TONIX PHARMACEUTICALS HOLDING CORP.

 

657,000 Shares of Common Stock

 

PLACEMENT AGENT AGREEMENT

 

July 11, 2014

 

Roth Capital Partners, LLC

888 San Clemente Drive

Newport Beach, CA 92660

 

Ladies and Gentlemen:

 

Tonix Pharmaceuticals Holding Corp., a Nevada corporation (the “Company”),
proposes to issue and sell to the purchasers, pursuant to the terms and
conditions of this Placement Agent Agreement (this “Agreement”) and the
Subscription Agreements in the form of Exhibit A attached hereto (the
“Subscription Agreements”) entered into with the purchasers identified therein
(each a “Purchaser” and, collectively, the “Purchasers”), up to an aggregate of
657,000 authorized but unissued shares (the “Shares”) of common stock, par value
$0.001 per share (the “Common Stock”), of the Company. The Company hereby
confirms its agreement with Roth Capital Partners, LLC (the “Placement Agent”)
to act as Placement Agent in accordance with the terms and conditions hereof.

 

The Company and the Placement Agent hereby confirm their agreement as follows:

 

1.          Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the “Commission”) a
registration statement on Form S-3 (File No. 333-192541) under the Securities
Act of 1933, as amended (the “Securities Act”) and the rules and regulations
(the “Rules and Regulations”) of the Commission thereunder, and such amendments
to such registration statement (including post effective amendments) as may have
been required to the date of this Agreement and a preliminary prospectus
supplement or “red herring” pursuant to Rule 424(b) under the Securities Act.
Such registration statement, as amended (including any post effective
amendments), has been declared effective by the Commission. Such registration
statement, including amendments thereto (including post effective amendments
thereto) at the time of effectiveness thereof (the “Effective Time”), the
exhibits and any schedules thereto at the Effective Time or thereafter during
the period of effectiveness and the documents and information otherwise deemed
to be a part thereof or included therein by the Securities Act or otherwise
pursuant to the Rules and Regulations at the Effective Time or thereafter during
the period of effectiveness, is herein called the “Registration Statement.” If
the Company has filed or files an abbreviated registration statement pursuant to
Rule 462(b) under the Securities Act (the “Rule 462 Registration Statement”),
then any reference herein to the term Registration Statement shall include such
Rule 462 Registration Statement.

 

 

 

 

The Company is filing with the Commission pursuant to Rule 424 under the
Securities Act a final prospectus supplement relating to the Shares to a form of
prospectus included in the Registration Statement. The form of prospectus
included in the Registration Statement at the time it was declared effective, as
it may have been amended, modified or supplemented and filed with the Commission
after such effective date and prior to the date hereof pursuant to Rule
424(b)(3), is hereinafter called the “Base Prospectus,” and such final
prospectus supplement, as filed, along with the Base Prospectus, is hereinafter
called the “Final Prospectus.” Such Final Prospectus and any preliminary
prospectus supplement or “red herring” relating to the Shares in the form in
which they shall be filed with the Commission pursuant to Rule 424(b) under the
Securities Act (including the Base Prospectus as so supplemented) is hereinafter
called a “Prospectus.”

 

For purposes of this Agreement, all references to the Registration Statement,
the Rule 462 Registration Statement, the Base Prospectus, the Final Prospectus,
the Prospectus or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Interactive
Data Electronic Applications system. All references in this Agreement to
amendments or supplements to the Registration Statement, the Rule 462
Registration Statement, the Base Prospectus, the Final Prospectus or the
Prospectus shall be deemed to mean and include the subsequent filing of any
document under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), that is deemed to be incorporated therein by reference therein or
otherwise deemed by the Rules and Regulations to be a part thereof.

 

2.          Agreement to Act as Placement Agent; Placement of the Shares. On the
basis of the representations, warranties and agreements of the Company herein
contained, and subject to all the terms and conditions of this Agreement:

 

(a)          The Company hereby authorizes the Placement Agent to act as its
exclusive agent to solicit offers for the purchase of all or part of the Shares
from the Company in connection with the proposed offering of the Shares (the
“Offering”). Until the Closing Date (as defined in Section 4 below) or earlier
upon termination of this Agreement pursuant to Section 9 the Company shall not,
without the prior written consent of the Placement Agent, solicit or accept
offers to purchase the Shares otherwise than through the Placement Agent.

 

(b)          The Company hereby acknowledges that the Placement Agent has
agreed, as agent of the Company, to use its reasonable efforts to solicit offers
to purchase the Shares from the Company on the terms and subject to the
conditions set forth in the Prospectus (as defined below). The Placement Agent
shall use reasonable efforts to assist the Company in obtaining performance by
each Purchaser whose offer to purchase Shares has been solicited by the
Placement Agent and accepted by the Company, but the Placement Agent shall not,
except as otherwise provided in this Agreement, be obligated to disclose the
identity of any potential purchaser or have any liability to the Company in the
event any such purchase is not consummated for any reason. Under no
circumstances will the Placement Agent be obligated to underwrite or purchase
any Shares for its own account and, in soliciting purchases of the Shares, the
Placement Agent shall act solely as the Company’s agent and not as principal.

 

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(c)          Subject to the provisions of this Section 2, offers for the
purchase of the Shares may be solicited by the Placement Agent as agent for the
Company at such times and in such amounts as the Placement Agent deems
advisable. The Placement Agent shall communicate to the Company, orally or in
writing, each reasonable offer to purchase Shares received by it as agent of the
Company. The Company shall have the sole right to accept offers to purchase
Shares and may reject any such offer, in whole or in part. The Placement Agent
shall have the right, in its discretion reasonably exercised, without notice to
the Company, to reject any offer to purchase Shares received by it, in whole or
in part, and any such rejection shall not be deemed a breach of this Agreement.

 

(d)          The Shares are being sold to the Purchasers at an offering price of
$11.90 per share. The purchases of the Shares by the Purchasers shall be
evidenced by the execution of Subscription Agreements by each of the Purchasers
and the Company.

 

(e)          As compensation for services rendered, on the Closing Date (as
defined in Section 4 below), the Company shall pay to the Placement Agent by
wire transfer of immediately available funds to an account or accounts
designated by the Placement Agent, an aggregate amount equal to six percent (6%)
of the gross proceeds received by the Company (the “Placement Fee”) from the
sale of the Shares on such Closing Date. The Placement Agent may retain other
brokers or dealers to act as sub-agents on its behalf in connection with the
Offering, the fees of which shall be paid out of the Placement Fee.
Notwithstanding the foregoing, with respect to any investment in the Offering
made by Technology Partners, Inc., the Placement Agent shall only be entitled to
a fee of 0.87% of the gross proceeds received by the Company from such
investment by Technology Partners, Inc.

 

(f)          No Shares which the Company has agreed to sell pursuant to this
Agreement and the Subscription Agreements shall be deemed to have been purchased
and paid for, or sold by the Company, until such Shares shall have been
delivered to the Purchaser thereof against payment by such Purchaser. If the
Company shall default in its obligations to deliver Shares to a Purchaser whose
offer it has accepted, the Company shall indemnify and hold the Placement Agent
harmless against any loss, claim, damage or expense arising from or as a result
of such default by the Company in accordance with the procedures set forth in
Section 7(c) herein.

 

2a.         Representations and Warranties of the Company Regarding the
Offering.

 

(a)          The Company represents and warrants to, and agrees with, the
Placement Agent, as of the date hereof and as of the Closing Date (as defined in
Section 4 below), except as otherwise indicated, as follows:

 

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(i)          At each time of effectiveness, at the date hereof and at the
Closing Date, the Registration Statement and any post-effective amendment
thereto complied or will comply in all material respects with the requirements
of the Securities Act and the Rules and Regulations and did not, does not and
will not contain any 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. The Time of Sale Disclosure Package (as defined in
Section 2a(a)(iii)(A)(1) below) as of the date hereof, at the Closing Date, and
the Prospectus, as amended or supplemented, as of its date, at the time of
filing pursuant to Rule 424(b) under the Securities Act and at the Closing Date,
does not and will not contain any 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, in the light of the circumstances under which they were
made, not misleading. The representations and warranties set forth in the two
immediately preceding sentences shall not apply to statements in or omissions
from the Registration Statement, the Time of Sale Disclosure Package or any
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Placement Agent specifically for use in the
preparation thereof, which written information is described in Section 7(f). The
Registration Statement contains all exhibits and schedules required to be filed
by the Securities Act or the Rules and Regulations. No order preventing or
suspending the effectiveness or use of the Registration Statement or any
Prospectus is in effect and no proceedings for such purpose have been instituted
or are pending, or, to the knowledge of the Company, are contemplated or
threatened by the Commission.

 

(ii)         The Company has not distributed any prospectus or other offering
material in connection with the offering and sale of the Shares other than the
Time of Sale Disclosure Package.

 

(iii)        (A) The Company has provided a copy to the Placement Agent of each
Issuer Free Writing Prospectus (as defined below) used in the sale of the
Shares.  The Company has filed all Issuer Free Writing Prospectuses required to
be so filed with the Commission, and no order preventing or suspending the
effectiveness or use of any Issuer Free Writing Prospectus is in effect and no
proceedings for such purpose have been instituted or are pending, or, to the
knowledge of the Company, are contemplated or threatened by the Commission. 
When taken together with the rest of the Time of Sale Disclosure Package or the
Final Prospectus, since its first use and at all relevant times since then, no
Issuer Free Writing Prospectus has, does or will include (1) any untrue
statement of a material fact or omission to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or (2) information that conflicted,
conflicts or will conflict with the information contained in the Registration
Statement or the Final Prospectus. The representations and warranties set forth
in the immediately preceding sentence shall not apply to statements in or
omissions from the Time of Sale Disclosure Package, the Final Prospectus or any
Issuer Free Writing Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by the Placement Agent specifically for use
in the preparation thereof.  As used in this paragraph and elsewhere in this
Agreement:

 

(1)         “Time of Sale Disclosure Package” means the Base Prospectus, the
Prospectus most recently filed with the Commission before the time of this
Agreement, including any preliminary prospectus supplement deemed to be a part
thereof, each Issuer Free Writing Prospectus, and the description of the
transaction provided by the Placement Agent included on Schedule I.

 

(2)         “Issuer Free Writing Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433 under the Securities Act, relating to the
Shares that (A) is required to be filed with the Commission by the Company, or
(B) is exempt from filing pursuant to Rule 433(d)(5)(i) or (d)(8) under the
Securities Act, in each case 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) under the Securities Act.

 

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(B)         At the time of filing of the Registration Statement and at the date
hereof, the Company was not and is not an “excluded issuer” as defined in Rule
164 under the Securities Act.

 

(C)         Each Issuer Free Writing Prospectus satisfied, as of its issue date
and at all subsequent times through the Prospectus Delivery Period (as defined
below in Section 4(a)(i)), all other conditions as may be applicable to its use
as set forth in Rules 164 and 433 under the Securities Act, including any
legend, record-keeping or other requirements.

 

(iv)        The financial statements of the Company, together with the related
notes, included or incorporated by reference in the Registration Statement, the
Time of Sale Disclosure Package and the Final Prospectus comply in all material
respects with the applicable requirements of the Securities Act and fairly
present the financial condition of the Company as of the dates indicated and the
results of operations and changes in cash flows for the periods therein
specified in conformity with U.S. generally accepted accounting principles
consistently applied throughout the periods involved; and the supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein. The pro forma financial information included in
the Registration Statement, the Time of Sale Disclosure Package and the Final
Prospectus has been properly compiled and prepared in all material respects in
accordance with the applicable requirements of the Securities Act and the Rules
and Regulations and include all adjustments necessary to present fairly in
accordance with U.S. generally accepted accounting principles the pro forma
financial position of the respective entity or entities presented therein at the
respective dates indicated and their cash flows and the results of operations
for the respective periods specified. The assumptions used in preparing the pro
forma financial information included in the Registration Statement, the Time of
Sale Disclosure Package and the Final Prospectus provide a reasonable basis for
presenting the significant effects directly attributable to the transactions or
events described therein. The related pro forma adjustments give appropriate
effect to those assumptions; and the pro forma and pro forma as adjusted
financial information reflect the proper application of those adjustments to the
corresponding historical financial statement amounts. No other financial
statements, pro forma financial information or schedules are required under the
Securities Act to be included or incorporated by reference in the Registration
Statement, the Time of Sale Disclosure Package or the Final Prospectus.

 

(v)         To the Company’s knowledge, EisnerAmper LLP, which has expressed its
opinion with respect to the financial statements and schedules incorporated by
reference as a part of the Registration Statement and incorporated by reference
in the Registration Statement, the Time of Sale Disclosure Package and the Final
Prospectus, is an independent public accounting firm with respect to the Company
within the meaning of the Securities Act and the Rules and Regulations.

 

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(vi)        The Company had a reasonable basis for, and made in good faith, each
“forward-looking statement” (within the meaning of Section 27A of the Securities
Act or Section 21E of the Exchange Act) contained or incorporated by reference
in the Registration Statement, the Time of Sale Disclosure Package, the Final
Prospectus, in each case at the time such “forward-looking statement” was made.

 

(vii)       All statistical or market-related data included or incorporated by
reference in the Registration Statement, the Time of Sale Disclosure Package or
the Final Prospectus, are based on or derived from sources that the Company
reasonably believes to be reliable and accurate, and the Company has obtained
the written consent to the use of such data from such sources, to the extent
required, other than such consents the failure of which to obtain is not
reasonably likely to result in a Material Adverse Effect (as defined below in
Section 3(a)(i)).

 

(viii)      The Common Stock is registered pursuant to Section 12(b) of the
Exchange Act and is listed on the NASDAQ Capital Market. Except as set forth in
the Registration Statement, the Time of Sale Disclosure Package and the
Prospectus, there is no action pending by the Company or, to the Company’s
knowledge, by the NASDAQ Capital Market to delist the Common Stock from the
NASDAQ Capital Market, nor has the Company received any notification that the
NASDAQ Capital Market is contemplating terminating such listing. The Company has
submitted a Notification Form: Listing of Additional Shares with the NASDAQ
Capital Market with respect to the Shares.

 

(ix)         The Company has not taken, directly or indirectly, any action that
is designed to or that has constituted or that would reasonably be expected to
cause or result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale of the Shares.

 

(x)          The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the net proceeds thereof, will not be
an “investment company,” as such term is defined in the Investment Company Act
of 1940, as amended.

 

(b)          Any certificate signed by any officer of the Company and delivered
to the Placement Agent or to the Placement Agent’s counsel shall be deemed a
representation and warranty by the Company to the Placement Agent as to the
matters covered thereby.

 

3.          Representations and Warranties Regarding the Company.

 

(a)          The Company represents and warrants to and agrees with, the
Placement Agent, as of the date hereof and as of the Closing Date (as defined in
Section 4 below), except as set forth in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus, as follows:

 

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(i)          Each of the Company and its subsidiaries has been duly organized
and is validly existing as a corporation or other entity in good standing under
the laws of its jurisdiction of organization. Each of the Company and its
subsidiaries has the power and authority (corporate or otherwise) to own its
properties and conduct its business as currently being carried on and as
described in the Registration Statement, the Time of Sale Disclosure Package and
the Prospectus, and is duly qualified to do business as a foreign corporation or
other entity in good standing in each jurisdiction in which it owns or leases
real property or in which the conduct of its business makes such qualification
necessary and in which the failure to so qualify would have or is reasonably
likely to result in a material adverse effect upon the business, prospects,
properties, operations, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole, or in its
ability to perform its obligations under this Agreement (“Material Adverse
Effect”). Except for those of the Company’s subsidiaries set forth on Schedule
II attached hereto, none of the Company’s subsidiaries is a “significant
subsidiary” (as such term is defined in Rule 1-02 of Regulation S-X promulgated
under the Securities Act).

 

(ii)         The Company has the power and authority to enter into this
Agreement and each of the Subscription Agreements and to perform and to
discharge its obligations hereunder and thereunder. This Agreement and each of
the Subscription Agreements have been duly authorized, executed and delivered by
the Company, and constitutes a valid, legal and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
rights to indemnity hereunder may be limited by federal or state securities laws
and except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.

 

(iii)        The execution, delivery and performance of this Agreement and the
Subscription Agreements and the consummation of the transactions herein
contemplated will not (A) result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any law, order, rule or
regulation to which the Company or any subsidiary is subject, or by which any
property or asset of the Company or any subsidiary is bound or affected, except
to the extent such breach, violation or default is not reasonably likely to have
a Material Adverse Effect, (B) conflict with, result in any violation or breach
of, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) (a “Default Acceleration Event”) of, any agreement, lease, credit
facility, debt, note, bond, mortgage, indenture or other instrument (the
“Contracts”) or obligation or other understanding to which the Company or any
subsidiary is a party or by which any property or asset of the Company or any
subsidiary is bound or affected, except to the extent that such conflict,
default or Default Acceleration Event is not reasonably likely to result in a
Material Adverse Effect, or (C) result in a breach or violation of any of the
terms and provisions of, or constitute a default under, the Company’s articles
of incorporation, as amended, or by-laws, as amended.

 

(iv)        Neither the Company nor any of its subsidiaries is in violation,
breach or default under its articles of incorporation, as amended, by-laws, as
amended, or other equivalent organizational or governing documents, except where
the violation, breach or default in the case of a subsidiary of the Company is
not reasonably likely to result in a Material Adverse Effect.

 

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(v)         No consents, approvals, orders, authorizations or filings are
required on the part of the Company and its subsidiaries in connection with the
execution, delivery or performance of this Agreement, the Subscription
Agreements and the issue and sale of the Shares, except (A) the registration
under the Securities Act of the Shares, (B) such consents, approvals,
authorizations, registrations or qualifications as may be required under state
or foreign securities or Blue Sky laws and the rules of the Financial Industry
Regulatory Authority, Inc. (“FINRA”) in connection with the placement and
distribution of the Shares by the Placement Agent, (C) the necessary filings and
approvals from the NASDAQ Capital Market to list the Shares and (D) such
consents, approvals, orders, authorizations and filings the failure of which to
make or obtain is not reasonably likely to result in a Material Adverse Effect.

 

(vi)        The Company has an authorized capitalization as set forth in the
Registration Statement, the Time of Sale Disclosure Package and the Prospectus.
All of the issued and outstanding shares of capital stock of the Company are
duly authorized and validly issued, fully paid and nonassessable, and have been
issued in compliance with all applicable securities laws, and conform in all
material respects to the description thereof in the Registration Statement, the
Time of Sale Disclosure Package and the Prospectus. All of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned directly
or indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims. Except for the issuances of options or restricted stock in
the ordinary course of business, since the respective dates as of which
information is provided in the Registration Statement, the Time of Sale
Disclosure Package or the Prospectus, the Company has not entered into or
granted any convertible or exchangeable securities, options, warrants,
agreements, contracts or other rights in existence to purchase or acquire from
the Company any shares of the capital stock of the Company. The Shares to be
issued and sold by the Company to the Purchasers hereunder and under the
Subscription Agreements have been duly authorized and, when issued, will be
validly issued, fully paid and nonassessable, will be issued in compliance with
all applicable securities laws, and will be free of preemptive, registration or
similar rights and will conform to the description of the capital stock of the
Company contained in the Registration Statement, the Time of Sale Disclosure
Package and the Prospectus. The Shares, when issued, will conform in all
material respects to the descriptions thereof set forth in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus.

 

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(vii)       Each of the Company and its subsidiaries has (A) 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
and (B) 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 or such respective subsidiary, except, in all cases, for any such
amounts that the Company or any subsidiary is contesting in good faith and
except in any case in which the failure to so file or pay would not reasonably
be expected to have a Material Adverse Effect. 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. 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 or its subsidiaries, and no waivers of statutes
of limitation with respect to the returns or collection of taxes have been given
by or requested from the Company or its subsidiaries. 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.

 

(viii)      Since the respective dates as of which information is given
(including by incorporation by reference) in the Registration Statement, the
Time of Sale Disclosure Package or the Prospectus, (a) neither the Company nor
any of its subsidiaries has 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 (other than a change in the number of outstanding shares
of Common Stock due to the issuance of shares upon the exercise of outstanding
options or warrants or the issuance of restricted stock awards or restricted
stock units under the Company’s existing stock awards plan, or any new grants
thereof in the ordinary course of business), (d) there has not been any material
change in the Company’s long-term or short-term debt, and (e) there has not been
the occurrence of any Material Adverse Effect.

 

(ix)         Except as a set forth in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus, there is not pending or, to the
knowledge of the Company, threatened, any action, suit or proceeding to which
the Company or any of its subsidiaries is a party or of which any property or
assets of the Company or its subsidiaries is the subject before or by any court
or governmental agency, authority or body, or any arbitrator or mediator, which
is reasonably likely to result in a Material Adverse Effect or adversely affect
the consummation of the transactions contemplated by this Agreement.

 

(x)          The Company and each of its subsidiaries holds, and is in
compliance with, all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates and orders (“Permits”) of any governmental or
self-regulatory agency, authority or body required for the conduct of its
business, and all such Permits are in full force and effect, in each case except
where the failure to hold, or comply with, any of them is not reasonably likely
to result in a Material Adverse Effect.

 

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(xi)         The Company and its subsidiaries have good and marketable title to
all property (whether real or personal) described in the Registration Statement,
the Time of Sale Disclosure Package and the Prospectus as being owned by them
that is material to the business of the Company, in each case free and clear of
all liens, claims, security interests, other encumbrances or defects, except
those that are not reasonably likely to result in a Material Adverse Effect. The
property held under lease by the Company and its subsidiaries is held by them
under valid, subsisting and enforceable leases with only such exceptions with
respect to any particular lease as do not interfere in any material respect with
the conduct of the business of the Company and its subsidiaries.

 

(xii)        The Company and each of its subsidiaries owns or possesses or has
valid right to use all patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service mark registrations, copyrights,
licenses, inventions, trade secrets and similar rights (“Intellectual Property”)
necessary for the conduct of the business of the Company and its subsidiaries as
currently carried on and as described in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus. To the knowledge of the Company, no
action or use by the Company or any of its subsidiaries will involve or give
rise to any infringement of, or license or similar fees for, any Intellectual
Property of others, except where such action, use, license or fee is not
reasonably likely to result in a Material Adverse Effect. Neither the Company
nor any of its subsidiaries has received any notice alleging any such
infringement or fee.

 

(xiii)       The Company and each of its subsidiaries has complied with, is not
in violation of, and has not received any notice of violation relating to any
law, rule or regulation relating to the conduct of its business, or the
ownership or operation of its property and assets, including, without
limitation, (A) the Currency and Foreign Transactions Reporting Act of 1970, as
amended, or any money laundering laws, rules or regulations, (B) any laws, rules
or regulations related to health, safety or the environment, including those
relating to the regulation of hazardous substances, (C) the Sarbanes-Oxley Act
and the rules and regulations of the Commission thereunder, (D) the Foreign
Corrupt Practices Act of 1977 and the rules and regulations thereunder, and (E)
the Employment Retirement Income Security Act of 1974 and the rules and
regulations thereunder, in each case except where the failure to be in
compliance is not reasonably likely to result in a Material Adverse Effect.

 

(xiv)      Neither the Company nor any of its subsidiaries nor, to the knowledge
of the Company, any director, officer, employee, representative, agent or
affiliate of the Company or any of its subsidiaries 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 the offering of the Shares contemplated hereby, or lend,
contribute or otherwise make available such proceeds to any person or entity,
for the purpose of financing the activities of any person currently subject to
any U.S. sanctions administered by OFAC.

 

(xv)       The Company and each of its subsidiaries carries, or is covered by,
insurance in such amounts and covering such risks as, in the Company’s
reasonable judgment, is adequate for the conduct of its business and the value
of its properties and as is customary for similarly sized companies engaged in
similar businesses in similar industries.

 

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(xvi)      No labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the knowledge of the Company, is imminent, that is
reasonably likely to result in a Material Adverse Effect.

 

(xvii)     Except as set forth in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus, neither the Company, its subsidiaries
nor, to its knowledge, any other party is in violation, breach or default of any
Contract that is reasonably likely to result in a Material Adverse Effect.

 

(xviii)    No supplier, customer, distributor or sales agent of the Company
has notified the Company that it intends to discontinue or decrease the rate of
business done with the Company, except where such decrease is not reasonably
likely to result in a Material Adverse Effect.

 

(xix)       There are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder’s, consulting or
origination fee with respect to the introduction of the Company to the Placement
Agent or the sale of the Shares hereunder or any other arrangements, agreements,
understandings, payments or issuances with respect to the Company that may
affect the Placement Agent’s compensation, as determined by FINRA.

 

(xx)        Except as set forth or incorporated by reference in the Registration
Statement, the Time of Sale Disclosure Package 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, investing fee or otherwise, in
consideration of such person raising capital for the Company or introducing to
the Company persons who provided capital to the Company, (ii) any FINRA member,
or (iii) any person or entity that has any direct or indirect affiliation or
association with any FINRA member within the 12-month period prior to the date
on which the Registration Statement was filed with the Commission (“Filing
Date”) or thereafter.

 

(xxi)       None of the net proceeds of the offering will be paid by the Company
to any participating FINRA member or any affiliate or associate of any
participating FINRA member, except as specifically authorized herein.

 

(xxii)      Except as set forth or incorporated by reference in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus, to the
Company’s knowledge, no (i) officer or director of the Company or its
subsidiaries, (ii) owner of 5% or more of the Company’s unregistered securities
or that of its subsidiaries or (iii) owner of any amount of the Company’s
unregistered securities acquired within the 180-day period prior to the Filing
Date, has any direct or indirect affiliation or association with any FINRA
member. The Company will advise the Placement Agent and its counsel if it
becomes aware that any officer, director or stockholder of the Company or its
subsidiaries is or becomes an affiliate or associated person of a FINRA member
participating in the offering.

 

-11-

 

 

(xxiii)     Other than the Placement Agent, no person has the right to act as a
placement agent, an underwriter or as a financial advisor to the Company in
connection with the transactions contemplated hereby.

 

(xxiv)    The statements set forth in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus under the caption “Description of
Capital Stock” insofar as they purport to constitute a summary of the terms of
the Shares and documents referred to therein, are accurate, complete and fair.

 

(xxv)     Except as set forth in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus, there are no contracts, agreements or
understandings between the Company and any person granting such person the right
(other than rights which have been waived in writing or otherwise satisfied) to
require the Company to file a registration statement under the Securities Act
with respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the securities
registered pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the Company
under the Securities Act.

 

(xxvi)    Except as set forth or incorporated by reference in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus, the Company
has not sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to Rule 144A
under, or Regulations D or S of, the Securities Act, other than shares issued
pursuant to employee benefit plans, stock option plans or other employee
compensation plans or pursuant to outstanding options, rights or warrants.

 

(xxvii)   The Company and each of its subsidiaries (i) are in compliance with
all, and have not violated any, laws, regulations, ordinances, rules, orders,
judgments, decrees, permits or other legal requirements of any governmental
authority, including without limitation any international, national, state,
provincial, regional, or local authority, relating to the protection of human
health or safety, the environment, or natural resources, or to hazardous or
toxic substances or wastes, pollutants or contaminants (including, without
limitation, all health and safety laws) (“Environmental Laws”) applicable to
such entity, which compliance includes, without limitation, obtaining,
maintaining and complying with all permits and authorizations and approvals
required by Environmental Laws to conduct their respective businesses as
described in the Registration Statement, the Time of Sale Disclosure Package and
the Prospectus, except where the failure to comply would not, singularly or in
the aggregate, have a Material Adverse Effect, and (ii) have not received notice
of any actual or alleged violation of Environmental Laws, or of any potential
liability for or other obligation concerning the presence, disposal or release
of hazardous or toxic substances or wastes, pollutants or contaminants.

 

(A)         There are no proceedings that are pending, or known to be
contemplated, against the Company or any of its subsidiaries under Environmental
Laws in which a governmental authority is also a party.

 

-12-

 

 

(B)         The Company and its subsidiaries are not aware of any existing
liabilities concerning hazardous or toxic substances or wastes, pollutants or
contaminants that could reasonably be expected to have a Material Adverse Effect
on the capital expenditures, earnings or competitive position of the Company and
its subsidiaries.

 

(C)         To the knowledge of the Company, no property which is or has been
owned, leased, used, operated or occupied by the Company or its subsidiaries has
been designated as a Superfund site pursuant to the Comprehensive Environmental
Response, Compensation of Liability Act of 1980, as amended (42 U.S.C. Section
9601, et. seq.), or otherwise designated as a contaminated site under applicable
state or local law.

 

(xxviii)  The Company maintains a system of internal control over financial
reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act)
that complies in all material respects with the requirements of the Exchange Act
and has been designed by the Company’s principal executive officer and principal
financial officer, or under their supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. The Company’s internal control over financial
reporting is effective and the Company is not aware of any material weaknesses
in its internal control over financial reporting.

 

(xxix)    Since the date of the latest audited financial statements included or
incorporated by reference in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus, there has been no change in the Company’s
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.

 

(xxx)    The Company maintains disclosure controls and procedures (as such term
is defined in Rule 13a-15(e) under the Exchange Act) that comply with the
requirements of the Exchange Act; such disclosure controls and procedures have
been designed to ensure that material information relating to the Company and
its subsidiaries is made known to the Company’s principal executive officer and
principal financial officer by others within those entities; and such disclosure
controls and procedures are effective.

 

(xxxi)   The operations of the Company and its subsidiaries are being conducted
in material compliance with applicable employment laws, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Employee Benefit Laws”) and no action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or any of its subsidiaries with respect to the Employee
Benefit Laws is pending or, to the knowledge of the Company, threatened.

 

-13-

 

 

(xxxii)   Neither the Company nor any of its subsidiaries or affiliates, nor any
director, officer, or employee, nor, to the Company’s knowledge, any agent or
representative of the Company or of any of its subsidiaries or affiliates, has
taken any action in furtherance of an offer, payment, promise to pay, or
authorization or approval of the payment or giving of money, property, gifts or
anything else of value, directly or indirectly, to any “government official”
(including any officer or employee of a government or government-owned or
controlled entity or of a public international organization, or any person
acting in an official capacity for or on behalf of any of the foregoing, or any
political party or party official or candidate for political office) to
influence official action or secure an improper advantage; and the Company and
its subsidiaries and affiliates conduct their businesses in compliance in all
material respects with applicable anti-corruption laws and have instituted and
maintain and will continue to maintain policies and procedures designed to
promote and achieve compliance in all material respects with such laws and with
the representation and warranty contained herein.

 

4.          The Closing. The time and date of closing and delivery of the
documents required to be delivered to the Placement Agent pursuant to Sections 5
and 6 hereof shall be at 10:00 A.M., New York time, on July 16, 2014 (the
“Closing Date”) at the office of Lowenstein Sandler LLP, 1251 Avenue of the
Americas, New York, New York 10020.

 

5.          Covenants.

 

(a)          The Company covenants and agrees with the Placement Agent as
follows:

 

(i)          To prepare the Prospectus in a form approved by the Placement Agent
and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not
later than the Commission’s close of business on the second business day
following the execution and delivery of this Agreement, or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Securities Act.

 

(ii)         During the period beginning on the date hereof and ending on the
date that the Prospectus is no longer required by law to be delivered in
connection with sales by an underwriter or dealer (the “Prospectus Delivery
Period”), prior to amending or supplementing the Registration Statement,
including any Rule 462 Registration Statement, the Time of Sale Disclosure
Package or the Prospectus, the Company shall furnish to the Placement Agent for
review and comment a copy of each such proposed amendment or supplement, and the
Company shall not file any such proposed amendment or supplement to which the
Placement Agent reasonably objects.

 

-14-

 

 

(iii)        From the date of this Agreement until the end of the Prospectus
Delivery Period, the Company shall promptly advise the Placement Agent in
writing (A) of the receipt of any comments of, or requests for additional or
supplemental information from, the Commission, (B) of the time and date of any
filing of any post-effective amendment to the Registration Statement or any
amendment or supplement to the Time of Sale Disclosure Package, the Prospectus
or any Issuer Free Writing Prospectus, (C) of the time and date that any
post-effective amendment to the Registration Statement becomes effective and (D)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or of any order preventing or suspending its use
or the use of the Time of Sale Disclosure Package or any Issuer Free Writing
Prospectus, or of any proceedings to remove, suspend or terminate from listing
or quotation the Common Stock from any securities exchange upon which it is
listed for trading or included or designated for quotation, or of the
threatening or initiation of any proceedings for any of such purposes. If the
Commission shall enter any such stop order at any time during the Prospectus
Delivery Period, the Company will use its reasonable efforts to obtain the
lifting of such order at the earliest possible moment. Additionally, the Company
agrees that it shall comply with the provisions of Rules 424(b), 430A and 430B,
as applicable, under the Securities Act and will use its reasonable efforts to
confirm that any filings made by the Company under Rule 424(b) or Rule 433 were
received in a timely manner by the Commission (without reliance on Rule
424(b)(8) or 164(b) of the Securities Act).

 

(iv)        (A) During the Prospectus Delivery Period, the Company will comply
with all requirements imposed upon it by the Securities Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to time in
force, and by the Exchange Act, as now and hereafter amended, so far as
necessary to permit the continuance of sales of or dealings in the Shares as
contemplated by the provisions hereof, the Time of Sale Disclosure Package, the
Registration Statement and the Prospectus. If during such period any event
occurs as the result of which the Prospectus (or if the Prospectus is not yet
available to prospective purchasers, the Time of Sale Disclosure Package) 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
under which such statement was made, not misleading, or if during such period it
is necessary or appropriate in the opinion of the Company or its counsel or the
Placement Agent or its counsel to amend the Registration Statement or supplement
the Prospectus (or if the Prospectus is not yet available to prospective
purchasers, the Time of Sale Disclosure Package) to comply with the Securities
Act, the Company will promptly notify the Placement Agent and will amend the
Registration Statement or supplement the Prospectus (or if the Prospectus is not
yet available to prospective purchasers, the Time of Sale Disclosure Package) so
as to correct such statement or omission or effect such compliance.

 

(B)         If during the Prospectus Delivery Period there occurred or occurs an
event or development the result of which is that such Issuer Free Writing
Prospectus conflicted or would conflict with the information contained in the
Registration Statement or any Prospectus or included or would include an untrue
statement of a material fact or omitted or would omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances prevailing at that subsequent time, not misleading, the Company
has promptly notified or promptly will notify the Placement Agent and has
promptly amended or will promptly amend or supplement, at its own expense, such
Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue
statement or omission.

 

-15-

 

 

(v)         The Company shall take or cause to be taken all necessary action to
qualify the Shares for sale under the securities laws of such jurisdictions as
the Placement Agent reasonably designates and to continue such qualifications in
effect so long as required for the distribution of the Shares, except that the
Company shall not be required in connection therewith to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is not
so qualified, to execute a general consent to service of process in any state or
to subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise subject.

 

(vi)        The Company will furnish to the Placement Agent and counsel for the
Placement Agent copies of the Registration Statement, each Prospectus, any
Issuer Free Writing Prospectus, and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as the
Placement Agent may from time to time reasonably request.

 

(vii)       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 shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 of the Rules and Regulations.

 

(viii)      The Company, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay or cause to be paid
(A) all expenses (including transfer taxes allocated to the respective
transferees) incurred in connection with the delivery to the Placement Agent of
the Shares, (B) all expenses and fees (including, without limitation, fees and
expenses of the Company’s counsel) in connection with the preparation, printing,
filing, delivery, and shipping of the Registration Statement (including the
financial statements therein and all amendments, schedules, and exhibits
thereto), the Shares, the Time of Sale Disclosure Package, the Prospectus, any
Issuer Free Writing Prospectus and any amendment thereof or supplement thereto,
(C) all reasonable filing fees and reasonable fees and disbursements of the
Placement Agent’s counsel incurred in connection with the qualification of the
Shares for offering and sale by the Placement Agent or by dealers under the
securities or blue sky laws of the states and other jurisdictions that the
Placement Agent shall designate, (D) the fees and expenses of any transfer agent
or registrar, (E) the reasonable files fees and reasonable fees and
disbursements of the Placement Agent’s counsel incident to any required review
and approval by FINRA of the terms of the sale of the Shares, (F) listing fees,
if any, and (G) all other costs and expenses incident to the performance of its
obligations hereunder that are not otherwise specifically provided for herein.
The Company will reimburse the Placement Agent for its reasonable out-of-pocket
expenses, including its legal fees and disbursements, in connection with the
purchase and sale of the Shares contemplated hereby up to an aggregate of
$20,000 without the Company’s prior consent, which shall not be unreasonably
withheld, but in no event to exceed $35,000 in the aggregate (including pursuant
to clause (E) above). In no event may the maximum compensation payable to FINRA
members and independent broker-dealers exceed 8.0% of the gross proceeds of this
offering. If this Agreement is terminated by the Placement Agent in accordance
with the provisions of Section 6, Section 9 or Section 10, the Company will
reimburse the Placement Agent for all out-of-pocket disbursements (including,
but not limited to, reasonable fees and disbursements of counsel, travel
expenses, postage, facsimile and telephone charges) fees and disbursements
incurred by the Placement Agent in connection with its investigation, preparing
to market and marketing the Shares or in contemplation of performing its
obligations hereunder.

 

-16-

 

 

(ix)         The Company intends to apply the net proceeds from the sale of the
Shares to be sold by it hereunder for the purposes set forth in the Time of Sale
Disclosure Package and in the Final Prospectus.

 

(x)          The Company has not taken and will not take, directly or
indirectly, during the Prospectus Delivery Period, any action designed to or
which might reasonably be expected to cause or result in, or that has
constituted, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares.

 

(xi)         The Company represents and agrees that, unless it obtains the prior
written consent of the Placement Agent, and the Placement Agent represents and
agrees that, unless it obtains, the prior written consent of the Company, it has
not made and will not make any offer relating to the Shares that would
constitute an Issuer Free Writing Prospectus; provided that the prior written
consent of the parties hereto shall be deemed to have been given in respect of
the free writing prospectuses included in Schedule III. Any such free writing
prospectus consented to by the Company and the Placement Agent is hereinafter
referred to as a “Permitted Free Writing Prospectus.” The Company represents
that it has treated or agrees that it will treat each Permitted Free Writing
Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and
has complied or will comply with the requirements of Rule 433 applicable to any
Permitted Free Writing Prospectus, including timely Commission filing where
required, legending and record-keeping.

 

(xii)        The Company hereby agrees that, without the prior written consent
of the Placement Agent, it will not, during the period ending 30 days after the
date hereof (“Lock-Up Period”), (i) offer, pledge, issue, sell, contract to
sell, purchase, contract to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock; or (ii) 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 Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise; or (iii) file
any registration statement with the Commission relating to the offering of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (other than (A) a registration statement on Form
S-4 and Form S-8 or (B) a post-effective amendment on Form S-3 to a previously
filed and effective registration statement on Form S-1 solely for purposes of
keeping such prior effective registration statement current). The restrictions
contained in the preceding sentence shall not apply to (1) the Shares to be sold
hereunder, (2) the issuance of Common Stock upon the exercise of options,
warrants or other exchange rights as disclosed as outstanding in the
Registration Statement (excluding exhibits thereto) or the Prospectus, or (3)
the issuance of employee stock options not exercisable during the Lock-Up Period
and the grant of restricted stock awards or restricted stock units pursuant to
equity incentive plans described in the Registration Statement (excluding
exhibits thereto) and the Prospectus. Notwithstanding the foregoing, to the
extent that the Placement Agent is at such time providing research coverage to
the Company or intends to commence research coverage to the Company and is
subject to the restrictions set forth in NASD Rule 2711(f)(4), if (x) 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 (y) 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 clause 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 Placement Agent waives such extension in writing;
provided, however, that this sentence shall not apply if the research published
or distributed on the Company is compliant with Rule 139 of the Securities Act
and the Company’s securities are “actively traded” as defined in Rule 101(c)(1)
of Regulation M of the Exchange Act.

 

-17-

 

 

(xiii)      To engage and maintain, at its expense, a registrar and transfer
agent for the Common Stock.

 

(xiv)      To use its best efforts to list the Shares on the NASDAQ Capital
Market.

 

(xv)        To not take, directly or indirectly, any action designed to cause or
result in, or that has constituted or might reasonably be expected to
constitute, under the Exchange Act or otherwise, the stabilization or
manipulation of the price of any securities of the Company to facilitate the
sale or resale of the Shares.

 

6.          Conditions of the Placement Agent’s Obligations. The obligations of
the Placement Agent hereunder, and the Closing of the sale of the Shares, are
subject to the accuracy, as of the date hereof and at the Closing Date, of and
compliance in all material respects with all representations, warranties and
agreements of the Company contained herein, the performance by the Company of
its obligations hereunder and the following additional conditions:

 

(a)          If filing of the Prospectus, or any amendment or supplement
thereto, or any Issuer Free Writing Prospectus, is required under the Securities
Act or the Rules and Regulations, the Company shall have filed the Prospectus
(or such amendment or supplement) or such Issuer Free Writing Prospectus with
the Commission in the manner and within the time period so required (without
reliance on Rule 424(b)(8) or 164(b) under the Securities Act); the Registration
Statement shall remain effective; no stop order suspending the effectiveness of
the Registration Statement or any part thereof, any Rule 462 Registration
Statement, or any amendment thereof, nor suspending or preventing the use of the
Time of Sale Disclosure Package, the Prospectus or any Issuer Free Writing
Prospectus shall have been issued; no proceedings for the issuance of such an
order shall have been initiated or threatened; any request of the Commission or
the Placement Agent for additional information (to be included in the
Registration Statement, the Time of Sale Disclosure Package, the Prospectus, any
Issuer Free Writing Prospectus or otherwise) shall have been complied with to
the Placement Agent’s satisfaction.

 

(b)          The Shares shall be qualified for listing on the NASDAQ Capital
Market.

 

-18-

 

 

(c)          The Company shall have entered into Subscription Agreements with
each of the Purchasers and such agreements shall be in full force and effect.

 

(d)          FINRA shall have raised no objection to the fairness and
reasonableness of the terms of this Agreement or the transactions contemplated
thereby.

 

(e)          The Placement Agent shall not have reasonably determined, and
advised the Company, that the Registration Statement, the Time of Sale
Disclosure Package or the Prospectus, or any amendment thereof or supplement
thereto, or any Issuer Free Writing Prospectus, contains an untrue statement of
fact which, in the Placement Agent’s reasonable opinion, is material, or omits
to state a fact which, in the Placement Agent’s reasonable opinion, is material
and is required to be stated therein or necessary to make the statements therein
not misleading.

 

(f)          On the Closing Date, there shall have been furnished to the
Placement Agent the opinion and negative assurance letter of Sichenzia Ross
Friedman Ference LLP, outside corporate counsel for the Company dated the
Closing Date, and addressed to the Placement Agent, in form and substance
reasonably satisfactory to the Placement Agent.

 

(g)          On the Closing Date, there shall have been furnished to the
Placement Agent the opinion and negative assurance letter of Ropes & Gray LLP,
as intellectual property counsel for the Company dated the Closing Date, and
addressed to the Placement Agent, in form and substance reasonably satisfactory
to the Placement Agent.

 

(h)          On the Closing Date, there shall have been furnished to the
Placement Agent the opinion and negative assurance letter of Buchanan Ingersoll
& Rooney PC, as regulatory counsel for the Company dated the Closing Date, and
addressed to the Placement Agent, in form and substance reasonably satisfactory
to the Placement Agent.

 

(i)          On the Closing Date, there shall have been furnished to the
Placement Agent the negative assurance letter of Lowenstein Sandler LLP, counsel
to the Placement Agent, dated the Closing Date, and addressed to the Placement
Agent, in form and substance reasonably satisfactory to the Placement Agent.

 

(j)          The Placement Agent shall have received a letter of EisnerAmper LLP
on the date hereof and on the Closing Date, addressed to the Placement Agent,
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualifications of accountants under Rule 2-01 of Regulation S-X
of the Commission, and confirming, as of the date of each such letter (or, with
respect to matters involving changes or developments since the respective dates
as of which specified financial information is given in the Time of Sale
Disclosure Package, as of a date not prior to the date hereof or more than five
days prior to the date of such letter), the conclusions and findings of said
firm with respect to the financial information and other matters required by the
Placement Agent.

 

-19-

 

 

(k)          On the Closing Date, there shall have been furnished to the
Placement Agent a certificate, dated the Closing Date, and addressed to the
Placement Agent, signed by the chief executive officer and the chief financial
officer of the Company, in their capacity as officers of the Company, to the
effect that:

 

(i)          The representations and warranties of the Company in this Agreement
that are qualified by materiality or by reference to any Material Adverse Effect
are true and correct in all respects, and all other representations and
warranties of the Company in this Agreement are true and correct, in all
material respects, as if made at and as of the Closing Date, and the Company has
complied with all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to the Closing Date;

 

(ii)         No stop order or other order (A) suspending the effectiveness of
the Registration Statement or any part thereof or any amendment thereof, (B)
suspending the qualification of the Shares for offering or sale, or (C)
suspending or preventing the use of the Time of Sale Disclosure Package, the
Prospectus or any Issuer Free Writing Prospectus, has been issued, and no
proceeding for that purpose has been instituted or, to their knowledge, is
contemplated by the Commission or any state or regulatory body; and

 

(iii)        There has been no occurrence of any event resulting or reasonably
likely to result in a Material Adverse Effect during the period from and after
the date of this Agreement and prior to the Closing Date.

 

(l)          On or before the date hereof, the Placement Agent shall have
received duly executed “lock-up” agreements, in a form set forth on Schedule IV,
among the Placement Agent and each of the individuals specified in Schedule V.

 

(m)          On the Closing Date, there shall have been furnished to the
Placement Agent a certificate, dated the Closing Date, and addressed to the
Placement Agent, signed by the chief financial officer of the Company, in form
and substance satisfactory to the Placement Agent.

 

(n)          The Company shall have furnished to the Placement Agent and its
counsel such additional documents, certificates and evidence as the Placement
Agent or its counsel may have reasonably requested.

 

If any condition specified in this Section 6 shall not have been fulfilled when
and as required to be fulfilled, this Agreement may be terminated by the
Placement Agent by notice to the Company at any time at or prior to the Closing
Date, and such termination shall be without liability of any party to any other
party, except that Section 5(a)(viii), Section 7 and Section 8 shall survive any
such termination and remain in full force and effect.

 

-20-

 

 

7.          Indemnification and Contribution.

 

(a)          The Company agrees to indemnify, defend and hold harmless the
Placement Agent, its affiliates, directors and officers and employees, and each
person, if any, who controls the Placement Agent within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, from and against any
losses, claims, damages or liabilities to which the Placement Agent or such
person may become subject, under the Securities Act or otherwise (including in
settlement of any litigation if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) an untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, including the information deemed to be a part of the
Registration Statement at the time of effectiveness and at any subsequent time
pursuant to Rules 430A and 430B of the Rules and Regulations, or arise out of or
are based upon the omission from the Registration Statement, or alleged omission
to state therein, a material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) an untrue statement or alleged
untrue statement of a material fact contained in the Time of Sale Disclosure
Package, the Prospectus, or any amendment or supplement thereto (including any
documents filed under the Exchange Act and deemed to be incorporated by
reference into the Registration Statement or the Prospectus), any Issuer Free
Writing Prospectus or in any other materials used in connection with the
offering of the Shares, or arise out of or are based upon the omission or
alleged omission to state therein a 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, (iii) an untrue statement or alleged
untrue statement of a material fact contained in 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 Shares, including any roadshow or
investor presentations made to investors by the Company (whether in person or
electronically), or arise out of or are based upon the omission or alleged
omission to state therein a 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, (iv) in whole or in part, any material
breach in the representations and warranties of the Company contained herein or
in the Subscription Agreements, or (v) in whole or in part, any failure of the
Company to perform its obligations hereunder, under the Subscription Agreements
or under law, and will reimburse the Placement Agent for any legal or other
expenses reasonably incurred by it in connection with evaluating, investigating
or defending against such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, the Time of Sale Disclosure
Package, the Prospectus, or any amendment or supplement thereto or any Issuer
Free Writing Prospectus, in reliance upon and in conformity with written
information furnished to the Company by the Placement Agent specifically for use
in the preparation thereof, which written information is described in Section
7(f).

 

(b)          The Placement Agent will indemnify, defend and hold harmless the
Company, its affiliates, directors, officers and employees, and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, from and against any losses, claims,
damages or liabilities to which the Company may become subject, under the
Securities Act or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Placement Agent), insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, the Time of Sale
Disclosure Package, the Prospectus, or any amendment or supplement thereto or
any Issuer Free Writing Prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Time of Sale Disclosure Package, the Prospectus, or
any amendment or supplement thereto or any Issuer Free Writing Prospectus in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent specifically for use in the preparation thereof,
which written information is described in Section 7(f), and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with defending against any such loss, claim, damage, liability or
action.

 

-21-

 

 

(c)          Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the failure to notify the indemnifying party shall not
relieve the indemnifying party from any liability that it may have to any
indemnified party except to the extent such indemnifying party has been
materially prejudiced by such failure. In case any such action shall be brought
against any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of the indemnifying party’s election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof; provided, however, that if (i) the indemnified party has reasonably
concluded (based on advice of 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, (ii) a conflict or
potential conflict exists (based on advice of 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 (iii) the indemnifying party has not in
fact employed counsel reasonably satisfactory to the indemnified party to assume
the defense of such action within a reasonable time after receiving notice of
the commencement of the action, the indemnified party shall have the right to
employ a single counsel to represent it in any claim in respect of which
indemnity may be sought under subsection (a) or (b) of this Section 7, in which
event the reasonable fees and expenses of such separate counsel shall be borne
by the indemnifying party or parties and reimbursed to the indemnified party as
incurred.

 

The indemnifying party under this Section 7 shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party against any loss,
claim, damage, liability or expense by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement, compromise or consent to the entry of judgment in
any pending or threatened action, suit or proceeding in respect of which any
indemnified party is a party or could be named and indemnity was or would be
sought hereunder by such indemnified party, unless such settlement, compromise
or consent (a) includes an unconditional release of such indemnified party from
all liability for claims that are the subject matter of such action, suit or
proceeding and (b) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.

 

-22-

 

 

(d)          If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above, (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Placement Agent on the other from the
offering and sale of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Placement Agent
on the other in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Placement Agent on the other 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 fees and commissions
received by the Placement Agent, in each case as set forth in the table on the
cover page of the Final Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Placement Agent and the
parties’ relevant intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Placement Agent agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were to be determined by pro rata allocation or
by any other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this subsection (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending against any
action or claim that is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), the Placement Agent shall be required to
contribute any amount in excess of the amount of the Placement Agent’s
commissions referenced in Section 4(a) actually received by the Placement Agent
pursuant to this Agreement. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

 

(e)          The obligations of the Company under this Section 7 shall be in
addition to any liability that the Company may otherwise have and the benefits
of such obligations shall extend, upon the same terms and conditions, to each
person, if any, who controls the Placement Agent within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act; and the several
obligations of the Placement Agent under this Section 7 shall be in addition to
any liability that the Placement Agent may otherwise have and the benefits of
such obligations shall extend, upon the same terms and conditions, to the
Company, and its officers, directors and each person who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act.

 

-23-

 

 

(f)          For purposes of this Agreement, the Placement Agent confirms, and
the Company acknowledges, that there is no information concerning the Placement
Agent furnished in writing to the Company by the Placement Agent specifically
for preparation of or inclusion in the Registration Statement, the Time of Sale
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, other
than the statements set forth in the fifth paragraph on the cover page of the
Prospectus, and the second, sixteenth and eighteenth paragraphs under the
heading “Plan of Distribution” in the Prospectus and Time of Sale Disclosure
Package.

 

8.          Representations and Agreements to Survive Delivery. All
representations, warranties, and agreements of the Company herein or in
certificates delivered pursuant hereto, including, but not limited to, the
agreements of the Placement Agent and the Company contained in Section
5(a)(viii) and Section 7 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Placement
Agent or any controlling person thereof, or the Company or any of its officers,
directors, or controlling persons, and shall survive delivery of, and payment
for, the Shares to and by the Placement Agent hereunder.

 

9.          Termination of this Agreement.

 

(a)          The Placement Agent shall have the right to terminate this
Agreement by giving notice to the Company as hereinafter specified at any time
at or prior to the Closing Date, if in the discretion of the Placement Agent,
(i) there has occurred any material adverse change in the securities markets or
any event, act or occurrence that has materially disrupted, or in the opinion of
the Placement Agent, will in the future materially disrupt, the securities
markets or there shall be such a material adverse change in general financial,
political or economic conditions or the effect of international conditions on
the financial markets in the United States is such as to make it, in the
judgment of the Placement Agent, inadvisable or impracticable to market the
Shares or enforce contracts for the sale of the Shares, (ii) trading in the
Company’s Common Stock shall have been suspended by the Commission, the NASDAQ
Capital Market or trading in securities generally on the NASDAQ Global Market,
New York Stock Exchange or NYSE MKT shall have been suspended, (iii) minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required, on the NASDAQ Global Market, New York
Stock Exchange, or NYSE MKT, by such exchange or by order of the Commission or
any other governmental authority having jurisdiction, (iv) a banking moratorium
shall have been declared by federal or New York or California state authorities,
(v) there shall have occurred any attack on, outbreak or escalation of
hostilities or act of terrorism involving the United States, any declaration by
the United States of a national emergency or war, any substantial change or
development involving a prospective substantial change in United States or
international political, financial or economic conditions or any other calamity
or crisis, (vi) the Company suffers any loss by strike, fire, flood, earthquake,
accident or other calamity, whether or not covered by insurance, (vii) in the
judgment of the Placement Agent, there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus, any material adverse change in the assets, properties,
condition, financial or otherwise, or in the results of operations, business
affairs or business prospects of the Company and its subsidiaries considered as
a whole, whether or not arising in the ordinary course of business, or (viii)
the Purchasers shall decline to purchase the Shares for any reason permitted
under this Agreement or the Subscription Agreements. Any such termination shall
be without liability of any party to any other party except that the provisions
of Section 5(a)(viii) and Section 7 hereof shall at all times be effective and
shall survive such termination.

 

-24-

 

 

(b)          If the Placement Agent elects to terminate this Agreement as
provided in this Section, the Company shall be notified promptly by the
Placement Agent by telephone, confirmed by letter.

 

10.         Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing and, (i) if to the Placement Agent, shall be
mailed, delivered or telecopied to Roth Capital Partners, LLC, 888 San Clemente
Drive, Newport Beach, CA 92660, telecopy number: (949) 720-7227, Attention:
Managing Director, and (ii) if to the Company, shall be mailed, delivered or
telecopied to it at Tonix Pharmaceuticals Holding Corp., 509 Madison Avenue,
Suite 306, New York, NY 10022, telecopy number: (212) 923-5700, Attention: Chief
Financial Officer; or in each case to such other address as the person to be
notified may have requested in writing. Any 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.

 

11.         Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns and the controlling persons, officers and directors
referred to in Section 7. Nothing in this Agreement is intended or shall be
construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any provision
herein contained.

 

12.         Absence of Fiduciary Relationship. The Company acknowledges and
agrees that: (a) the Placement Agent has been retained solely to act as
placement agent in connection with the Offering and no fiduciary, advisory or
agency relationship between the Company and the Placement Agent has been created
in respect of any of the transactions contemplated by this Agreement,
irrespective of whether the Placement Agent has advised or is advising the
Company on other matters; (b) the price and other terms of the Shares set forth
in this Agreement were established by the Company following discussions and
arms-length negotiations with the Placement Agent and the Company is capable of
evaluating and understanding and understands and accepts the terms, risks and
conditions of the transactions contemplated by this Agreement; (c) it has been
advised that the Placement Agent and its affiliates are engaged in a broad range
of transactions that may involve interests that differ from those of the Company
and that the Placement Agent does not have any obligation to disclose such
interest and transactions to the Company by virtue of any fiduciary, advisory or
agency relationship; (d) it has been advised that the Placement Agent is acting,
in respect of the transactions contemplated by this Agreement, solely for the
benefit of the Placement Agent, and not on behalf of the Company.

 

13.         Amendments and Waivers. No supplement, modification or waiver of
this Agreement shall be binding unless executed in writing by the party to be
bound thereby. The failure of a party to exercise any right or remedy shall not
be deemed or constitute a waiver of such right or remedy in the future. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (regardless of whether
similar), nor shall any such waiver be deemed or constitute a continuing waiver
unless otherwise expressly provided.

 

-25-

 

 

14.         Partial Unenforceability. The invalidity or unenforceability of any
section, paragraph, clause or provision of this Agreement shall not affect the
validity or enforceability of any other section, paragraph, clause or provision.

 

15.         Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

 

16.         Submission to Jurisdiction. The Company irrevocably (a) submits to
the jurisdiction of any court of the State of New York for the purpose of any
suit, action, or other proceeding arising out of this Agreement, or any of the
agreements or transactions contemplated by this Agreement, the Registration
Statement and the Prospectus (each a “Proceeding”), (b) agrees that all claims
in respect of any Proceeding may be heard and determined in any such court, (c)
waives, to the fullest extent permitted by law, any immunity from jurisdiction
of any such court or from any legal process therein, (d) agrees not to commence
any Proceeding other than in such courts, and (e) waives, to the fullest extent
permitted by law, any claim that such Proceeding is brought in an inconvenient
forum. THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY
LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, THE REGISTRATION STATEMENT, THE TIME OF SALE DISCLOSURE PACKAGE
AND THE PROSPECTUS.

 

17.         Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original and all such counterparts
shall together constitute one and the same instrument.

 

[Signature Page Follows]

 

-26-

 

 

Please sign and return to the Company the enclosed duplicates of this letter
whereupon this letter will become a binding agreement between the Company and
the Placement Agent in accordance with its terms.

 

      Very truly yours,               TONIX PHARMACEUTICALS HOLDING CORP.      
          By: /s/ Leland Gershell       Name: Leland Gershell       Title: Chief
Financial Officer           Confirmed as of the date first above-      
mentioned by the Placement Agent.               ROTH CAPITAL PARTNERS, LLC      
          By: /s/ Aaron Gurewitz       Name: Aaron Gurewitz       Title: Head of
Equity Capital Markets      

 

 

 

 

EXHIBIT A

 

Form of Subscription Agreement

 

 

 

 

SCHEDULE I

 

Final Term Sheet

 

Issuer:   Tonix Pharmaceuticals Holding Corp. (the “Company”)       Symbol:  
TNXP       Security:   657,000 shares of common stock, par value $0.001 per
share (the “Common Stock”), of the Company       Offering price:   $11.90 per
share       Placement Fee:   $0.714 per share       Net proceeds (excluding the
over-allotment):   $7.2 million (after deducting the Placement Fee and estimated
offering expenses payable by the Company)       Trade date:   July 11, 2014    
  Settlement date:   July 16, 2014       Placement Agent:   Roth Capital
Partners, LLC

 

 

 

 

SCHEDULE II

 

Subsidiaries

 

None.

 

 

 

 

SCHEDULE III

 

Free Writing Prospectus

 

None.

 

 

 

 

SCHEDULE IV

 

Form of Lock-Up Agreement

 

July __, 2014

 

Roth Capital Partners, LLC

888 San Clemente Drive

Newport Beach, CA 92660;

 

Ladies and Gentlemen:

 

This Lock-Up Agreement is being delivered to you in connection with the proposed
Placement Agent Agreement (the “Placement Agent Agreement”) to be entered into
between Tonix Pharmaceuticals Holding Corp., a Nevada corporation (the
“Company”) and Roth Capital Partners, LLC, as the placement agent (the
“Placement Agent”), with respect to the proposed offering of securities of the
Company (the “Offering”), including shares of common stock, par value $0.001 per
share, of the Company (the “Common Stock”). Capitalized terms used and not
otherwise defined herein shall have the meanings given them in the Placement
Agent Agreement.

 

In order to induce you to enter into the Placement Agent Agreement, the
undersigned agrees that, for a period (the “Lock-Up Period”) beginning on the
date hereof and ending on, and including, the date that is 90 days after the
date of the final prospectus supplement relating to the Offering, the
undersigned will not, without the prior written consent of the Placement Agent,
(i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant
any option to purchase or otherwise dispose of or agree to dispose of, directly
or indirectly, or file (or participate in the filing of) a registration
statement with the Securities and Exchange Commission (the “Commission”) in
respect of, or establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission promulgated thereunder (the “Exchange Act”) with respect to, any
Common Stock or any other securities of the Company that are substantially
similar to Common Stock, or any securities convertible into or exchangeable or
exercisable for, or any warrants or other rights to purchase, the foregoing,
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of Common Stock
or any other securities of the Company that are substantially similar to Common
Stock, or any securities convertible into or exchangeable or exercisable for, or
any warrants or other rights to purchase, the foregoing, whether any such
transaction is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise or (iii) publicly announce an intention to
effect any transaction specified in clause (i) or (ii).

 

The foregoing paragraph shall not apply to (a) the registration of the offer and
sale of Common Stock as contemplated by the Placement Agent Agreement and the
sale of the Common Stock to the Purchasers in the Offering, (b) bona fide gifts,
provided the recipient thereof agrees in writing with the Placement Agent to be
bound by the terms of this Lock-Up Agreement, (c) dispositions to any trust for
the direct or indirect benefit of the undersigned and/or the immediate family of
the undersigned, provided that such trust agrees in writing with the Placement
Agent to be bound by the terms of this Lock-Up Agreement, (d) transfers of
Common Stock or securities convertible into Common Stock on death by will or
intestacy, (e) sales or transfers of Common Stock solely in connection with the
“cashless” exercise of Company stock options outstanding on the date hereof for
the purpose of exercising such stock options (provided that any remaining Common
Stock received upon such exercise will be subject to the restrictions provided
for in this Lock-Up Agreement) or (f) sales or transfers of Common Stock or
securities convertible into Common Stock pursuant to a sales plan entered into
prior to the date hereof pursuant to Rule 10b5-1 under the Exchange Act, a copy
of which has been provided to the Placement Agent. In addition, the restrictions
sets forth herein shall not prevent the undersigned from entering into a sales
plan pursuant to Rule 10b5-1 under the Exchange Act after the date hereof,
provided that (i) a copy of such plan is provided to the Placement Agent
promptly upon entering into the same and (ii) no sales or transfers may be made
under such plan until the Lock-Up Period ends or this Lock-Up Agreement is
terminated in accordance with its terms. For purposes of this paragraph,
“immediate family” shall mean the undersigned and the spouse, any lineal
descendent, father, mother, brother or sister of the undersigned.

 

 

 

 

In addition, the undersigned hereby waives any rights the undersigned may have
to require registration of Common Stock in connection with the filing of a
registration statement relating to the Offering. The undersigned further agrees
that, for the Lock-Up Period, the undersigned will not, without the prior
written consent of the Placement Agent, make any demand for, or exercise any
right with respect to, the registration of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or warrants or
other rights to purchase Common Stock or any such securities.

 

Notwithstanding the above, if (a) during the period that begins on the date that
is fifteen (15) calendar days plus three (3) business days before the last day
of the Lock-Up Period and ends on the last day of the Lock-Up Period, the
Company issues an earnings release or material news or a material event relating
to the Company occurs; or (b) prior to the expiration of the Lock-Up Period, the
Company announces that it will release earnings results during the sixteen (16)
day period beginning on the last day of the Lock-Up Period, then the
restrictions imposed by this Lock-Up Agreement shall continue to apply until the
expiration of the date that is fifteen (15) calendar days plus three (3)
business days after the date on which the issuance of the earnings release or
the material news or material event occurs; provided, however, that this
paragraph shall not apply if (i) the safe harbor provided by Rule 139 under the
Act is available in the manner contemplated by Rule 2711(f)(4) of the Financial
Industry Regulatory Authority, Inc. (“FINRA”) and (ii) within the 3 business
days preceding the 15th calendar day before the last day of the Lock-Up Period,
the Company delivers to the Placement Agent a certificate, signed by the Chief
Financial Officer or Chief Executive Officer of the Company, certifying on
behalf of the Company that the Company’s shares of Common Stock are “actively
traded securities,” within the meaning of Rule 2711(f)(4) of FINRA.

 

The undersigned hereby confirms that the undersigned has not, directly or
indirectly, taken, and hereby covenants that the undersigned will not, directly
or indirectly, take, any action designed, or which has constituted or will
constitute or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of shares of Common Stock.

 

If (i) the Company notifies you in writing that it does not intend to proceed
with the Offering, (ii) the registration statement filed with the Commission
with respect to the Offering is withdrawn, (iii) if the closing of the Offering
does not occur prior to ninety (90) days from the date of this Lock-Up Agreement
or (iv) for any reason the Placement Agent Agreement shall be terminated prior
to the effective time of the Registration Statement (as defined in the Placement
Agent Agreement), this Lock-Up Agreement shall be terminated and the undersigned
shall be released from its obligations hereunder.

 

[signature page follows]

 

 

 

 

  Very truly yours,           (Name - Please Print)           (Signature)      
    (Name of Signatory, in the case of entities - Please Print)           (Title
of Signatory, in the case of entities - Please Print)       Address:            
             

 

 

 

 

SCHEDULE V

 

List of officers, directors and shareholders executing lock-up agreements

 

Seth Lederman

Leland Gershell

Bruce Daugherty

Donald Kellerman

Gregory Sullivan

Stuart Davidson

Patrick Grace

Donald W. Landry

Ernest Mario

Charles E. Mather IV

John Rhodes

Samuel Saks