AVANIR PHARMACEUTICALS DOCS® Financing Program 5,684,000 Shares of Class A Common Stock, no par value SALES AGREEMENT December 15, 2006
\
Exhibit 10.1
DOCS® Financing Program
5,684,000 Shares of Class A Common Stock,
no par value
no par value
December 15, 2006
DOCS® is a registered service xxxx of Xxxxxxx Xxxxxxx Securities Corporation
THIS SALES AGREEMENT (the “Agreement”) dated as of December 15, 2006 between Xxxxxxx Xxxxxxx
Securities Corporation, having its principal office at 000 Xxxxxxx Xxxxxx, 0xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (the “Sales Manager”) and Avanir Pharmaceuticals, a corporation organized
and existing under the laws of the State of California (the “Company”).
WHEREAS, the Company desires to issue and sell through the Sales Manager, as agent, up to
5,684,000 shares (the “Maximum Amount”) of its Class A Common Stock, no par value (the “Stock”),
on the terms set forth in Article II below. The Maximum Amount shall be appropriately adjusted for
stock splits and reverse splits.
IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the
Sales Manager agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
OF THE COMPANY
1.1 For purposes of this Agreement, unless the context requires to the contrary, the term
“Company” shall also include all significant subsidiaries (as defined by Section 1-02 of Regulation
S-X) of the Company. The Company represents and warrants to, and agrees with, the Sales Manager
that:
(a) The Company meets the requirements for use of Form S-3 under the Securities Act of 1933,
as amended (the “Act”), and the rules and regulations thereunder (“Rules and Regulations”), and the
Company is eligible to use Form S-3 for the transactions contemplated by this Agreement. A
registration statement on Form S-3 (Registration No. 333-125979) with respect to, among other
securities, the Stock, including a form of prospectus, has been prepared by the Company in
conformity with the requirements of the Act and the Rules and Regulations, has been filed with the
Securities and Exchange Commission (the “Commission”) and has been declared effective by the
Commission. No stop order suspending the effectiveness of such registration statement has been
issued, and no proceeding for that purpose has been instituted or, to the knowledge of the Company,
threatened by the Commission. Such registration statement, as it may have heretofore been or may
hereafter be amended, is referred to herein as the “Registration Statement,” and the final form of
prospectus included in the Registration Statement for purposes of offers and sales of the Stock
contemplated herein, as amended or supplemented from time to time, is referred to herein as the
“Prospectus.” Any reference herein to the Registration Statement, the Prospectus, or any amendment
or supplement thereto shall be deemed to refer to and include the documents incorporated (or deemed
to be incorporated) by reference therein, and any reference herein to the terms “amend,”
“amendment” or “supplement” with respect to the Registration Statement or Prospectus shall be
deemed to refer to and include the filing after the execution hereof of any document with the
Commission deemed to be incorporated by reference therein.
(b) Each part of the Registration Statement, when such part became or becomes effective, and
the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the
Commission and at each Settlement Date (as hereinafter defined), conformed or
will conform in all material respects with the requirements of the Act and the Rules and
Regulations; each part of the Registration Statement, when such part became or becomes effective,
did not or will not contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not misleading; and the
Prospectus and any amendment or supplement thereto, on the date of filing thereof with the
Commission and at each Settlement Date, did not or will not include an untrue statement of a
material fact or omit to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; except that the foregoing
shall not apply to statements in or omissions from any such document in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of the Sales Manager,
specifically for use in the Registration Statement, the Prospectus or any amendment or supplement
thereto. There are no Commission comments to any part of the Registration Statement, Prospectus or
any amendment or supplement thereto, that have not been resolved as of the date hereof.
(c) The documents incorporated by reference in the Registration Statement or the Prospectus,
or any amendment or supplement thereto, when they were or are filed with the Commission under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), conformed or will conform in all
material respects with the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder.
(d) The financial statements of the Company, together with the related schedules and notes
thereto, set forth or included in the Registration Statement and Prospectus, fairly present the
financial condition of the Company as of the dates indicated and the results of operations, changes
in financial position, stockholders’ equity, and cash flows for the periods therein specified, in
conformity with generally accepted accounting principles consistently applied throughout the
periods involved (except as otherwise stated therein). The summary and selected financial and
statistical data, if any, included in the Registration Statement and the Prospectus present fairly
the information shown therein and, to the extent based upon or derived from the financial
statements, have been compiled on a basis consistent with the financial statements presented
therein. As of the date hereof, there are no comments pending from the Commission that, if not
resolved favourably to the Company, could have the effect of requiring a restatement of financial
statements of the Company.
(e) The accountants who certified the financial statements and the supporting schedules
included in the Registration Statement are and, during the periods covered by their reports, were
qualified and independent public accountants as required by Rule 2-01 of Regulation S-X.
(f) The Company has been duly organized and is validly existing as a corporation in good
standing under the laws of the State of California. The Company is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the character or location of its
assets or properties (owned, leased or licensed) or the nature of its business makes such
qualification necessary (including every jurisdiction in which it owns or leases real property),
except for such jurisdictions where the failure to so qualify would not have a Material Adverse
Effect on the Company. For purposes of this Agreement, “Material Adverse Effect” means (i) any
adverse effect on the business, operations, properties or financial condition of the Company
2
that is (either alone or together with all other adverse effects) material to the Company,
and/or (ii) any material adverse effect on the transactions contemplated under this Agreement or
any other agreement or document contemplated hereby or thereby. Each of the Company’s significant
subsidiaries is validly existing as a corporation, limited liability company or partnership, as
applicable, in its respective jurisdiction of formation. Schedule 1.1(f) hereto identifies each of
the Company’s subsidiaries that is a significant subsidiary (as defined in Section 1-02 of
Regulation S-X) of the Company. All of the issued and outstanding capital stock, limited liability
company interests or partnership interests, as applicable, of each significant subsidiary has been
duly authorized and validly issued, is fully paid and nonassessable and (except as otherwise
disclosed in the Registration Statement and the Prospectus) is owned by the Company, directly or
indirectly, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity. Except as disclosed in the Registration Statement and the Prospectus, the Company does not
own, lease or license any asset or property or conduct any business outside the United States of
America. The Company has all requisite corporate power and authority and all necessary
authorizations, approvals, consents, orders, licenses, certificates and permits of and from all
governmental orders or regulatory bodies or any other person or entity, to own, lease, license and
operate its assets and properties and conduct its business as now being conducted and as described
in the Registration Statement and the Prospectus; except for such authorizations, approvals,
consents, orders, licenses, certificates and permits the absence of which would not have a Material
Adverse Effect.
(g) The Company has good and marketable title to, or leasehold interests in, all properties
and assets (including, without limitation, mortgaged assets) as described in the Registration
Statement and the Prospectus as owned by the Company, free and clear of all liens, charges,
encumbrances or restrictions, except such as are described in the Registration Statement and the
Prospectus and except such as would not have a Material Adverse Effect on the Company. The Company
has such consents, easements, rights-of-way or licenses (collectively, “rights-of-way”) from any
person as are necessary to conduct its business in the manner described in the Registration
Statement, except for those which if not obtained would not, singly or in the aggregate, have a
Material Adverse Effect on the Company, and none of such rights-of-way contains any restriction
that is materially burdensome to the Company.
(h) The Company has been subject to the requirements of Section 12 of the Exchange Act during
the period commencing 36 months preceding the filing of the Registration Statement and ending on
the date hereof (the “Reporting Period”) and during such Reporting Period the Company has timely
filed all material and reports required under Sections 13(a), 14 and/or 15(d) of the Exchange Act.
All such materials and reports conformed in form and substance to the requirements of the Exchange
Act and the rules and regulations thereunder. As of the date of filing of the Registration
Statement, and as of the date hereof, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the Company was and is at least $150 million.
(i) There is no litigation or governmental or other proceeding or investigation before any
court or before or by any public body or board pending or, to the knowledge of the Company,
threatened against, or involving the assets, properties or businesses of the Company which would
have a Material Adverse Effect on the Company or the offering contemplated by this Agreement,
except as described in the Registration Statement.
3
(j) The Company maintains insurance (issued by insurers of recognized financial
responsibility) of the types and in the amounts generally deemed adequate for its businesses and,
to the knowledge of the Company, consistent with insurance coverage maintained by similar companies
in similar businesses, including, but not limited to, product liability insurance covering the
Company’s products, insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect.
(k) Subsequent to the respective dates as of which information is given in the Registration
Statement and the Prospectus, except as described therein, (i) there has not been any material
adverse change in the assets or properties, business, results of operations, or condition
(financial or otherwise) of the Company, whether or not arising from transactions in the ordinary
course of business; (ii) the Company has not sustained any material loss or interference with its
assets, businesses or properties (whether owned or leased) from fire, explosion, earthquake, flood
or other calamity, whether or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree; (iii) since the date of the latest
balance sheet, included or incorporated by reference in the Registration Statement and the
Prospectus, except as reflected therein, the Company has not undertaken any liability or
obligation, direct or contingent, except such liabilities or obligations undertaken in the ordinary
course of business; and (iv) there has not been any transaction that is material to the Company,
except transactions in the ordinary course of business or as otherwise disclosed in the
Registration Statement and the Prospectus.
(l) There is no document or contract of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement
that is not described or filed in the manner and within the time periods required under the
Exchange Act. Each document, instrument, contract and agreement of the Company described in the
Registration Statement or the Prospectus or incorporated by reference therein or listed as exhibits
to the Registration Statement is in full force and effect and is valid and enforceable by and
against the Company in accordance with their terms, assuming the due authorization, execution and
delivery thereof by each of the other parties thereto except as otherwise disclosed in the
Registration Statement or Prospectus. The Company is not, nor to the knowledge of the Company is
any other party, in default in the observance or performance of any term or obligation to be
performed by it under any such agreement, and no event has occurred which with notice or lapse of
time or both would constitute such a default, which default or event would have a Material Adverse
Effect. No default exists, and no event has occurred which with notice or lapse of time or both
would constitute a default, in the due performance and observance of any term, covenant or
condition, by the Company of any other agreement or instrument to which the Company is a party or
by which it or its properties or business may be bound or affected, which default or event would
have a Material Adverse Effect.
(m) The Company is not in violation of any term or provision of its charter, by-laws or
operating agreement, as applicable. The Company is not in violation of any franchise, license,
permit, judgment, decree, order, statute, rule or regulation, where the consequences of such
violation would have a Material Adverse Effect.
4
(n) Except as described in the Prospectus, neither the execution, delivery and performance of
this Agreement by the Company nor the consummation of any of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the Company of the Stock) will give rise
to a right to terminate or accelerate the due date of any payment due under, or conflict with or
result in the breach of any term or provision of, or constitute a default (or an event which with
notice or lapse of time or both would constitute a default) under, or require any consent or waiver
under, or result in the execution or imposition of any lien, charge, encumbrance, claim, security
interest, restriction or defect upon any properties or assets of the Company pursuant to the terms
of, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company is
a party or by which the Company is bound, or any of its properties are bound, or any franchise,
license, permit, judgment, decree, order, statute, rule or regulation applicable to the Company or
violate any provision of the charter or by-laws of the Company, except for such consents or waivers
which have already been obtained and are in full force and effect.
(o) All of the outstanding shares of common stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable and none of such shares were issued in
violation of any pre-emptive or other similar right. The Stock, when issued and sold pursuant to
this Agreement, will be duly authorized and validly issued, fully paid and nonassessable and will
not be issued in violation of any pre-emptive or other similar right. Except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding option, warrant or other right
calling for the issuance of, and there is no commitment, plan or arrangement to issue, any capital
stock of the Company or any security convertible into or exercisable or exchangeable for such
capital stock, except for standard dividend reinvestment plans. The Stock conforms in all material
respects to all statements relating thereto contained in the Registration Statement and the
Prospectus. All stock options issued by the Company have been issued in compliance with law; and
the terms and provision of such stock options were established in compliance with law.
(p) Subsequent to the respective dates as of which information is given in the Registration
Statement and the Prospectus, except as (x) described or referred to therein, or (y) are not
material (as to clauses (i) and (ii) only), are consistent with past practice (as to clauses (i)
and (ii) only), and are publicly disclosed, the Company has not (i) issued any securities (except
as would have been permitted pursuant to the proviso contained in Section 3.1(k) of this Agreement)
or incurred any liability or obligation, direct or contingent, except such liabilities or
obligations incurred in the ordinary course of business including, without limitation, debt
financing to acquire and develop properties, (ii) entered into any transaction not in the ordinary
course of business or (iii) declared or paid any dividend or made any distribution on any shares of
its capital stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
otherwise acquire any shares of its capital stock.
(q) Except as disclosed in the Registration Statement and Prospectus, no holder of any
security of the Company has the right, which has not been waived, to have any security owned by
such holder included in the Registration Statement.
(r) All necessary corporate action has been duly and validly taken by the Company to authorize
the execution, delivery and performance of this Agreement and the issuance and sale of
5
the Stock by the Company. This Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes and will constitute the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms. Except
for any “blue sky” filings or Trading Market (as defined below) listing applications to be filed
pursuant hereto), each approval, consent, order, authorization, designation, declaration or filing
by or with any regulatory, administrative or other governmental body necessary in connection with
the execution and delivery by the Company of this Agreement and the consummation of the
transactions contemplated hereby and the issuance and sale of the Stock by the Company has been
obtained or made and is in full force and effect. The Company will use commercially reasonable
efforts to cause the Stock to be listed for trading on the Trading Market. For purposes of this
Agreement, the “Trading Market” is (i) the NASDAQ Global Market, and (ii) each other national
securities exchange or market on which the common stock of the Company trades or is admitted for
trading.
(s) The Company has not incurred any liability for a fee, commission or other compensation on
account of the employment of a broker or finder in connection with the transactions contemplated by
this Agreement other than as contemplated hereby or as described in the Registration Statement.
(t) The Company is conducting its business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting business, except where the failure to be
so in compliance would not have a Material Adverse Effect.
(u) No transaction has occurred between or among the Company and any of its officers or
directors or any affiliate or affiliates of any such officer or director that is required to be
described in and is not described in the Registration Statement and the Prospectus.
(v) The Company has not taken, nor will it take, directly or indirectly, any action designed
to or which might reasonably be expected to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of the price of the
common stock of the Company to facilitate the sale or resale of any of the Stock.
(w) The Company has filed all federal, state, local and foreign tax returns that are required
to be filed through the date hereof (and will file all such tax returns when and as required to be
filed after the date hereof), or has received extensions thereof, and has paid all taxes shown on
such returns to be due on or prior to the date hereof (and will pay all taxes shown on such returns
to be due after the date hereof) and all assessments received by it to the extent that the same are
material and have become due except where the failure to file such a return or pay such amount
would not have a Material Adverse Effect.
(x) The Company owns or has valid, binding and enforceable licenses or other rights to use the
patents and patent applications, inventions, copyrights, trademarks, service marks, trade names,
service names, technology and know-how (including without limitation trade secrets and other
unpatented and/or unpatentable proprietary rights but excluding generally commercially available
“off the shelf” software programs licensed pursuant to shrink wrap or “click and accept” licenses)
necessary to conduct the business of the Company in the manner described in the Registration
Statement and the Prospectus (collectively, the “Company
6
Intellectual Property”), except for any Company Intellectual Property the absence of which,
individually or in the aggregate, would not have a Material Adverse Effect. Except as described in
the Prospectus, the Company Intellectual Property is free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, whether imposed by agreement, contract,
understanding, law, equity or otherwise, except for (i) liens for taxes not yet due, (ii) mechanics
liens and similar liens for labor, materials or supplies incurred in the ordinary course of
business for amounts that are not delinquent and (iii) any liens that individually or in the
aggregate are not material (a “Permitted Liens”) or where any failure to have such adequate
licenses or other rights of use to such Intellectual Property, individually or in the aggregate,
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect. The Company is not obligated to pay a royalty, grant a license or provide other
consideration to any third party in connection with the Company Intellectual Property other than as
disclosed in the Registration Statement and the Prospectus. Except as disclosed in the
Registration Statement and the Prospectus or as would not have a Material Adverse Effect, (i) the
Company has not received any notice of infringement or conflict with asserted rights of others with
respect to any Company Intellectual Property, (ii) the conduct of the business of the Company in
the manner described in the Registration Statement and the Prospectus does not and, to the
knowledge of the Company, will not, infringe, interfere or conflict with any valid issued patent
claim or other Intellectual Property right of any third party and (iii) no third party, including
without limitation any academic or governmental organization, possesses or could obtain rights to
the Company Intellectual Property which, if exercised, could enable such party to develop products
competitive to those of the Company, other than rights arising under applicable law in connection
with government sponsorship of Company research activities. Except as disclosed in the
Registration Statement and the Prospectus, the Company has not received any notice or has any
knowledge of (i) any potential infringement or misappropriation by others of the Company
Intellectual Property or (ii) any Intellectual Property of others that potentially conflicts or
interferes with the Company Intellectual Property, that might reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. To the Company’s knowledge, no claim
of any patent or patent application (assuming the claims of patent applications issue as currently
pending) included in the Company Intellectual Property is unenforceable or invalid, except for such
unenforceability or invalidity that would not reasonably be expected to result, individually or in
the aggregate, in a Material Adverse Effect. Each former and current key employee and key
independent contractor of the Company has signed and delivered one or more written contracts with
the Company pursuant to which such employee or independent contractor assigns to the Company all of
his, her or its rights in and to any inventions, discoveries, improvements, works of authorship,
know-how or information made, conceived, reduced to practice, authored or discovered in the course
of employment by or performance of services for the Company and any and all patent rights,
copyrights, trademark and other intellectual property rights therein or thereto.
(y) Except as described in the Registration Statement and the Prospectus, the Company
possesses all certificates, authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective businesses as currently
conducted, including without limitation all such certificates, authorizations and permits required
by the United States Food and Drug Administration (the “FDA”) or any other federal, state or
foreign agencies or bodies engaged in the regulation of pharmaceuticals or biohazardous materials,
except where the failure to so possess such certificates, authorizations and permits,
7
individually or in the aggregate, would not result in a Material Adverse Effect. Except as
described in the Registration Statement and the Prospectus, the Company has not received any notice
of proceedings relating to the revocation or modification of any such certificate, authorization or
permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, would have a Material Adverse Effect.
(z) Except to the extent disclosed in the Registration Statement and the Prospectus, the
Company has not received any written notices or statements from the FDA, the European Medicines
Agency (the “EMEA”) or any other governmental agency, and otherwise has no knowledge or reason to
believe, that (i) any new drug application or marketing authorization application for Zenvia
(formerly known as Neurodex) (“Zenvia”) may or will be rejected or determined to be non-approvable;
(ii) a delay in time for review and/or approval of a marketing authorization application or
marketing approval application in any jurisdiction for Zenvia is or may be required, requested or
being implemented; (iii) one or more clinical studies for Zenvia shall or may be requested or
required in addition to the clinical studies submitted to the FDA prior to the date hereof as a
precondition to or condition of issuance or maintenance of a marketing approval for Zenvia; (iv)
any license, approval, permit or authorization to conduct any clinical trial of or market any
product or potential product of the Company has been, will be or may be suspended, revoked,
modified or limited, except in the cases of clauses (i), (ii), (iii) and (iv) where such
rejections, determinations, delays, requests, suspensions, revocations, modifications or
limitations might not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(aa) Except to the extent disclosed in the Registration Statement and the Prospectus, to the
Company’s knowledge, the preclinical and clinical testing, application for marketing approval of,
manufacture, distribution, promotion and sale of the products and potential products of the Company
is in compliance, in all material respects, with all laws, rules and regulations applicable to such
activities, including without limitation applicable good laboratory practices, good clinical
practices and good manufacturing practices, except for such non-compliance as would not,
individually or in the aggregate, have a Material Adverse Effect. The descriptions of the results
of such tests and trials contained in the Registration Statement and the Prospectus are accurate in
all material respects. Except to the extent disclosed in the Registration Statement and the
Prospectus, the Company has not received notice of adverse finding, warning letter or clinical hold
notice from the FDA or any non-U.S. counterpart of any of the foregoing, or any untitled letter or
other correspondence or notice from the FDA or any other governmental authority or agency or any
institutional or ethical review board alleging or asserting noncompliance with any law, rule or
regulation applicable in any jurisdiction, except notices, letters, and correspondences and
non-U.S. counterparts thereof alleging or asserting such noncompliance as would not, individually
or in the aggregate, have a Material Adverse Effect. Except to the extent disclosed in the
Registration Statement and the Prospectus, the Company has not, either voluntarily or
involuntarily, initiated, conducted or issued, or caused to be initiated, conducted or issued, any
recall, field correction, market withdrawal or replacement, safety alert, warning, “dear doctor”
letter, investigator notice, or other notice or action relating to an alleged or potential lack of
safety or efficacy of any product or potential product of the Company, any alleged product defect
of any product or potential product of the Company, or any violation of any material applicable
law, rule, regulation or any clinical trial or marketing license, approval, permit or authorization
for any product or potential product of the Company, and the Company is not aware of any facts
8
or information that would cause it to initiate any such notice or action and has no knowledge
or reason to believe that the FDA, the EMEA or any other governmental agency or authority or any
institutional or ethical review board or other non-governmental authority intends to impose,
require, request or suggest such notice or action.
(bb) The Company is not an “investment company” within the meaning of the Investment Company
Act of 1940, as amended.
(cc) The Company’s systems of internal accounting controls taken as a whole are sufficient to
meet the broad objectives of internal accounting control insofar as those objectives pertain to the
prevention or detection of errors or irregularities in amounts that would be material in relation
to the Company’s financial statements; and, to the best of the Company’s knowledge, neither the
Company nor any employee or agent thereof has made any payment of funds of the Company or received
or retained any funds, and no funds of the Company have been set aside to be used for any payment,
in each case in violation of any law, rule or regulation.
(dd) The Company is not involved in any labor dispute and, to the knowledge of the Company, no
such dispute has been threatened, except for such disputes as would not have a Material Adverse
Effect on the Company, or subject the Company or its shareholders to any material liability or
disability.
(ee) Except as disclosed in the Registration Statement or the Prospectus, (i) there has been
no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of
toxic wastes, hazardous wastes or hazardous substances by the Company (or to the knowledge of the
Company, any of their predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require remedial action under any
applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any
violation or remedial action which would not have a Material Adverse Effect; (ii) there has been no
material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto
such property or into the environment surrounding such property of any toxic wastes, solid wastes,
hazardous wastes or hazardous substances due to or caused by the Company, except for any such
spill, discharge, leak emission, injection, escape, dumping or release which would not have a
Material Adverse Effect; and (iii) the terms “hazardous wastes,” “toxic wastes” and “hazardous
substances” shall have the meanings specified in any applicable local, state, federal and foreign
laws or regulations with respect to environmental protection.
(ff) There is and has been no failure on the part of the Company or any of the Company’s
directors or officers, in their capacities as such, to comply with any provision of the
Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations promulgated in connection therewith (the
“Xxxxxxxx-Xxxxx Act”), including without limitation Section 402 related to loans and Sections 302
and 906 related to certifications.
9
ARTICLE II
SALE AND DELIVERY OF SECURITIES
2.1 Sale and Delivery of Securities.
(a) On the basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company agrees to issue and sell through
the Sales Manager, as agent, and the Sales Manager agrees to sell, as agent for the Company, on a
best efforts basis, up to the Maximum Amount of the Stock during the term of this Agreement on the
terms set forth herein. The Stock will be sold from time to time as described in the Registration
Statement and Prospectus, in amounts, and subject to price limitations, as directed by the Company
and as agreed to by the Sales Manager.
(b) The Company or the Sales Manager may, upon notice to the other party hereto by telephone
(confirmed promptly by facsimile), at any time and from time to time suspend the offering of Stock;
provided, however, that such suspension shall not affect or impair the parties’
respective obligations with respect to the Stock sold hereunder prior to the giving of such notice.
(c) The compensation to the Sales Manager for sales of Stock shall be at a commission
rate of 4.5% of the gross sales price per share for the Stock sold under this Agreement up to
aggregate gross proceeds of $7 million under this Agreement, and thereafter at a commission rate of
3.5% of the gross sales price per share for the Stock sold under this Agreement. The
remaining proceeds, after further deduction for any transaction fees imposed by any governmental or
self-regulatory organization in respect to such sale shall constitute the net proceeds to the
Company for such Stock (the “Net Proceeds”).
(d) The Company shall open and maintain a trading account (the “Trading Account”) at a
clearing agent designated by the Sales Manager to facilitate the transactions contemplated by this
Agreement. The Company shall, with respect to each sale of Stock, effect delivery of the
applicable number of Stock to the Trading Account, on or before the third business day (or such
other day as is industry practice for regular-way trading) following each sale of the Stock (each,
a “Settlement Date”). The Net Proceeds from the sale of the Stock shall be available in the
Trading Account following the settlement of the sale on the Settlement Date. The Sales Manager’s
compensation shall be withheld from the sales proceeds on each Settlement Date and shall be paid to
the Sales Manager.
(e) At each Settlement Date, the Company shall be deemed to have affirmed each representation,
warranty, covenant and other agreement contained in this Agreement. Any obligation of the Sales
Manager under this Agreement shall be subject to the continuing accuracy of the representations and
warranties of the Company herein, to the performance by the Company of its obligations hereunder
and to the continuing satisfaction of the additional conditions specified in Article IV below.
(f) If the Company shall default on its obligation to deliver Stock on any Settlement Date,
the Company shall (i) hold the Sales Manager harmless against any loss, claim or damage
10
arising from or as a result of such default by the Company and (ii) pay the Sales Manager any
commission to which it would otherwise be entitled absent such default.
ARTICLE III
COVENANTS OF THE COMPANY
3.1 The Company covenants and agrees with the Sales Manager that:
(a) As promptly as practicable after the date of this Agreement, the Company will file a
supplement to the Prospectus under Rule 424(b) of the Act naming the Sales Manager as an
underwriter, to permit sales of the Stock under the Act.
(b) During the period in which the Sales Agent has been requested to offer and sell Stock, the
Company will notify the Sales Manager promptly of the time when any subsequent amendment to the
Registration Statement has become effective or any subsequent supplement to the Prospectus has been
filed and of any request by the Commission for any amendment or supplement to the Registration
Statement or the Prospectus or for additional information. The Company will prepare and file with
the Commission, promptly upon the Sales Manager’s reasonable request, any amendments or supplements
to the Registration Statement or Prospectus that, in the Sales Manager’s reasonable opinion, may be
necessary or advisable in connection with the sale of the Stock pursuant to this Agreement. The
Company will not file any amendment or supplement to the Registration Statement or Prospectus
(other than a supplement to the Prospectus that (i) relates solely to the issuance of securities
other than the Stock of the Company pursuant to this Agreement and (ii) does not materially change
the information about the Company or its business, operations, properties or financial condition
disclosed in the Registration Statement or Prospectus previously thereto (an “Excluded
Supplement”)) unless a copy thereof has been submitted to the Sales Manager a reasonable period of
time before the filing and the Sales Manager has not reasonably objected thereto; and it will
notify the Sales Manager at the time of filing thereof of any document that, upon filing, is deemed
to be incorporated by reference in the Registration Statement or Prospectus (unless such document
is available on the SEC’s XXXXX database, in which case no notification shall be required). The
Company will cause each amendment to the Registration Statement or supplement to the Prospectus,
and each filing or report incorporated therein, to be prepared in form and substance as required by
the Act, the Rules and Regulations, the Exchange Act and the rules and regulations thereunder, and
to be timely filed with the Commission. Any press releases or similar publicity by the Company
related to this offering that is not covered by the preceding provisions of this Section 3(b) must
be reasonably acceptable to the Sales Manager.
(c) The Company will advise the Sales Manager, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement, of the suspension of the qualification of the Stock
for offering or sale in any jurisdiction, or of the initiation or threatening of any proceeding for
any such purpose; and it will promptly use its commercially reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.
11
(d) Within the time during which a prospectus relating to the Stock is required to be
delivered under the Act, the Company will comply with all requirements imposed upon it by the Act
and by the Rules and Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Stock as contemplated by the provisions hereof and the
Prospectus. If during such period any event occurs as a result of which the Prospectus, as then
amended or supplemented, would include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or supplement the
Registration Statement or Prospectus to comply with the Act, the Company will promptly notify the
Sales Manager to suspend the offering of Stock during such period and the Company will amend or
supplement the Registration Statement or Prospectus (at the expense of the Company) so as to
correct such statement or omission or effect such compliance and will use commercially reasonable
efforts to have any amendment or supplement to the Registration Statement or Prospectus declared
effective as soon as possible, unless the Company has reasonable business reasons to defer public
disclosure of the relevant information.
(e) The Company will use commercially reasonable efforts to qualify the Stock for sale under
the securities laws of such jurisdictions as the Sales Manager designates in writing and to
continue such qualifications in effect so long as required for the sale of the Stock, except that
the Company shall not be required in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction.
(f) The Company will furnish to the Sales Manager and its legal counsel (at the expense of the
Company) copies of the Registration Statement and the Prospectus during the period in which a
prospectus relating to the Stock is required to be delivered under the Act, in each case as soon as
available and in such quantities as the Sales Manager may from time to time reasonably request.
The Company will take such action as to enable the conditions set forth in Rule 153(b) to be
satisfied at all times that the Sales Agent is selling Stock.
(g) The Company will make generally available to its security holders as soon as practicable,
but in any event not later than 15 months after the end of the Company’s current fiscal quarter, an
earnings statement (which need not be audited) covering a 12-month period that satisfies the
provisions of Section 11(a) of the Act and Rule 158 of the Rules and Regulations.
(h) The Company, whether or not the transactions contemplated hereunder are consummated or
this Agreement is terminated, will pay all of its expenses incident to the performance of its
obligations hereunder (including, but not limited to, any transaction fees imposed by any
governmental or self-regulatory organization with respect to transactions contemplated by this
Agreement and any blue sky fees) and will pay the expenses of printing all documents relating to
the offering. The Company will reimburse the Sales Manager for its reasonable out-of-pocket costs
and expenses incurred in connection with entering into this Agreement, including, without
limitation, reasonable travel, reproduction, printing and similar expenses, initial and ongoing due
diligence, and reasonable fees and disbursements of its legal counsel, up to an aggregate amount of
$75,000. In addition, without limiting the foregoing, the Company will pay, or reimburse the Sales
Manager for, any filing fees incurred by the Sales Manager in connection with filings (if any)
required to be made by the Sales Manager with the NASD.
12
(i) The Company will use commercially reasonable efforts to maintain the quotation of the
Stock on the Trading Market and to file with the Trading Market all documents and notices required
by the Trading Market of companies quotations for which are reported by the Trading Market.
(j) The Company will apply the Net Proceeds from the sale of the Stock as set forth in the
Prospectus.
(k) The Company will not, directly or indirectly, offer or sell any shares of common stock
(other than the Stock) or securities convertible into or exchangeable for, or any rights to
purchase or acquire, common stock, during the period from the date of this Agreement through the
final Settlement Date for the sale of Stock hereunder without (i) giving the Sales Manager at least
eight hours prior written notice specifying the nature of the proposed sale and the date of such
proposed sale and (ii) suspending activity under this program for such period of time as may
reasonably be determined by agreement of the Company and the Sales Manager; provided,
however, that no such notice and suspension shall be required in connection with the
Company’s issuance or sale of (i) shares of common stock pursuant to any employee or director stock
option or benefits plan, stock ownership plan, dividend reinvestment plan, as such plans may be
amended from time to time, (ii) common stock, options and equity-based awards issued pursuant to
the exception contained in NASDAQ Rule 4350(i)(1)(A)(iv), and (iii) common stock issuable upon
conversion of securities or the exercise of warrants, options or other rights in effect or
outstanding on the date hereof. Notwithstanding the foregoing, this paragraph (k) shall not apply
during periods that the Company is neither selling Stock through the Sales Manager nor has
requested the Sales Manager to sell Stock.
(l) The Company will, at any time during the term of this Agreement, as supplemented from time
to time, advise the Sales Manager immediately after it shall have received notice or obtain
knowledge thereof, of any information or fact that would materially alter or affect any opinion,
certificate, letter and other document provided to the Sales Manager pursuant to Article IV below.
(m) Each time that the Registration Statement or the Prospectus shall be amended or
supplemented (other than an Excluded Supplement) and on the dates specified in Section 4.1(f)
below, the Company shall (unless the Company is not then selling Stock through the Sales Manager
and has not requested the Sales Manager to sell Stock) furnish or cause to be furnished to the
Sales Manager forthwith a certificate, in form and substance satisfactory to the Sales Manager, to
the effect that the statements contained in the certificates referred to in Section 4.1(f) below
that were last furnished to the Sales Manager are true and correct at the time of such amendment,
supplement, filing, as the case may be, as though made at and as of such time (except that such
statements shall be deemed to relate to the Registration Statement and the Prospectus as amended
and supplemented to such time) or, in lieu of such certificates, certificates of the same tenor as
the certificates referred to in said Section 4.1(f) below, modified as necessary to relate to the
Registration Statement and the Prospectus as amended and supplemented to the time of delivery of
such certificate.
(n) Each time that a post-effective amendment to the Registration Statement is declared
effective or the Company files an Annual Report on Form 10-K, and at such other times
13
as may be reasonably requested by the Sales Manager, the Company shall (unless the Company is
not then selling Stock through the Sales Manager and has not requested the Sales Manager to sell
Stock) furnish or cause to be furnished forthwith to the Sales Manager and to its legal counsel, a
written opinion of Xxxxxx Xxxxxx LLP (“Company Counsel”), or other counsel reasonably satisfactory
to the Sales Manager, dated the date of effectiveness of such amendment or the date of filing with
the Commission of such document, as the case may be, in form and substance satisfactory to the
Sales Manager, of the same tenor as the opinion referred to in Section 4.1(d) below, but modified
as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented
to the time of delivery of such opinion. In addition, at each such time, the Company shall cause
to be forwarded to the Sales Manager such opinions of special counsel to the Company as may be
reasonably requested by the Sales Manager.
(o) Each time that a post-effective amendment to the Registration Statement is declared
effective or the Company files a Annual Report on Form 10-K, and at such other times as may be
reasonably requested by the Sales Manager, the Company shall (unless the Company is not then
selling Stock through the Sales Manager and has not requested the Sales Manager to sell Stock)
cause Deloitte & Touche LLP, or other independent accountants then retained by the Company,
forthwith to furnish to the Sales Manager a letter, dated the date of effectiveness of such
amendment, or the date of filing of such supplement or other document with the Commission, as the
case may be, in form and substance satisfactory to the Sales Manager, of the same tenor as the
letter referred to in Section 4.1(e) below but modified to relate to the Registration Statement and
the Prospectus, as amended and supplemented to the date of such letter.
(p) The Company represents and agrees that, unless it obtains the prior consent of the Sales
Manager, and the Sales Manager represents and agrees that, unless it obtains the prior consent of
the Company, it has not made and will not make any offer relating to the Offered Securities that
would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a “free
writing prospectus” as defined in Rule 405, required to be filed with the Commission. Any such
free writing prospectus consented to by the Company and the Sales Manager is hereinafter referred
to as a “Permitted Free Writing Prospectus.” The Company represents that it has treated and agrees
that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,”
as defined in Rule 433 (“Rule 433”), and has complied and will comply with the requirements of
Rules 164 and 433, as applicable to any Permitted Free Writing Prospectus, including timely
Commission filings where required, legending and record keeping.
For the purposes of this Section, “Issuer Free Writing Prospectus” means any “issuer free
writing prospectus,” as defined in Rule 433 under the Act, relating to the Stock in the
form filed or required to be filed with the Commission or, if not required to be filed, in the form
retained in the Company’s records pursuant to Rule 433(g).
ARTICLE IV
CONDITIONS OF THE SALES MANAGER’S OBLIGATIONS
4.1 The obligations of the Sales Manager to sell the Stock as provided in this Agreement shall
be subject to the accuracy, as of the date hereof, and as of each Settlement Date
14
contemplated under this Agreement, of the representations and warranties of the Company in
this Agreement, to the performance by the Company of its obligations in this Agreement and to the
following additional conditions:
(a) The Registration Statement has been declared effective. No stop order suspending the
effectiveness of the Registration Statement shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the Company or the Sales Manager,
threatened by the Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall have been complied
with to the Sales Manager’s reasonable satisfaction. The supplement to the Prospectus contemplated
by Section 3.1(a) above has been filed.
(b) The Sales Manager shall not have advised the Company that the disclosures in the
Registration Statement or the Prospectus are not reasonably acceptable to the Sales Manager.
(c) Except as contemplated in the Prospectus, subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, there shall not have been
any material adverse change in the capital stock of the Company, or any material adverse change, or
any development that may reasonably be expected to cause a material adverse change, in the
condition (financial or other), business, prospects, net worth or results of operations of the
Company, or any adverse change in the rating assigned to any debt securities of the Company, if
any.
(d) The Sales Manager shall have received at the date of the first sale of Stock hereunder
(the “Commencement Date”) and at every other date specified in Section 3.1(n) above, opinions of
Company Counsel and special counsel, dated as of the Commencement Date and dated as of such other
date, in form and substance reasonably acceptable to the Sales Manager.
(e) At the Commencement Date and at such other dates specified in Section 3.1(o) above, the
Sales Manager shall have received a “comfort letter” from Deloitte & Touche LLP, independent public
accountants for the Company, or other independent accountants then retained by the Company, dated
the date of delivery thereof, in form and substance satisfactory to the Sales Manager.
(f) The Sales Manager shall have received from the Company a certificate, or certificates,
signed by (i) the Chief Financial Officer and (ii) the President and Chief Executive Officer or any
Vice President of the Company, dated as of the Commencement Date and (unless the Company is not
then selling Stock through the Sales Manager and has not requested the Sales Manager to sell Stock)
dated as of the first business day of each calendar month thereafter (each, a “Certificate Date”),
to the effect that, to the best of their knowledge based upon reasonable investigation:
(i) The representations and warranties of the Company in this Agreement are true and
correct, as if made at and as of the Commencement Date or the Certificate Date (as the case
may be), and the Company has complied with all the agreements and
15
satisfied all the conditions on its part to be performed or satisfied at or prior to
the Commencement Date and each such Certificate Date (as the case may be);
(ii) No stop order suspending the effectiveness of the Registration Statement has been
issued, and no proceeding for that purpose has been instituted or, to the knowledge of such
officer after due inquiry, is threatened, by the Commission;
(iii) Since the date of this Agreement there has occurred no event required to be set
forth in an amendment or supplement to the Registration Statement or Prospectus that has not
been so set forth and there has been no document required to be filed under the Exchange Act
and the rules and regulations of the Commission thereunder that upon such filing would be
deemed to be incorporated by reference in the Prospectus that has not been so filed; and
(iv) Since the date of this Agreement, there has not been any material adverse change
in the assets or properties, business, prospects, results of operations, or condition
(financial or otherwise) of the Company, which has not been described in an amendment or
supplement to the Registration Statement or Prospectus (directly or by incorporation).
(g) At the Commencement Date and on each Settlement Date, the Company shall have furnished to
the Sales Manager such appropriate further information, officers’ certificates and similar
documents as the Sales Manager may reasonably request.
(h) At the Commencement Date and on each Settlement Date, the Company shall have listed for
quotation the Stock on the Trading Market.
All such opinions, certificates, letters and other documents will be in compliance with the
provisions hereof only if they are satisfactory in form and substance to the Sales Manager. The
Company will furnish the Sales Manager with such conformed copies of such opinions, certificates,
letters and other documents, as the Sales Manager shall reasonably request.
ARTICLE V
INDEMNIFICATION AND CONTRIBUTION
5.1 The Company agrees to indemnify and hold harmless the Sales Manager and each person, if
any, who controls the Sales Manager within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act (collectively, the “Sales Manager Indemnitees”), as follows:
(a) against any and all loss, liability, claim, damage and expense whatsoever, as incurred,
arising out of any untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto)
or the omission or alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading;
16
(b) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to
the extent of the aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue statement or omission,
if such settlement is effected with the written consent of the Company; and
(c) against any and all expense whatsoever, as incurred (including, subject to Section 5.3
below, the reasonable fees and disbursements of legal counsel chosen by the Sales Manager),
reasonably incurred in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss, liability, claim,
damage or expense to the extent arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with written information furnished to
the Company by the Sales Manager expressly for use in the Registration Statement (or any amendment
thereto) or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto).
5.2 The Sales Manager agrees to indemnify and hold harmless the Company and its directors and
each officer of the Company who signed the Registration Statement, and each person, if any, who
controls 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 indemnity contained
in Section 5.1 above, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or any amendments
thereto) or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with written information furnished to the Company by the Sales
Manager expressly for use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement thereto). The total
liability of the Sales Manager under this Section 5.2 shall not exceed the Net Proceeds in respect
of the Stock sold by the Sales Manager that is the subject of the dispute.
5.3 Any indemnified party that proposes to assert the right to be indemnified under this
Article V will, promptly after receipt of notice of commencement of any action against such party
in respect of which a claim is to be made against an indemnifying party or parties under this
Article V, notify each such indemnifying party of the commencement of such action, enclosing a copy
of all papers served, but the omission so to notify such indemnifying party will not relieve the
indemnifying party from any liability that it might have to any indemnified party to the extent it
is not materially prejudiced as a result thereof. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by delivering written
notice to the indemnified party promptly after receiving notice of the commencement of the action
from the indemnified party, jointly with any other indemnifying party similarly
17
notified, to assume the defense of the action, with legal counsel reasonably satisfactory to
the indemnified party, and after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the indemnified party
for any legal or other expenses except as provided below. The indemnified party will have the
right to employ its own legal counsel in any such action, but the fees, expenses and other charges
of such legal counsel will be at the expense of such indemnified party unless (1) the employment of
legal counsel by the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based on the written advice of legal counsel)
that there may be legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a conflict or potential
conflict exists (based on the written advice of legal counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the indemnifying party will not have
the right to direct the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed legal counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of legal counsel will be at the expense
of the indemnifying party or parties. It is understood that the indemnifying party or parties
shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be
liable for the reasonable fees, disbursements and other charges of more than one separate firm
admitted to practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying
party promptly as they are incurred. An indemnifying party will not be liable for any settlement
of any action or claim effected without its written consent (which consent will not be unreasonably
withheld).
5.4 In order to provide for just and equitable contribution in circumstances in which the
indemnification provided for in the foregoing paragraphs of this Article V is applicable in
accordance with its terms but for any reason is held to be unavailable from the Company or the
Sales Manager, the Company and the Sales Manager will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted, but after deducting any contribution received by the Company from persons
other than the Sales Manager, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors of the Company,
who also may be liable for contribution) to which the Company and the Sales Manager may be subject
in such proportion as shall be appropriate to reflect the relative benefits received by the Company
on the one hand and the Sales Manager on the other. The relative benefits received by the Company
on the one hand and the Sales Manager on the other hand shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting expenses) received by the
Company bear to the total compensation (before deducting expenses) received by the Sales Manager
from the sale of Stock on behalf of the Company. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made
in such proportion as is appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand, and the Sales
Manager, on the other, with respect to the statements or omission which resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to such
18
offering. Such relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Sales Manager, the intent of the parties
and their relative knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Sales Manager agree that it would not be just and
equitable if contributions pursuant to this Section 5.4 were to be determined by pro rata
allocation or by any other method of allocation, which does not take into account, the equitable
considerations referred to herein. The amount paid or payable by an indemnified party as a result
of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above
in this Section 5.4 shall be deemed to include, for the purpose of this Section 5.4, any legal or
other expenses reasonably incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the foregoing provisions of this Section 5.4,
the Sales Manager shall not be required to contribute any amount in excess of the amount by which
the total actual sales price at which Stock sold by the Sales Manager exceeds the amount of any
damages that the Sales Manager has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 5.4, any person who controls a party to this Agreement within the meaning of the Act will
have the same rights to contribution as that party, and each officer and director of the Company
who signed the Registration Statement will have the same rights to contribution as the Company,
subject in each case to the provisions hereof. Any party entitled to contribution, promptly after
receipt of notice of commencement of any action against such party in respect of which a claim for
contribution may be made under this Section 5.4, will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve that party or parties
from whom contribution may be sought from any other obligation it or they may have under this
Section 5.4. No party will be liable for contribution with respect to any action or claim settled
without its written consent (which consent will not be unreasonably withheld).
5.5 The indemnity and contribution provided by this Article V shall not relieve the Company
and the Sales Manager from any liability the Company and the Sales Manager may otherwise have
(including, without limitation, any liability the Sales Manager may have for a breach of its
obligations under Article II above).
ARTICLE VI
REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY
6.1 All representations, warranties and agreements of the Company herein or in certificates
delivered pursuant hereto, and the agreements of the Sales Manager contained in Article V above,
shall remain operative and in full force and effect regardless of any investigation made by or on
behalf of the Sales Manager or any controlling persons, or the Company (or any of their officers,
directors or controlling persons), and shall survive delivery of and payment for the Stock.
19
ARTICLE VII
TERMINATION
7.1 The Company shall have the right, by giving notice as hereinafter specified, to terminate
this Agreement in its sole discretion at any time. Any such termination shall be without liability
of any party to any other party except that the provisions of Section 3.1(h), Article V and Article
VI above shall remain in full force and effect notwithstanding such termination.
7.2 The Sales Manager shall have the right, by giving notice as hereinafter specified, to
terminate this Agreement in its sole discretion at any time. Any such termination shall be without
liability of any party to any other party except that the provisions of Section 3.1(h), Article V
and Article VI above shall remain in full force and effect notwithstanding such termination.
7.3 This Agreement shall remain in full force and effect unless terminated pursuant to
Sections 7.1 or 7.2 above or otherwise by mutual agreement of the parties; provided that any such
termination by mutual agreement shall in all cases be deemed to provide that Section 3.1(h),
Article V and Article VI above shall remain in full force and effect.
7.4 Any termination of this Agreement shall be effective on the date specified in such notice
of termination; provided that such termination shall not be effective until the close of business
on the date of receipt of such notice by the Sales Manager or the Company, as the case may be. If
such termination shall occur during a period when sales of Stock are being made pursuant to this
Agreement, any sales of Stock made prior to the termination of this Agreement shall settle in
accordance with the provisions of this Agreement.
ARTICLE VIII
NOTICES
8.1 All notices or communications hereunder shall be in writing and if sent to the Sales
Manager shall be mailed, delivered or facsimiled and confirmed to the Sales Manager at Xxxxxxx
Xxxxxxx Securities Corporation, 000 Xxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
facsimile number (000) 000-0000, Attention: Corporate Finance, or if sent to the Company, shall be
mailed, delivered or telecopied and confirmed to the Company at 000 Xxxxxxxxxx, Xxxxx 000, Xxxxx
Xxxxx, Xxxxxxxxxx 00000, Attention: Chief Financial Officer; facsimile number (000) 000-0000.
Each party to this Agreement may change such address for notices by sending to the parties to this
Agreement written notice of a new address for such purpose.
ARTICLE IX
MISCELLANEOUS
9.1 This Agreement shall inure to the benefit of and be binding upon the Company and the Sales
Manager and their respective successors and the controlling persons, officers and
20
directors referred to in Article V above, and no other person will have any right or
obligation hereunder.
9.2 Indemnification pursuant to Section 5.1 hereof will not constitute the exclusive remedy
available to the Sales Manager Indemnitees for any breach or alleged breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement.
9.3 This Agreement constitutes the entire agreement and supersedes all other prior and
contemporaneous agreements and undertakings, both written and oral, between the parties hereto with
regard to the subject matter hereof.
9.4 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
9.5 This Agreement may be executed in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same instrument. The parties
agree that this Agreement will be considered signed when the signature of a party is delivered by
facsimile transmission. Such facsimile transmission shall be treated in all respects as having the
same effect as an original signature.
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the date hereof.
| AVANIR PHARMACEUTICALS |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxxxxxx | |||
| Title: | CFO | |||
| XXXXXXX XXXXXXX SECURITIES CORPORATION |
||||
| By: | /s/ Xxxx Xxxxx | |||
| Name: | Xxxx Xxxxx | |||
| Title: | Managing Director | |||
22
SCHEDULE 1.1(f)
List of Significant Subsidiaries
Alamo Pharmaceuticals, LLC
