification
or change of the outstanding Shares), the corporation formed by such consolidation or share
reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase
Option providing that the holder of each Purchase Option then outstanding or to be outstanding
shall have the right thereafter (until the stated expiration of such Purchase Option) to receive,
upon exercise of such Purchase Option, the kind and amount of shares of stock and other securities
and property receivable upon such consolidation or share reconstruction or amalgamation, by a
holder of the number of Shares of the Company for which such Purchase Option might have been
exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or
transfer. Such supplemental Purchase Option shall provide for adjustments which shall be identical
to the adjustments provided for in this Section 6. The above provision of this Section shall
similarly apply to successive consolidations or share reconstructions or amalgamations.
6.3 Elimination of Fractional Interests. The Company shall not be required to issue
certificates representing fractions of Shares upon the exercise of the Purchase Option, nor shall
it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent
of the parties that all fractional interests shall be eliminated by rounding any fraction up or
down, as the case may be, to the nearest whole number of Shares or other securities, properties or
rights.
7. Reservation and Listing. The Company shall at all times reserve and keep available out
of its authorized Shares, solely for the purpose of issuance upon exercise of the Purchase Options,
such number of Shares or other securities, properties or rights as shall be issuable upon the
exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Options and
payment of the Exercise Price therefore, in accordance with the terms hereby, all Shares and other
securities issuable upon such exercise shall be duly and validly issued, fully paid and
non-assessable and not subject to preemptive rights of any shareholder. The Company further
covenants and agrees that upon exercise of the Purchase Options and payment of the exercise price
therefore, all Shares and other securities issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. As
long as the Purchase Options shall be outstanding, the Company shall use its commercially
reasonable efforts to cause all Shares issuable upon exercise of the Purchase Options to be listed
(subject to official notice of issuance) on all securities exchanges (or, if applicable on the
Nasdaq Global Market, Capital Market, OTC Bulletin Board or any successor trading market) on which
the Shares issued to the public in the Offering may then be listed and/or quoted.
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8. Certain Notice Requirements.
8.1 Holder’s Right to Receive Notice. Nothing herein shall be construed as conferring
upon the Holders the right to vote or consent or to receive notice as a shareholder for the
election of directors or any other matter, or as having any rights whatsoever as a shareholder of
the Company. If, however, at any time prior to the expiration of the Purchase Options and their
exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said
events, the Company shall give written notice of such event at least fifteen days prior to the date
fixed as a record date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, conversion or exchange of securities or
subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or
sale. Such notice shall specify such record date or the date of the closing of the transfer books,
as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy
of each notice given to the other shareholders of the Company at the same time and in the same
manner that such notice is given to the shareholders.
8.2 Events Requiring Notice. The Company shall be required to give the notice
described in this Section 8 upon one or more of the following events: (i) if the Company shall take
a record of the holders of its Shares for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of retained earnings, as indicated by the accounting treatment of such dividend or
distribution on the books of the Company, (ii) the Company shall offer to all the holders of its
Shares any additional shares of capital stock of the Company or securities convertible into or
exchangeable for shares of capital stock of the Company, or any option, right or warrant to
subscribe therefore, or (iii) a dissolution, liquidation or winding up of the Company(other than in
connection with a consolidation or share reconstruction or amalgamation) or a sale of all or
substantially all of its property, assets and business shall be proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly after an event
requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders
of such event and change (“Price Notice”). The Price Notice shall describe the event causing the
change and the method of calculating same and shall be certified as being true and accurate by the
Company’s Chief Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and other communications
under this Purchase Option shall be in writing and shall be deemed to have been duly made when hand
delivered, or mailed by express mail or private courier service: (i) if to the registered Holder of
the Purchase Option, to the address of such Holder as shown on the books of the Company, or (ii) if
to the Company, to following address or to such other address as the Company may designate by
notice to the Holders:
Kips Bay Medical, Inc.
0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
Fax No.:
0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
Fax No.:
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With a copy to:
Xxxxxxxxxx & Xxxxx, P.A.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxx
Fax No.: 000-000-0000
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxx
Fax No.: 000-000-0000
9. Miscellaneous.
9.1 Amendments. The Company and Xxxxxx & Xxxxxxx may from time to time supplement or
amend this Purchase Option without the approval of any of the Holders in order to cure any
ambiguity, to correct or supplement any provision contained herein that may be defective or
inconsistent with any other provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder that the Company and Xxxxxx & Xxxxxxx may xxxx necessary or
desirable and that the Company and Xxxxxx & Xxxxxxx xxxx shall not adversely affect the interest of
the Holders. All other modifications or amendments shall require the written consent of and be
signed by the party against whom enforcement of the modification or amendment is sought.
9.2 Headings. The headings contained herein are for the sole purpose of convenience of
reference, and shall not in any way limit or affect the meaning or interpretation of any of the
terms or provisions of this Purchase Option.
9.3. Entire Agreement. This Purchase Option (together with the other agreements and
documents being delivered pursuant to or in connection with this Purchase Option) constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes
all prior agreements and understandings of the parties, oral and written, with respect to the
subject matter hereof.
9.4 Binding Effect. This Purchase Option shall inure solely to the benefit of and
shall be binding upon, the Holder and the Company and their permitted assignees, respective
successors, legal representative and assigns, and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by virtue of this
Purchase Option or any provisions herein contained.
9.5 Governing Law; Submission to Jurisdiction. This Purchase Option shall be governed
by and construed and enforced in accordance with the laws of the State of New York, without giving
effect to conflict of laws principles thereof. The Company hereby agrees that any action,
proceeding or claim against it arising out of, or relating in any way to this Purchase Option shall
be brought and enforced in the New York Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be
served upon the Company may be served by transmitting a copy thereof by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address set forth in
Section 8 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon
the Company in any action, proceeding or claim. The Company and the Holder agree that the
prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all
of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or
incurred in connection with the
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preparation therefore.
9.6 Waiver, etc. The failure of the Company or the Holder to at any time enforce any
of the provisions of this Purchase Option shall not be deemed or construed to be a waiver of any
such provision, nor to in any way affect the validity of this Purchase Option or any provision
hereof or the right of the Company or any Holder to thereafter enforce each and every provision of
this Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Purchase Option shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such waiver is sought; and no
waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a
waiver of any other or subsequent breach, non-compliance or non-fulfillment.
9.7 Execution in Counterparts. This Purchase Option may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to each of the other parties hereto. Such counterparts may be
delivered by facsimile transmission or other electronic transmission.
9.8 Exchange Agreement. As a condition of the Holder’s receipt and acceptance of this
Purchase Option, Holder agrees that, at any time prior to the complete exercise of this Purchase
Option by Holder, if the Company and Xxxxxx & Xxxxxxx enter into an agreement (“Exchange
Agreement”) pursuant to which they agree that all outstanding Purchase Options will be exchanged
for securities or cash or a combination of both, then Holder shall agree to such exchange and
become a party to the Exchange Agreement.
[Remainder of page deliberately left blank.]
A—11
IN WITNESS WHEREOF, the Company has caused this Purchase Option to be signed by its duly
authorized officer as of the ____ day of _______, 20__.
| KIPS BAY MEDICAL, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
A—12
[Form to be used to exercise Purchase Option:
Date: , 20___
The undersigned hereby elects irrevocably to exercise the Purchase Option for [___]
Shares of Kips Bay Medical, Inc. and hereby makes payment of $[_________] (at the rate of
$[___________] per Share) in payment of the Exercise Price pursuant thereto. Please issue
the Shares as to which this Purchase Option is exercised in accordance with the instructions
given below and, if applicable, a new Purchase Option representing the number of Shares for
which this Purchase Option has not been exercised.
or
The undersigned hereby elects irrevocably to convert its right to purchase [___] Shares
under the Purchase Option for [___] Shares, as determined in accordance with the following
formula:
X
|
= | Y(A-B) | ||||||||
| A | ||||||||||
| Where, | X | = | The number of Shares to be issued to Holder; | |||||||
| Y | = | The number of Shares for which the Purchase Option is being exercised; | ||||||||
| A | = | The fair market value of one Share which is equal to $[____]; and | ||||||||
| B | = | The Exercise Price which is equal to $[_____] per share |
The undersigned agrees and acknowledges that the calculation set forth above is subject
to confirmation by the Company and any disagreement with respect to the calculation shall be
resolved by the Company in its sole discretion.
Please issue the Shares as to which this Purchase Option is exercised in accordance
with the instructions given below and, if applicable, a new Purchase Option representing the
number of Shares for which this Purchase Option has not been converted.
Signature
Signature Guaranteed
A—13
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name:
(Print in Block Letters)
Address:
NOTICE: The signature to this form must correspond with the name as written upon the face of the
Purchase Option without alteration or enlargement or any change whatsoever, and must be guaranteed
by a bank, other than a savings bank, or by a trust company or by a firm having membership on a
registered national securities exchange.
A—14
Form to be used to assign Purchase Option:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the within Purchase Option):
FOR VALUE RECEIVED, does hereby sell, assign and transfer unto the right to purchase Shares of Kips
Bay Medical, Inc. (“Company”) evidenced by the Purchase Option and does hereby authorize the
Company to transfer such right on the books of the Company.
Dated: , 20__
Signature
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name as written upon the face of the
within Purchase Option without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
A—15
EXHIBIT B-1
Lock-Up Agreement
___________ __, 20__
Xxxxxx & Xxxxxxx, LLC
0000 Xxxxxx xx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
0000 Xxxxxx xx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
The undersigned understands that Xxxxxx & Xxxxxxx, LLC (the “Representative”) proposes to
enter into an Underwriting Agreement (the “Underwriting Agreement”) with Kips Bay Medical, Inc., a
Delaware corporation (the “Company”), providing for the public offering (the “Public Offering”) by
the Representative of an estimated [_____] shares of common stock (“Firm Shares”), par value $_____
per share, of the Company (the “Shares”).
To induce the Representative to continue its efforts in connection with the Public Offering,
the undersigned hereby agrees that, without the prior written consent of the Representative, it
will not, during the period commencing on the date hereof and ending on 180 calendar days after the
date of the final prospectus (the “Prospectus”) relating to the Public Offering (the “Lock-Up
Period”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose
of, directly or indirectly, any Shares or any securities convertible into or exercisable or
exchangeable for Shares, or (2) enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of the Shares, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of Shares or such
other securities, in cash or otherwise. Notwithstanding the foregoing, the undersigned may
transfer Shares without the prior consent of the Representative in connection with (a) transactions
relating to Shares or other securities acquired in open market transactions after the completion of
the Public Offering, provided that no filing under Section 16(a) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), shall be required or shall be voluntarily made in connection
with subsequent sales of Shares or other securities acquired in such open market transactions, (b)
transfers of Shares or any security convertible into Shares as a bona fide gift, by will or
intestacy or to a family member or trust for the benefit of a family member; provided that in the
case of any transfer or distribution pursuant to clause (b), (i) each donee or distributee shall
sign and deliver a lock-up letter substantially in the form of this letter agreement and (ii) no
filing under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of
Shares, shall be required or shall be voluntarily made during the Lock-up Period, (c) transfer of
Shares to a charity or educational institution, or (d) if the undersigned, directly or indirectly,
controls a corporation, partnership, limited liability company or other business entity, any
transfers of Shares to any shareholder, partner or member of, or owner of similar equity interests
in, the undersigned, as the case may be, if, in any such case, such transfer is not for value. In
addition, the undersigned agrees that during the Lock-Up Period, without the prior written consent
of the Representative, it will not make any demand for or exercise any right with respect to the
registration of any Shares or any security convertible into or exercisable or exchangeable for
Shares. The undersigned also agrees and consents to the entry of stop transfer instructions with
the Company’s transfer agent and registrar against the transfer of the undersigned’s Shares except
in compliance with this Agreement.
If (i) the Company issues an earnings release or material news, during the last 17 days of the
Lock-Up Period, or (ii) prior to the expiration of the Lock-Up Period, the Company announces that
it will release earnings results during the 16-day period beginning on the last day of the Lock-Up
Period, the restrictions imposed by this agreement shall continue to apply until the expiration of
the 18-day period beginning on the issuance of the earnings release, unless the Representative
waives such extension.
No provision in this agreement shall be deemed to restrict or prohibit the exercise or
exchange by the undersigned of any option or warrant to acquire Shares, or securities exchangeable
or exercisable for or convertible into Shares, provided that the undersigned does not transfer the
Shares acquired on such exercise or exchange during the Lock-Up Period, unless otherwise permitted
pursuant to the terms of this letter agreement. In addition, no provision herein shall be
B-1-1
deemed to restrict or prohibit the entry into or modification of a so-called “10b5-1” plan at
any time (other than the entry into or modification of such a plan in such a manner as to cause the
sale of any Shares or any securities convertible into or exercisable or exchangeable for Shares
within the Lock-Up Period).
The undersigned understands that the Company and the Representative are relying upon this
letter agreement in proceeding toward consummation of the Public Offering. The undersigned further
understands that this agreement is irrevocable and shall be binding upon the undersigned’s heirs,
legal representatives, successors and assigns.
The undersigned understands that, if the Underwriting Agreement is not executed by
____________, or if the Underwriting Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for and delivery of the Shares to be
sold thereunder this agreement shall be void and of no further force or effect.
Whether or not the Public Offering actually occurs depends on a number of factors, including
market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement,
the terms of which are subject to negotiation between the Company and the Representative.
| Very truly yours, |
||||
| (Name): | ||||
| (Address) | ||||
B-1 -2-
ANNEX 1
