exv10w1






Exhibit 10.1




At Market Issuance Sales Agreement




January 12,
2009




Wm Smith & Co.

1700 Lincoln Street, Suite 2545

Denver CO 80203



Ladies and Gentlemen:




     Novavax Inc., a Delaware corporation (the “Company”), confirms its agreement (this
“Agreement”) with Wm Smith & Co., a Colorado Corporation (“Wm Smith”), as follows:



     1. Issuance and Sale of Shares. The Company agrees that, from time to time during the
term of this Agreement, on the terms and subject to the conditions set forth herein, it may issue
and sell through Wm Smith, acting as agent and/or principal, up to $25,000,000 of shares (the
“Shares”) of the Company’s common stock, par value $0.01 per share (the “Common
Stock”). Notwithstanding anything to the contrary contained herein, the parties hereto agree
that compliance with the limitations set forth in this Section 1 on the number of Shares issued and
sold under this Agreement shall be the sole responsibility of the Company and that Wm Smith shall
have no obligation in connection with such compliance. The issuance and sale of Shares through Wm
Smith will be effected pursuant to the Registration Statement (as defined below) filed by the
Company and declared effective by the Securities and Exchange Commission (the
“Commission”), although nothing in this Agreement shall be construed as requiring the
Company to use the Registration Statement to issue Common Stock or Preferred Stock.



     The Company has filed, in accordance with the provisions of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (collectively, the “Securities Act”),
with the Commission a registration statement on Form S-3 (File No. 333-138893), including a base
prospectus, with respect to equity and other offerings, including the Shares, and which
incorporates by reference documents that the Company has filed or will file in accordance with the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (collectively, the “Exchange Act”). The Company will prepare a prospectus
supplement (the “Prospectus Supplement”) to the base prospectus included as part of such
registration statement. The Company will furnish to Wm Smith, for use by Wm Smith, copies of the
prospectus included as part of such registration statement, as supplemented by the Prospectus
Supplement, relating to the Shares. Except where the context otherwise requires, such registration
statement, as amended when it became effective, including all documents filed as part thereof or
incorporated by reference therein, and including any information contained in a Prospectus (as
defined below) subsequently filed with the Commission pursuant to Rule 424(b) under the Securities
Act and also including any other registration statement filed pursuant to Rule 462(b) under the
Securities Act, collectively, are herein called the “Registration Statement,” and the base
prospectus, including all documents incorporated therein by reference, included in



 









 







the Registration Statement, as it may be supplemented by the Prospectus Supplement, in the
form in which such prospectus and/or Prospectus Supplement have most recently been filed by the
Company with the Commission pursuant to Rule 424(b) under the Securities Act is herein called the
“Prospectus.” Any reference herein to the Registration Statement, the Prospectus or any
amendment or supplement thereto shall be deemed to refer to and include the documents incorporated
by reference therein, and any reference herein to the terms “amend,” “amendment” or “supplement”
with respect to the Registration Statement or the Prospectus shall be deemed to refer to and
include the filing after the execution hereof of any document with the Commission deemed to be
incorporated by reference therein. For purposes of this Agreement, all references to the
Registration Statement, the Prospectus or to any amendment or supplement thereto shall be deemed to
include any copy filed with the Commission pursuant to its Electronic Data Gathering Analysis and
Retrieval System (“EDGAR”).



     2. Placements. Each time that the Company wishes to issue and sell Shares hereunder
(each, a “Placement”), it will notify Wm Smith by email notice (or other method mutually
agreed to in writing by the Parties) of the number of Shares (the “Placement Shares”) to be
issued, the type of Shares, the time period during which sales are requested to be made, any
limitation on the number of Shares that may be sold in any one day and any minimum price below
which sales may not be made (a “Placement Notice”), the form of which is attached hereto as
Schedule 1. The Placement Notice shall originate from any of the individuals from the Company set
forth on Schedule 3 (with a copy to each of the other individuals from the Company listed on such
schedule), and shall be addressed to each of the individuals from Wm Smith set forth on Schedule 3,
as such Schedule 3 may be amended from time to time. The Placement Notice shall be effective
unless and until (i) Wm Smith declines to accept the terms contained therein as a result of any
suspension or limitation of trading in the Placement Shares or in securities generally on the
Exchange or any occurrence or event that causes a material adverse change in the operation or
prospects of the Company, (ii) the entire amount of the Placement Shares have been sold, (iii) the
Company suspends or terminates the Placement Notice or (iv) the Agreement has been terminated under
the provisions of Section 12. The amount of any discount, commission or other compensation to be
paid by the Company to Wm Smith in connection with the sale of the Placement Shares shall be
calculated in accordance with the terms set forth in Schedule 2. It is expressly acknowledged and
agreed that neither the Company nor Wm Smith will have any obligation whatsoever with respect to a
Placement or any Placement Shares unless and until the Company delivers a Placement Notice to Wm
Smith and Wm Smith does not decline such Placement Notice pursuant to the terms set forth above,
and then only upon the terms specified therein and herein. In the event of a conflict between the
terms of this Agreement and the terms of a Placement Notice, the terms of the Placement Notice will
control.



     3. Sale of Placement Shares by Wm Smith. Subject to the terms and conditions herein
set forth, upon the Company’s issuance of a Placement Notice, and unless the sale of the Placement
Shares described therein has been declined, suspended, or otherwise terminated in accordance with
the terms of this Agreement, Wm Smith will use its commercially reasonable efforts consistent with
its normal trading and sales practices to sell such Placement Shares up to the amount specified,
and otherwise in accordance with the terms of such Placement Notice. Wm Smith will provide written
confirmation to the Company no later than the opening of the Trading Day (as defined below)
immediately following the Trading Day on which it has made sales of Placement Shares hereunder
setting forth the number of Placement Shares sold on such



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day, the compensation payable by the Company to Wm Smith pursuant to Section 2 with respect to
such sales, and the Net Proceeds (as defined below) payable to the Company. Wm Smith may sell
Placement Shares by any method permitted by law deemed to be an “at the market” offering as defined
in Rule 415 of the Securities Act, including without limitation sales made directly on NASDAQ
Capital Market (the “Exchange”), on any other existing trading market for the Common Stock
or to or through a market maker. Wm Smith may also sell Placement Shares in privately negotiated
transactions, subject to approval by the Company. The Company acknowledges and agrees that (i)
there can be no assurance that Wm Smith will be successful in selling Placement Shares, and (ii) Wm
Smith will incur no liability or obligation to the Company or any other person or entity if it does
not sell Placement Shares for any reason other than a failure by Wm Smith to use its commercially
reasonable efforts consistent with its normal trading and sales practices to sell such Placement
Shares as required under this Section 3. For the purposes hereof, “Trading Day” means any
day on which Common Stock is purchased and sold on the principal market on which the Common Stock
is listed or quoted.



     4. Suspension of Sales. The Company or Wm Smith may, upon notice to the other party
in writing (including by email correspondence to each of the individuals of the other Party set
forth on Schedule 3, if receipt of such correspondence is actually acknowledged by any of the
individuals to whom the notice is sent, other than via auto-reply) or by telephone (confirmed
immediately by verifiable facsimile transmission or email correspondence to each of the individuals
of the other Party set forth on Schedule 3), suspend any sale of Placement Shares; provided,
however, that such suspension shall not affect or impair either party’s obligations with respect to
any Placement Shares sold hereunder prior to the receipt of such notice. Each of the Parties
agrees that no such notice under this Section 4 shall be effective against the other unless it is
made to one of the individuals named on Schedule 3 hereto, as such Schedule may be amended from
time to time.



     5. Settlement.



          (a) Settlement of Placement Shares. Unless otherwise specified in the applicable
Placement Notice, settlement for sales of Placement Shares will occur on the third (3rd) Trading
Day (or such earlier day as is industry practice for regular-way trading) (each, a “Settlement
Date”) following the respective Point of Sale (as defined below). The amount of proceeds to be
delivered to the Company on a Settlement Date against receipt of the Placement Shares sold (the
“Net Proceeds”) will be equal to the aggregate sales price received by Wm Smith at which
such Placement Shares were sold, after deduction for (i) Wm Smith’s commission, discount or other
compensation for such sales payable by the Company pursuant to Section 2 hereof, (ii) any other
amounts due and payable by the Company to Wm Smith hereunder pursuant to Section 7(g) (Expenses)
hereof, and (iii) any transaction fees imposed by any governmental or self-regulatory organization
in respect of such sales.




          (b) Delivery of Placement Shares. On or before each Settlement Date, the Company
will, or will cause its transfer agent to, electronically transfer the Placement Shares being sold
by crediting Wm Smith’s or its designee’s account at The Depository Trust Company through its
Deposit and Withdrawal at Custodian System (“DWAC”) or by such other means of delivery as
may be mutually agreed upon by the parties hereto which in all cases shall be freely tradeable,
transferable, registered shares in good deliverable form. On each Settlement Date,



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Wm Smith will deliver the related Net Proceeds in same day funds to an account designated by
the Company on, or prior to, the Settlement Date. Wm Smith will be responsible for obtaining DWAC
instructions or instructions for delivery by other means with regard to the transfer of Placement
Shares being sold. The Company agrees that if the Company, or its transfer agent (if applicable),
defaults in its obligation to deliver Placement Shares on a Settlement Date, the Company agrees
that in addition to and in no way limiting the rights and obligations set forth in Section 10(a)
(Indemnification and Contribution) hereto, it will (i) hold Wm Smith harmless against any loss,
claim, damage, or expense (including reasonable legal fees and expenses), as incurred, arising out
of or in connection with such default by the Company and (ii) pay to Wm Smith any commission,
discount, or other compensation to which it would otherwise have been entitled absent such default.




     6. Representations and Warranties of the Company. The Company represents and warrants
to, and agrees with, Wm Smith that as of the date of this Agreement and as of each Representation
Date (as defined in Section 7(m) below) on which a certificate is required to be delivered pursuant
to Section 7(m) of this Agreement, as the case may be, except as may be disclosed in the
Registration Statement or a Disclosure Schedule delivered in connection herewith:



          (a) Registration Statement and Prospectus. The Company and, assuming no act or
omission on the part of Wm Smith that would make such statement untrue, the transactions
contemplated by this Agreement meet the requirements for and comply with the conditions for the use
of Form S-3 under the Securities Act. The Registration Statement has been filed with the
Commission and has been declared effective under the Securities Act. The Prospectus Supplement
will name Wm Smith as an underwriter, acting as principal and/or agent, that the Company might
engage in the section entitled “Plan of Distribution.” The Company has not received, and has no
notice of, any order of the Commission preventing or suspending the use of the Registration
Statement, or threatening or instituting proceedings for that purpose. The Registration Statement
and the offer and sale of Shares as contemplated hereby meet the requirements of Rule 415 under the
Act and comply in all material respects with said Rule. Any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement have been so described or filed. Copies
of the Registration Statement, the Prospectus, and any such amendments or supplements and all
documents incorporated by reference therein that were filed with the Commission on or prior to the
date of this Agreement have been delivered, or are available through EDGAR, to Wm Smith and their
counsel. The Company has not distributed and, prior to the later to occur of each Settlement Date
and completion of the distribution of the Placement Shares, will not distribute any offering
material in connection with the offering or sale of the Placement Shares other than the
Registration Statement and the Prospectus and any Issuer Free Writing Prospectus (as defined below)
to which Wm Smith has consented. The Common Stock is currently listed on the NASDAQ Global Market
under the trading symbol “NVAX”. Except as disclosed in the Registration Statement, the Company
has not, in the 12 months preceding the date hereof, received notice from the Exchange to the
effect that the Company is not in compliance with the listing or maintenance requirements. The
Company has no reason to believe that it will not in the foreseeable future continue to be in
compliance with all such listing and maintenance requirements.




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          (b) No Misstatement or Omission. The Registration Statement, when it became or
becomes effective, and the Prospectus, and any amendment or supplement thereto, on the date of such
Prospectus or amendment or supplement, conformed or will conform in all material respects with the
requirements of the Securities Act. At each Settlement Date, the Registration Statement and the
Prospectus, as of such date, will conform in all material respects with the requirements of the
Act. The Registration Statement, when it became or becomes effective, did not, or will not,
contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The Prospectus and any
amendment or supplement thereto, on the date thereof and at each Point of Sale, did not or will not
include an untrue statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading.
The documents incorporated by reference in the Prospectus or any Prospectus Supplement did not, and
any further documents filed and incorporated by reference therein will not, when filed with the
Commission, contain an untrue statement of a material fact or omit to state a material fact
required to be stated in such document or necessary to make the statements in such document, in
light of the circumstances under which they were made, not misleading. The foregoing shall not
apply to statements in, or omissions from, any such document made in reliance upon, and in
conformity with, information furnished to the Company by Wm Smith specifically for use in the
preparation thereof. “Point of Sale” means, for a Placement, the time at which an acquiror
of Placement Shares entered into a contract, binding upon such acquiror, to acquire such Shares.




          (c) Conformity with Securities Act and Exchange Act. The documents incorporated by
reference in the Registration Statement, the Prospectus or any amendment or supplement thereto,
when such documents were or are filed with the Commission under the Securities Act or the Exchange
Act or became or become effective under the Securities Act, as the case may be, conformed or will
conform in all material respects with the requirements of the Securities Act and the Exchange Act,
as applicable.




          (d) Financial Information. The consolidated financial statements and the related
notes thereto included or incorporated by reference in the Registration Statement and the
Prospectus comply with the applicable requirements of the Act and the Exchange Act, as applicable,
and present fairly, the financial position of the Company as of the dates indicated and the results
of its operations and the changes in its consolidated cash flows for the periods specified; such
financial statements have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in the case of
unaudited interim financial statements, to the extent that they may not include footnotes or may be
condensed or summary statements), and the other financial information included or incorporated by
reference in the Registration Statement and the Prospectus has been derived from the accounting
records of the Company and presents fairly the information shown thereby. Any pro forma financial
statements or data included or incorporated by reference in the Registration Statement and the
Prospectus comply with the requirements of Regulation S-X of the Securities Act, including, without
limitation, Article 11 thereof, and the assumptions used in the preparation of such pro forma
financial statements and data are reasonable, the pro forma adjustments used therein are
appropriate to give effect to the circumstances referred to therein and the pro forma adjustments
have been properly applied to the historical amounts in the



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compilation of those statements and data. No other financial statements or schedules of the
Company or any other entity are required by the Act to be included in the Registration Statement or
the Prospectus. Except as set forth on Schedule 4, all disclosures contained in the Registration
Statement, the Pricing Disclosure Materials and the Prospectus regarding “non-GAAP financial
measures” (as such term is defined by Item 10 of Regulation S-K under the Act) comply with
Regulation G of the Exchange Act and Item 10 of Regulation S-K under the Act, to the extent
applicable. The Company does not have any material liabilities or obligations, direct or
contingent (including any off-balance sheet obligations and any “variable interest entities” within
the meaning of Financial Accounting Standards Board Interpretation No. 46), not disclosed in the
Registration Statement, the Pricing Disclosure Materials and the Prospectus.




          (e) Conformity with EDGAR Filing. The Prospectus delivered to Wm Smith for use in
connection with the sale of the Placement Shares pursuant to this Agreement will be identical to
the versions of the Prospectus created to be transmitted to the Commission for filing via EDGAR,
except to the extent permitted by Regulation S-T.




          (f) Organization. The Company is, and will be, duly organized, validly existing as a
corporation and in good standing under the laws of its jurisdiction of organization. The Company
is, and will be, duly licensed or qualified as a foreign corporation for transaction of business
and in good standing under the laws of each other jurisdiction in which its ownership or lease of
property or the conduct of its businesses requires such license or qualification, and has all
corporate power and authority necessary to own or hold its properties and to conduct its business
as described in the Registration Statement and the Prospectus, except where the failure to be so
qualified or in good standing or have such power or authority would not, individually or in the
aggregate, have a material adverse effect or would reasonably be expected to have a material
adverse effect on or affecting the business, properties, management, consolidated financial
position, stockholders’ equity or results of operations of the Company (a “Material Adverse
Effect”).




          (g) Subsidiaries. The Company has no active subsidiaries.




          (h) No Violation or Default. The Company is not (i) in violation of its charter or
by-laws or similar organizational documents; (ii) in default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of the property or assets of the Company is subject; or (iii) in
violation of any law or statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the case of each of clauses (ii) and
(iii) above, for any such violation or default that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. To the Company’s knowledge, no other
party under any material contract or other agreement to which it is a party is in default in any
respect thereunder where such default would have a Material Adverse Effect.




          (i) No Material Adverse Change. Except as set forth in or otherwise contemplated by
the Registration Statement (exclusive of any amendment thereof) or the Prospectus (exclusive of any
supplement thereto), since the date of the most recent financial




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statements of the Company included or incorporated by reference in the Registration Statement
and the Prospectus and prior to each Settlement Date, (i) there has not been and will not have been
any change in the capital stock of the Company (except for changes in the number of outstanding
shares of Common Stock of the Company due to the issuance of shares upon the exercise or conversion
of securities exercisable for, or convertible into, shares of Common Stock outstanding on the date
hereof) or long-term debt of the Company or any dividend or distribution of any kind declared, set
aside for payment, paid or made by the Company on any class of capital stock, that has resulted in
or that would reasonably be expected to result in a Material Adverse Effect to the Company taken as
a whole; (ii) other than this Agreement, the Company has not entered and will not enter into any
transaction or agreement, not in the ordinary course of business, that is material to the Company
taken as a whole or incurred and will not incur any liability or obligation, direct or contingent,
not in the ordinary course of business, that is material to the Company taken as a whole; (iii)
there has not been any material adverse change in the business, properties, management, financial
position, stockholders’ equity, or results of operations of the Company, taken as a whole; and (iv)
the Company has not sustained any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or
regulatory authority.




          (j) Capitalization. The issued and outstanding shares of capital stock of the Company
have been validly issued, are fully paid and nonassessable and, other than as disclosed in or
contemplated by the Registration Statement or the Prospectus, are not subject to any preemptive
rights, rights of first refusal or similar rights. The Company has an authorized, issued and
outstanding capitalization as set forth in the Registration Statement and the Prospectus as of the
dates referred to therein (other than the grant of additional options under the Company’s existing
stock option plans, or changes in the number of outstanding shares of Common Stock of the Company
due to the issuance of shares upon the exercise or conversion of securities exercisable for, or
convertible into, shares of Common Stock outstanding on the date hereof) and such authorized
capital stock conforms to the description thereof set forth in the Registration Statement and the
Prospectus. The description of the securities of the Company in the Registration Statement and the
Prospectus is complete and accurate in all material respects. Except as disclosed in or
contemplated by the Registration Statement or the Prospectus, as of the date referred to therein,
the Company does not have outstanding any options to purchase, or any rights or warrants to
subscribe for, or any securities or obligations convertible into, or exchangeable for, or any
contracts or commitments to issue or sell, any shares of capital stock or other securities.




          (k) Authorization; Enforceability. The Company has full legal right, power and
authority to enter into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and
binding agreement of the Company enforceable in accordance with its terms, except to the extent
that (i) enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally and by general equitable principles and (ii) the
indemnification and contribution provisions of Section 10 hereof may be limited by federal or state
securities laws and public policy considerations in respect thereof.




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          (l) Authorization of Placement Shares. The Placement Shares, when issued and
delivered pursuant to the terms approved by the Board of Directors or a duly designated committee
thereof, against payment therefor as provided herein, will be duly and validly authorized and
issued and fully paid and nonassessable, free and clear of any pledge, lien, encumbrance, security
interest or other claim, including any statutory or contractual preemptive rights, resale rights,
rights of first refusal or other similar rights, and will be registered pursuant to Section 12 of
the Exchange Act. The Placement Shares, when issued, will conform in all material respects to the
description thereof set forth in or incorporated into the Prospectus.




          (m) No Consents Required. No consent, approval, authorization, order, registration or
qualification of or with any court or arbitrator or governmental or regulatory authority is
required for the execution, delivery and performance by the Company this Agreement, the issuance
and sale by the Company of the Placement Shares, except for the registration of the Placement
Shares under the Act and such consents, approvals, authorizations, orders and registrations or
qualifications as may be required under applicable state securities laws or by the by-laws and
rules of the Financial Industry Regulatory Authority (“FINRA”) or the Exchange in
connection with the sale of the Placement Shares by Wm Smith.




          (n) No Preferential Rights. Except as set forth in the Registration Statement and the
Prospectus, (i) no person, as such term is defined in Rule 1-02 of Regulation S-X promulgated under
the Securities Act (each, a “Person”), has the right, contractual or otherwise, to cause
the Company to issue or sell to such Person any shares of Common Stock or shares of any other
capital stock or other securities of the Company, (ii) no Person has any preemptive rights, resale
rights, rights of first refusal, or any other rights (whether pursuant to a “poison pill” provision
or otherwise) to purchase any shares of Common Stock or shares of any other capital stock or other
securities of the Company, (iii) no Person has the right to act as an underwriter or as a financial
advisor to the Company in connection with the offer and sale of the Shares, and (iv) no Person has
the right, contractual or otherwise, to require the Company to register under the Securities Act
any shares of Common Stock or shares of any other capital stock or other securities of the Company,
or to include any such shares or other securities in the Registration Statement or the offering
contemplated thereby, whether as a result of the filing or effectiveness of the Registration
Statement or the sale of the Placement Shares as contemplated thereby or otherwise.




          (o) Independent Public Accountant. Ernst & Young LLP, whose report on the
consolidated financial statements of the Company is filed with the Commission as part of the
Registration Statement and the Prospectus for the period ended December 31, 2005, and Grant
Thornton LLP (the “Accountant”), whose report on the consolidated financial statements of
the Company is filed with the Commission as part of the Prospectus for the periods ended December
31, 2006 and December 31, 2007, are and, during the periods covered by their respective reports,
were independent public accountants within the meaning of the Securities Act and the Public Company
Accounting Oversight Board (United States). To the Company’s knowledge, after due and careful
inquiry, the Accountant is not in violation of the auditor independence requirements of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) with respect to the Company.




          (p) Enforceability of Agreements. To the knowledge of the Company, all agreements
between the Company and third parties expressly referenced in the Prospectus are




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legal, valid and binding obligations of the Company enforceable in accordance with their
respective terms, except to the extent that (i) enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by
general equitable principles and (ii) the indemnification provisions of certain agreements may be
limited be federal or state securities laws or public policy considerations in respect thereof and
except for any unenforceability that, individually or in the aggregate, would not unreasonably be
expected to have a Material Adverse Effect.




          (q) No Litigation. Except as set forth in the Registration Statement or the
Prospectus, there are no legal, governmental or regulatory actions, suits or proceedings pending,
nor, to the Company’s knowledge, any legal, governmental or regulatory investigations, to which the
Company is a party or to which any property of the Company is the subject that, individually or in
the aggregate, if determined adversely to the Company, would reasonably be expected to have a
Material Adverse Effect or materially and adversely affect the ability of the Company to perform
its obligations under this Agreement; to the Company’s knowledge, no such actions, suits or
proceedings are threatened or contemplated by any governmental or regulatory authority or
threatened by others; and (i) there are no current or pending legal, governmental or regulatory
investigations, actions, suits or proceedings that are required under the Act to be described in
the Prospectus that are not so described; and (ii) there are no contracts or other documents that
are required under the Act to be filed as exhibits to the Registration Statement that are not so
filed.




          (r) Licenses and Permits. Except as set forth in the Registration Statement or the
Prospectus, the Company possesses or has obtained, and at each Settlement Date will possess and
will have obtained, all licenses, certificates, consents, orders, approvals, permits and other
authorizations issued by, and have made all declarations and filings with, the appropriate federal,
state, local or foreign governmental or regulatory authorities that are necessary for the ownership
or lease of its properties or the conduct of its business as described in the Registration
Statement and the Prospectus (the “Permits”), except where the failure to possess, obtain
or make the same would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except as disclosed in the Registration Statement or the Prospectus, the
Company has not received written notice of any proceeding relating to revocation or modification of
any such Permit and does not have any reason to believe that such Permit will not be renewed in the
ordinary course, except where the failure to obtain any such renewal would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.




          (s) Market Capitalization. As of the close of trading on the Exchange on the Trading
Day immediately prior to the date of this Agreement and the Trading Day immediately prior to the
date of each Placement Notice (i) the aggregate market value of the outstanding voting and
non-voting common equity (as defined in Securities Act Rule 405) of the Company held by persons
other than affiliates of the Company (pursuant to Securities Act Rule 144, those that directly, or
indirectly through one or more intermediaries, control, or are controlled by, or are under common
control with, the Company) (the “Non-Affiliate Shares”), was equal to or greater than $75
million (calculated by multiplying (x) the price at which the common equity of the Company was
last sold on the Exchange on the Trading Day immediately prior to the date of this Agreement times
(y) the number of Non-Affiliate Shares); or (ii) the aggregate market value of securities sold by
or on behalf of the Company as set forth on Schedule 5 during the previous




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12 calendar months, including the Placement Shares, is no more than one-third the aggregate
market value of the Non-Affiliate Shares.




          (t) No Material Defaults. The Company has not defaulted on any installment on
indebtedness for borrowed money or on any rental on one or more long-term leases, which defaults,
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
The Company has not filed a report pursuant to Section 13(a) or 15(d) of the Exchange Act since the
filing of its last Annual Report on Form 10-K, indicating that it (i) has failed to pay any
dividend or sinking fund installment on preferred stock or (ii) has defaulted on any installment on
indebtedness for borrowed money or on any rental on one or more long-term leases, which defaults,
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.




          (u) Certain Market Activities. Neither the Company, nor any of its respective
directors, officers or controlling persons has taken, directly or indirectly, any action designed,
or that has constituted or might reasonably be expected to cause or result in, under the Exchange
Act or otherwise, the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Placement Shares.




          (v) Broker/Dealer Relationships. Neither the Company nor any of its related entities
(i) is required to register as a “broker” or “dealer” in accordance with the provisions of the
Exchange Act or (ii) directly or indirectly through one or more intermediaries, controls or is a
“person associated with a member” or “associated person of a member” (within the meaning of Article
I of the NASD Manual administered by FINRA).




          (w) No Reliance. The Company has not relied upon Wm Smith or legal counsel for Wm
Smith for any legal, tax or accounting advice in connection with the offering and sale of the
Placement Shares.




          (x) Taxes. The Company has filed all federal, state, local and foreign tax returns
which have been required to be filed and paid all taxes shown thereon through the date hereof, to
the extent that such taxes have become due and are not being contested in good faith. Except as
otherwise disclosed in or contemplated by the Registration Statement or the Prospectus, no tax
deficiency has been determined adversely to the Company which has had, or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect. The Company has no
knowledge of any federal, state or other governmental tax deficiency, penalty or assessment which
has been or might be asserted or threatened against it which could have a Material Adverse Effect.




          (y) Title to Real and Personal Property. Except as set forth in the Registration
Statement or the Prospectus, the Company has good and valid title in fee simple to all items of
real property and good and valid title to all personal property described in the Registration
Statement or Prospectus as being owned by it that are material to the business of the Company, in
each case free and clear of all liens, encumbrances and claims, except those that (i) do not
materially interfere with the use made and proposed to be made of such property by the Company or
(ii) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse
Effect. Any real property described in the Registration Statement or




10









 




Prospectus as being leased by the Company is held by it under valid, existing and enforceable
leases, except those that (A) do not materially interfere with the use made or proposed to be made
of such property by the Company or (B) would not be reasonably expected, individually or in the
aggregate, to have a Material Adverse Effect.




          (z) Intellectual Property. Except as set forth in the Registration Statement or the
Prospectus, the Company owns or possesses adequate enforceable rights to use all patents, patent
applications, trademarks (both registered and unregistered), service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses and know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) (collectively, the “Intellectual Property”), necessary for the conduct of
its business as conducted as of the date hereof, except to the extent that the failure to own or
possess adequate rights to use such Intellectual Property would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; the Company has not received
any written notice of any claim of infringement or conflict which asserted Intellectual Property
rights of others, which infringement or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Effect; the Company has conducted reasonable searches of the United
States patents of record and to the Company’s knowledge none of the Company’s patents or patent
applications interfere with any other United States patents; the Company has conducted an
infringement search and determined that, to the Company’s knowledge, no valid and enforceable
patent held by any third party is infringed by the activities of the Company; there are no pending,
or to the Company’s knowledge, threatened judicial proceedings or interference proceedings
challenging the Company’s rights in or to or the validity of the scope of any of the Company’s
patents, patent applications or proprietary information; to the Company’s knowledge no other entity
or individual has any right or claim in any of the Company’s patents, patent applications or any
patent to be issued therefrom by virtue of any contract, license or other agreement entered into
between such entity or individual and the Company or by any non-contractual obligation, other than
by written licenses granted by the Company; the Company has not received any written notice of any
claim challenging the rights of the Company in or to any Intellectual Property owned, licensed or
optioned by the Company which claim, if the subject of an unfavorable decision would result in an
Material Adverse Effect.




          (aa) Compliance Program. The Company has established and administers a compliance
program applicable to the Company, to assist the Company and the directors, officers and employees
of the Company in complying with applicable regulatory guidelines.




          (bb) Environmental Laws. Except as set forth in the Registration Statement or the
Prospectus, the Company (i) is in compliance with any and all applicable federal, state, local and
foreign laws, rules, regulations, decisions and orders relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants
(collectively, “Environmental Laws”); (ii) has received and is in compliance with all
permits, licenses or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses as described in the Registration Statement and the Prospectus;
and (iii) has not received notice of any actual or potential liability for the investigation or
remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or
contaminants, except, in the case of any of clauses (i), (ii) or (iii) above, for




11









 




any such failure to comply or failure to receive required permits, licenses, other approvals
or liability as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.




          (cc) Disclosure Controls. The Company maintains systems of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to assets is permitted
only in accordance with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company has established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the
Company and designed such disclosure controls and procedures to ensure that material information
relating to the Company is made known to the certifying officers by others within those entities,
particularly during the period in which the Company’s Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, as the case may be, is being prepared. The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures as of a date within 90 days
prior to the filing date of the Form 10-K for the fiscal year ended December 31, 2007 (such date,
the “Evaluation Date”). The Company presented in its Form 10-K for the fiscal year ended
December 31, 2007 the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Company’s internal controls (as such
term is defined in Item 307(b) of Regulation S-K under the Act) or, to the Company’s knowledge, in
other factors that could significantly affect the Company’s internal controls.




          (dd) Sarbanes-Oxley. To the knowledge of the Company, there is and has been no
failure on the part of the Company and any of the Company’s directors or officers, in their
capacities as such, to comply with any applicable provisions of the Sarbanes-Oxley Act and the
rules and regulations promulgated thereunder. Each of the principal executive officer and the
principal financial officer of the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company as applicable) has made all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to all
reports, schedules, forms, statements and other documents required to be filed by it or furnished
by it to the Commission. For purposes of the preceding sentence, “principal executive officer” and
“principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley
Act.




          (ee) Finder’s Fees. The Company has not incurred any liability for any finder’s fees,
brokerage commissions or similar payments in connection with the transactions herein contemplated,
except as may otherwise exist with respect to Wm Smith pursuant to this Agreement.




          (ff) Labor Disputes. No labor disturbance by or dispute with employees of the Company
exists or, to the knowledge of the Company, is threatened which would reasonably be expected to
result in a Material Adverse Effect





12












 





          (gg) Investment Company Act. The Company, after giving effect to the offering and sale
of the Placement Shares, will not be an “investment company” or an entity “controlled” by an
“investment company,” as such terms are defined in the Investment Company Act of 1940, as amended
(the “Investment Company Act”).




          (hh) Operations. The operations of the Company are and have been conducted at all
times in compliance with applicable financial record keeping and reporting requirements of the
Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes
of all jurisdictions to which the Company is subject, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or enforced by any
governmental agency (collectively, the “Money Laundering Laws”), except as would not
reasonably be expected to result in a Material Adverse Effect; and no action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator involving the
Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company,
threatened.




          (ii) Off-Balance Sheet Arrangements. There are no transactions, arrangements and
other relationships between and/or among the Company, and/or, to the knowledge of the Company, any
of its affiliates and any unconsolidated entity, including, but not limited to, any structural
finance, special purpose or limited purpose entity (each, an “Off Balance Sheet
Transaction”) that could reasonably be expected to affect materially the Company’s liquidity or
the availability of or requirements for its capital resources, including those Off Balance Sheet
Transactions described in the Commission’s Statement about Management’s Discussion and Analysis of
Financial Conditions and Results of Operations (Release Nos. 33-8056; 34-45321; FR-61), required
to be described in the Prospectus which have not been described as required.




          (jj) Underwriter Agreements. The Company is not a party to any agreement with an
agent or underwriter for any other “at-the-market” or continuous equity transaction.




          (kk) ERISA. To the knowledge of the Company, each material employee benefit plan,
within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), that is maintained, administered or contributed to by the Company or any
of its affiliates for employees or former employees of the Company has been maintained in material
compliance with its terms and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended
(the “Code”); no prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, has occurred which would result in a material liability to the Company
with respect to any such plan excluding transactions effected pursuant to a statutory or
administrative exemption; and for each such plan that is subject to the funding rules of Section
412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as defined in Section
412 of the Code has been incurred, whether or not waived, and the fair market value of the assets
of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the
present value of all benefits accrued under such plan determined using reasonable actuarial
assumptions.




13









 








          (ll) Forward Looking Statements. No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act) (a “Forward Looking
Statement”) contained in the Registration Statement and the Prospectus has been made or
reaffirmed without a reasonable basis or has been disclosed other than in good faith. The Forward
Looking Statements incorporated by reference in the Registration Statement and the Prospectus from
the Company’s Annual Report on Form 10-K for the fiscal year most recently ended (i) are within the
coverage of the safe harbor for forward looking statements set forth in Section 27A of the Act,
Rule 175(b) under the Act or Rule 3b-6 under the Exchange Act, as applicable, (ii) were made by the
Company with a reasonable basis and in good faith and reflect the Company’s good faith commercially
reasonable best estimate of the matters described therein, and (iii) have been prepared in
accordance with Item 10 of Regulation S-K under the Act.




          (mm) Wm Smith Purchases. The Company acknowledges and agrees that Wm Smith has
informed the Company that Wm Smith may, to the extent permitted under the Securities Act and the
Exchange Act, purchase and sell shares of Common Stock for its own account while this Agreement is
in effect, provided, that (i) no such purchase or sales shall take place while a Placement Notice
is in effect (except to the extent Wm Smith may engage in sales of Placement Shares purchased or
deemed purchased from the Company as a “riskless principal” or in a similar capacity) and (ii) the
Company shall not be deemed to have authorized or consented to any such purchases or sales by Wm
Smith.




          (nn) Margin Rules. Neither the issuance, sale and delivery of the Shares nor the
application of the proceeds thereof by the Company as described in the Registration Statement and
the Prospectus will violate Regulation T, U or X of the Board of Governors of the Federal Reserve
System or any other regulation of such Board of Governors.




          (oo) Insurance. The Company carries, or is covered by, insurance in such amounts and
covering such risks as the Company reasonably believe are adequate for the conduct of its
properties and as is customary for companies engaged in similar businesses in similar industries.




          (pp) No Improper Practices. (i) Neither the Company, nor to the Company’s knowledge,
any of its respective executive officers has, in the past five years, made any unlawful
contributions to any candidate for any political office (or failed fully to disclose any
contribution in violation of law) or made any contribution or other payment to any official of, or
candidate for, any federal, state, municipal, or foreign office or other person charged with
similar public or quasi-public duty in violation of any law or of the character required to be
disclosed in the Prospectus; (ii) no relationship, direct or indirect, exists between or among the
Company or, to the Company’s knowledge any affiliate, on the one hand, and the directors, officers
and stockholders of the Company, on the other hand, that is required by the Securities Act to be
described in the Registration Statement and the Prospectus that is not so described; (iii) no
relationship, direct or indirect, exists between or among the Company or any affiliate, on the one
hand, and the directors, officers, stockholders or directors of the Company, on the other hand,
that is required by the rules of FINRA to be described in the Registration Statement and the
Prospectus that is not so described; and (iv) except as described in the Prospectus, there are no
material outstanding loans or advances or material guarantees of indebtedness by the Company




14









 







to or for the benefit of any of its officers or directors or any of the members of the
families of any of them.




          (qq) Status Under the Securities Act. The Company was not and is not an ineligible
issuer as defined in Rule 405 under the Securities Act at the times specified in Rules 164 and 433
under the Act in connection with the offering of the Shares.




          (rr) No Misstatement or Omission in an Issuer Free Writing Prospectus. Each issuer
free writing prospectus, as defined in Rule 405 under the Act (an “Issuer Free Writing
Prospectus,” and together with the Preliminary Prospectus the “Pricing Disclosure
Materials”), when considered together with the Pricing Disclosure Materials as of the
applicable Point of Sale, did not or will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representation or warranty with respect to any statement
contained in any Issuer Free Writing Prospectus in reliance upon and in conformity with information
concerning Wm Smith and furnished by Wm Smith to the Company expressly for use in the Issuer Free
Writing Prospectus.




          (ss) Conformity of Issuer Free Writing Prospectus. Each Issuer Free Writing
Prospectus conformed or will conform in all material respects to the requirements of the Act on the
date of first use, and the Company has complied or will comply with any filing requirements
applicable to such Issuer Free Writing Prospectus pursuant to the Act. Each Issuer Free Writing
Prospectus, as of its issue date and at all subsequent times through the completion of the public
offer and sale of the Shares, did not, does not and will not include any information that
conflicted, conflicts or will conflict with the information contained in the Registration Statement
or the Prospectus, including any document incorporated by reference therein that has not been
superseded or modified. The Company has not made any offer relating to the Shares that would
constitute an Issuer Free Writing Prospectus without the prior written consent of Wm Smith. The
Company has retained in accordance with the Act all Issuer Free Writing Prospectuses that were not
required to be filed pursuant to the Act.




          (tt) Pricing Disclosure Materials. The Pricing Disclosure Materials did not, as of
the applicable Point of Sale contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; provided, however, that the
Company makes no representation or warranty with respect to any statement contained in the Pricing
Disclosure Materials in reliance upon and in conformity with information concerning Wm Smith and
furnished in writing by Wm Smith to the Company expressly for use in the Pricing Disclosure
Materials.




          (uu) No Conflicts. Neither the execution of this Agreement, nor the issuance,
offering or sale of the Shares, nor the consummation of any of the transactions contemplated herein
and therein, nor the compliance by the Company with the terms and provisions hereof and thereof
will conflict with, or will result in a breach of, any of the terms and provisions of, or has
constituted or will constitute a default under, or has resulted in or will result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of the Company





15









 







pursuant to the terms of any contract or other agreement to which the Company may be bound or
to which any of the property or assets of the Company is subject, except (i) such conflicts,
breaches or defaults as may have been waived and (ii) such conflicts, breaches and defaults that
would not have a Material Adverse Effect; nor will such action result (x) in any violation of the
provisions of the organizational or governing documents of the Company, or (y) in any material
violation of the provisions of any statute or any order, rule or regulation applicable to the
Company or of any court or of any federal, state or other regulatory authority or other government
body having jurisdiction over the Company.




          (vv) Stock Transfer Taxes. On each Settlement Date, all stock transfer or other taxes
(other than income taxes) which are required to be paid in connection with the sale and transfer of
the Shares to be sold hereunder will be, or will have been, fully paid or provided for by the
Company and all laws imposing such taxes will be or will have been fully complied with.




     7. Covenants of the Company. The Company covenants and agrees with Wm Smith that:



          (a) Registration Statement Amendments. After the date of this Agreement and during
any period in which a Prospectus relating to any Placement Shares is required to be delivered by Wm
Smith under the Securities Act (including in circumstances where such requirement may be satisfied
pursuant to Rule 172 under the Securities Act), (i) the Company will notify Wm Smith promptly of
the time when any subsequent amendment to the Registration Statement, other than documents
incorporated by reference, has been filed with the Commission and/or has become effective or any
subsequent supplement to the Prospectus has been filed and of any request by the Commission for any
amendment or supplement to the Registration Statement or Prospectus or for additional information,
(ii) the Company will prepare and file with the Commission, promptly upon Wm Smith’s request, any
amendments or supplements to the Registration Statement or Prospectus that, in Wm Smith’s
reasonable opinion, may be necessary or advisable in connection with the distribution of the
Placement Shares by Wm Smith (provided, however, that the failure of Wm Smith to make such request
shall not relieve the Company of any obligation or liability hereunder, or affect Wm Smith’s right
to rely on the representations and warranties made by the Company in this Agreement and provided,
further, that the only remedy Wm Smith shall have with respect to the failure to make such filing
shall be to cease making sales under this Agreement until such amendment or supplement is filed);
(iii) the Company will not file any amendment or supplement to the Registration Statement or
Prospectus relating to the Placement Shares or a security convertible into the Placement Shares
unless a copy thereof has been submitted to Wm Smith within a reasonable period of time before the
filing and Wm Smith has not reasonably objected thereto (provided, however, that the failure of Wm
Smith to make such objection shall not relieve the Company of any obligation or liability
hereunder, or affect Wm Smith’s right to rely on the representations and warranties made by the
Company in this Agreement and provided, further, that the only remedy Wm Smith shall have with
respect to the failure by the Company to obtain such consent shall be to cease making sales under
this Agreement) and the Company will furnish to Wm Smith at the time of filing thereof a copy of
any document that upon filing is deemed to be incorporated by reference into the Registration
Statement or Prospectus, except for those documents available via EDGAR; and (iv) the Company will
cause each amendment or supplement to the Prospectus to be filed with the Commission as required
pursuant to the applicable paragraph of Rule 424(b) of the Securities




16









 







Act or, in the case of any document to be incorporated therein by reference, to be filed with
the Commission as required pursuant to the Exchange Act, within the time period prescribed (the
determination to file or not file any amendment or supplement with the Commission under this
Section 7(a), based on the Company’s reasonable opinion or reasonable objections, shall be made
exclusively by the Company).




          (b) Notice of Commission Stop Orders. The Company will advise Wm Smith, promptly
after it receives notice or obtains knowledge thereof, of the issuance or threatened issuance by
the Commission of any stop order suspending the effectiveness of the Registration Statement, of the
suspension of the qualification of the Placement Shares for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceeding for any such purpose; and it will promptly
use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such a stop order should be issued. The Company will advise Wm Smith promptly after
it receives any request by the Commission for any amendments to the Registration Statement or any
amendment or supplements to the Prospectus or any Issuer Free Writing Prospectus or for additional
information related to the offering of the Shares or for additional information related to the
Registration Statement, the Prospectus or any Issuer Free Writing Prospectus.




          (c) Delivery of Prospectus; Subsequent Changes. During any period in which a
Prospectus relating to the Placement Shares is required to be delivered by Wm Smith under the
Securities Act with respect to the offer and sale of the Placement Shares, (including in
circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities
Act), the Company will comply with all requirements imposed upon it by the Securities Act, as from
time to time in force, and to file on or before their respective due dates all reports and any
definitive proxy or information statements required to be filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange Act.
If the Company has omitted any information from the Registration Statement pursuant to Rule 430A
under the Act, it will use its best efforts to comply with the provisions of and make all requisite
filings with the Commission pursuant to said Rule 430A and to notify Wm Smith promptly of all such
filings. If during such period any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or supplement the
Registration Statement or Prospectus to comply with the Securities Act, the Company will promptly
notify Wm Smith to suspend the offering of Placement Shares during such period and the Company will
promptly amend or supplement the Registration Statement or Prospectus (at the expense of the
Company) so as to correct such statement or omission or effect such compliance; provided, however,
that the Company may delay any such amendment or supplement, if in the judgment of the Company, it
is in the best interests of the Company to do so.




          (d) Listing of Placement Shares. During any period in which the Prospectus relating
to the Placement Shares is required to be delivered by Wm Smith under the Securities Act with
respect to the offer and sale of the Placement Shares, the Company will use its reasonable best
efforts to cause the Placement Shares to be listed on the Exchange and to qualify the Placement
Shares for sale under the securities laws of such jurisdictions as Wm Smith





17









 







reasonably designates and to continue such qualifications in effect so long as required for
the distribution of the Placement Shares; provided, however, that the Company shall not be required
in connection therewith to qualify as a foreign corporation or dealer in securities or file a
general consent to service of process in any jurisdiction.




          (e) Delivery of Registration Statement and Prospectus. The Company will furnish to Wm
Smith and its counsel (at the expense of the Company) copies of the Registration Statement, the
Prospectus (including all documents incorporated by reference therein) and all amendments and
supplements to the Registration Statement or Prospectus that are filed with the Commission during
any period in which a Prospectus relating to the Placement Shares is required to be delivered under
the Securities Act (including all documents filed with the Commission during such period that are
deemed to be incorporated by reference therein), in each case as soon as reasonably practicable and
in such quantities as Wm Smith may from time to time reasonably request and, at Wm Smith’s request,
will also furnish copies of the Prospectus to each exchange or market on which sales of the
Placement Shares may be made; provided, however, that the Company shall not be required to furnish
any document (other than the Prospectus) to Wm Smith to the extent such document is available on
EDGAR.




          (f) Earnings Statement. 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 covering a 12-month period that satisfies
the provisions of Section 11(a) and Rule 158 of the Securities Act.




          (g) Expenses. The Company, whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, in accordance with the provisions of Section 12
hereunder, will pay all expenses incident to the performance of its obligations hereunder,
including, but not limited to, expenses relating to (i) the preparation, printing and filing of the
Registration Statement and each amendment and supplement thereto, of each Prospectus and of each
amendment and supplement thereto, (ii) the preparation, issuance and delivery of the Placement
Shares, (iii) the qualification of the Placement Shares under securities laws in accordance with
the provisions of Section 7(d) of this Agreement, including filing fees, (iv) the printing and
delivery to Wm Smith of copies of the Prospectus and any amendments or supplements thereto, and of
this Agreement, (v) the fees and expenses incurred in connection with the listing or qualification
of the Placement Shares for trading on the Exchange, (vi) filing fees and expenses, if any, of the
Commission and the FINRA Corporate Financing Department. Wm Smith will pay all expenses incident
to the performance of its obligations hereunder.




          (h) Use of Proceeds. The Company will use the Net Proceeds as described in the
Prospectus in the section entitled “Use of Proceeds.”




          (i) Notice of Other Sales. Without the prior written consent of Wm Smith, the Company
will not, directly or indirectly, offer to sell, sell, contract to sell, grant any option to sell
or otherwise dispose of any shares of Common Stock (other than the Shares offered pursuant to the
provisions of this Agreement) or securities convertible into or exchangeable for Common Stock,
warrants or any rights to purchase or acquire, Common Stock during the period beginning on the
fifth (5th) Trading Day immediately prior to the date on which any Placement Notice is delivered to
Wm Smith hereunder and ending on the fifth (5th) Trading Day immediately




18









 







following the final Settlement Date with respect to Placement Shares sold pursuant to such
Placement Notice (or, if the Placement Notice has been terminated or suspended prior to the sale of
all Shares covered by a Placement Notice, the date of such suspension or termination); and will not
directly or indirectly in any other “at-the-market” or continuous equity transaction offer to sell,
sell, contract to sell, grant any option to sell or otherwise dispose of any shares of Common Stock
(other than the Shares offered pursuant to the provisions of this Agreement) or securities
convertible into or exchangeable for Common Stock, warrants or any rights to purchase or acquire,
Common Stock prior to the later of the termination of this Agreement and the sixtieth (60th) day
immediately following the final Settlement Date with respect to Placement Shares sold pursuant to
such Placement Notice; provided, however, that such restrictions will not be required in connection
with the Company’s issuance or sale of (i) Common Stock, options to purchase shares of Common Stock
or Common Stock issuable upon the exercise of options, pursuant to any employee or director stock
option or benefits plan, stock ownership plan or dividend reinvestment plan (but not shares subject
to a waiver to exceed plan limits in its dividend reinvestment plan) of the Company whether now in
effect or hereafter implemented, and (ii) Common Stock issuable upon conversion of securities or
the exercise of warrants, options or other rights in effect or outstanding, and disclosed in
filings by the Company available on EDGAR or otherwise in writing to Wm Smith.




          (j) Change of Circumstances. The Company will, at any time during the pendency of a
Placement Notice advise Wm Smith promptly after it shall have received notice or obtained knowledge
thereof, of any information or fact that would alter or affect in any material respect any opinion,
certificate, letter or other document required to be provided to Wm Smith pursuant to this
Agreement.




          (k) Due Diligence Cooperation. The Company will cooperate with any reasonable due
diligence review conducted by Wm Smith or its agents in connection with the transactions
contemplated hereby, including, without limitation, providing information and making available
documents and senior corporate officers, during regular business hours and at the Company’s
principal offices, as Wm Smith may reasonably request.




          (l) Required Filings Relating to Placement of Placement Shares. The Company agrees
that on such dates as the Securities Act shall require, the Company will (i) file a prospectus
supplement with the Commission under the applicable paragraph of Rule 424(b) under the Securities
Act (each and every filing under Rule 424(b), a “Filing Date”), which prospectus supplement
will set forth, within the relevant period, the maximum amount of Placement Shares to be sold
through Wm Smith and the compensation payable by the Company to Wm Smith with respect to such
Placement Shares, and (ii) deliver such number of copies of each such prospectus supplement to each
exchange or market on which such sales were effected as may be required by the rules or regulations
of such exchange or market.




          (m) Representation Dates; Certificate. During the term of this Agreement, on the date
of each Placement Notice given hereunder and each time the Company (i) files the Prospectus
relating to the Placement Shares or amends or supplements the Registration Statement or the
Prospectus relating to the Placement Shares (other than a prospectus supplement filed in accordance
with Section 7(l) of this Agreement) by means of a post-effective amendment, sticker, or supplement
but not by means of incorporation of document(s) by





19









 







reference to the Registration Statement or the Prospectus relating to the Placement Shares;
(ii) files an annual report on Form 10-K under the Exchange Act; (iii) files its quarterly reports
on Form 10-Q under the Exchange Act; (iv) files a report on Form 8-K containing amended financial
information (other than an earnings release, to “furnish” information pursuant to Items 2.02 or
7.01 of Form 8-K or to provide disclosure pursuant to Item 8.01 of Form 8-K relating to the
reclassifications of certain properties as discontinued operations in accordance with Statement of
Financial Accounting Standards No. 144) under the Exchange Act or (v) files a Form 8-K under the
Exchange Act for any other purpose (other than to “furnish” information pursuant to Items 2.02 or
7.01 of revised Form 8-K) (each date of filing of one or more of the documents referred to in
clauses (i) through (v) shall be a “Representation Date”); the Company shall furnish Wm
Smith (but in the case of clause (v) above only if Wm Smith reasonably determines that the
information contained in such Form 8-K is material) with a certificate, in the form attached hereto
as Exhibit 7(m). The requirement to provide a certificate under this Section 7(m) shall be waived
for any Representation Date occurring at a time at which no Placement Notice is pending, which
waiver shall continue until the earlier to occur of the date the Company delivers a Placement
Notice hereunder (which for such calendar quarter shall be considered a Representation Date) and
the next occurring Representation Date; provided, however, that such waiver shall not apply for any
Representation Date on which the Company files its annual report on Form 10-K. Notwithstanding the
foregoing, if the Company subsequently decides to sell Placement Shares following a Representation
Date when the Company relied on such waiver and did not provide Wm Smith with a certificate under
this Section 7(m), then before the Company delivers the Placement Notice or Wm Smith sells any
Placement Shares, the Company shall provide Wm Smith with a certificate, in the form attached
hereto as Exhibit 7(m), dated the date of the Placement Notice.




          (n) Legal Opinion. No later than ten Trading Days following the date of each
Placement Notice given hereunder, the Company shall cause to be furnished to Wm Smith a written
opinion of Ballard Spahr Andrews & Ingersoll, LLP (“Company Counsel”), or other counsel
satisfactory to Wm Smith, in form and substance satisfactory to Wm Smith and its counsel, dated the
date of the Placement Notice, substantially similar to the form attached hereto as Exhibit
7(n)(1)(A) and Exhibit 7(n)(1)(B), respectively, modified, as necessary, to relate to the
Registration Statement and the Prospectus as then amended or supplemented; provided, however, the
Company shall be required to furnish to Wm Smith no more than one opinion hereunder per calendar
quarter; provided, further, that in lieu of such opinions for subsequent Placement Notices, counsel
may furnish Wm Smith with a letter (a “Reliance Letter”) to the effect that Wm Smith may
rely on a prior opinion delivered under this Section 7(n) to the same extent as if it were dated
the date of such letter (except that statements in such prior opinion shall be deemed to relate to
the Registration Statement and the Prospectus as amended or supplemented as of the date of the
Placement Notice).




          (o) Comfort Letter. No later than five Trading Days following the date the Company
files its annual report on Form 10-K for the year ended December 31, 2008 and thereafter within
five Trading Days following each subsequent date the Company files an annual report on Form 10-K
under the Exchange Act, during any period in which the Prospectus relating to the Placement Shares
is required to be delivered by Wm Smith (including in circumstances where such requirement may be
satisfied pursuant to Rule 172 under the Act) and with respect to which the Company is obligated to
deliver a certificate in the form attached hereto as Exhibit




20









 







7(m) for which no waiver is applicable, the Company shall cause its independent accountants to
furnish Wm Smith letters (the “Comfort Letters”), dated the date the Comfort Letter is
delivered; provided, that if requested by Wm Smith, the Company shall cause a Comfort Letter to be
furnished to Wm Smith within ten Trading Days of the date of occurrence of any material transaction
or event, including the restatement of the Company’s financial statements. The Comfort Letter from
the Company’s independent accountants shall be in a form and substance satisfactory to Wm Smith,
(i) confirming that they are an independent public accounting firm within the meaning of the
Securities Act and the PCAOB, (ii) stating, as of such date, the conclusions and findings of such
firm with respect to the financial information and other matters ordinarily covered by accountants’
“comfort letters” to underwriters in connection with registered public offerings (the first such
letter, the “Initial Comfort Letter”) and (iii) updating the Initial Comfort Letter with
any information that would have been included in the Initial Comfort Letter had it been given on
such date and modified as necessary to relate to the Registration Statement and the Prospectus, as
amended and supplemented to the date of such letter.




          (p) Market Activities. The Company will not, directly or indirectly, (i) take any
action designed to cause or result in, or that constitutes or might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (ii) sell, bid for, or purchase the Shares, or pay
anyone any compensation for soliciting purchases of the Shares other than Wm Smith.




          (q) Investment Company Act. The Company will conduct its affairs in such a manner so
as to reasonably ensure that it will not be or become, at any time prior to the termination of this
Agreement, an “investment company,” as such term is defined in the Investment Company Act, assuming
no change in the Commission’s current interpretation as to entities that are not considered an
investment company.




          (r) No Offer to Sell. Other than an Issuer Free Writing Prospectus approved in
advance by the Company and Wm Smith in its capacity as principal or agent hereunder, neither Wm
Smith nor the Company (including its agents and representatives, other than Wm Smith in its
capacity as such) will make, use, prepare, authorize, approve or refer to any written communication
(as defined in Rule 405 under the Act), required to be filed with the Commission, that constitutes
an offer to sell or solicitation of an offer to buy Shares hereunder.




          (s) Sarbanes-Oxley Act. The Company will maintain and keep accurate books and records
reflecting its assets and maintain internal accounting controls in a manner designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles and including those policies and procedures that (i) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as
necessary to permit the preparation of the Company’s consolidated financial statements in
accordance with generally accepted accounting principals, (iii) that receipts and expenditures of
the Company are being made only in accordance with management’s and the Company’s directors’
authorization, and (iv) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that




21









 







could have a material effect on its financial statements. The Company will maintain such
controls and other procedures, including, without limitation, those required by Sections 302 and
906 of the Sarbanes-Oxley Act, and the applicable regulations thereunder that are designed to
ensure that information required to be disclosed by the Company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the
Company’s management, including its Chief Executive Officer and principal financial officer, or
persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure and to ensure that material information relating to the Company is made known to them,
particularly during the period in which such periodic reports are being prepared.




     8. Covenants of Wm Smith. Wm Smith covenants and agrees that it is duly registered as
a broker-dealer under FINRA, the Exchange Act and the applicable statutes and regulations of each
state in which the Shares will be offered and sold, except such states in which Wm Smith is exempt
from registration or such registration is not otherwise required. Wm Smith shall continue, for the
term of this Agreement, to be duly registered as a broker-dealer under FINRA, the Exchange Act and
the applicable statutes and regulations of each state in which the Shares will be offered and sold,
except such states in which Wm Smith is exempt from registration or such registration is not
otherwise required, during the term of this Agreement.



     9. Conditions to Wm Smith’s Obligations. The obligations of Wm Smith hereunder with
respect to a Placement will be subject to the continuing accuracy and completeness of the
representations and warranties made by the Company herein, to the due performance by the Company of
its obligations hereunder, to the completion by Wm Smith of a due diligence review satisfactory to
Wm Smith in its reasonable judgment, and to the continuing satisfaction (or waiver by Wm Smith in
its sole discretion) of the following additional conditions:



          (a) Registration Statement Effective. The Registration Statement shall have become
effective and shall be available for the (i) resale of all Placement Shares issued to Wm Smith and
not yet sold by Wm Smith and (ii) the sale of all Placement Shares contemplated to be issued by any
Placement Notice.




          (b) No Material Notices. None of the following events shall have occurred and be
continuing: (i) receipt by the Company of any request for additional information from the
Commission or any other federal or state governmental authority during the period of effectiveness
of the Registration Statement, the response to which would require any post-effective amendments or
supplements to the Registration Statement or the Prospectus; (ii) the issuance by the Commission or
any other federal or state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt by
the Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Placement Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (iv) the occurrence of any event that makes any
material statement made in the Registration Statement or the Prospectus or any material document
incorporated or deemed to be incorporated




22









 







therein by reference untrue in any material respect or that requires the making of any changes
in the Registration Statement, related Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any materially untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to make the statements
therein not misleading and, that in the case of the Prospectus, it will not contain any materially
untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading.




          (c) No Misstatement or Material Omission. Wm Smith shall not have advised the Company
that the Registration Statement or Prospectus, or any amendment or supplement thereto, contains an
untrue statement of fact that in Wm Smith’s reasonable opinion is material, or omits to state a
fact that in Wm Smith’s opinion is material and is required to be stated therein or is necessary to
make the statements therein not misleading.




          (d) Material Changes. Except as contemplated in the Prospectus, or disclosed in the
Company’s reports filed with the Commission, there shall not have been any material adverse change,
on a consolidated basis, in the authorized capital stock of the Company or any Material Adverse
Effect, or any development that could reasonably be expected to cause a Material Adverse Effect, or
a downgrading in or withdrawal of the rating assigned to any of the Company’s securities (other
than asset backed securities) by any rating organization or a public announcement by any rating
organization that it has under surveillance or review its rating of any of the Company’s securities
(other than asset backed securities), the effect of which, in the case of any such action by a
rating organization described above, in the reasonable judgment of Wm Smith (without relieving the
Company of any obligation or liability it may otherwise have), is so material as to make it
impracticable or inadvisable to proceed with the offering of the Placement Shares on the terms and
in the manner contemplated in the Prospectus.




          (e) Legal Opinion. Wm Smith shall have received the opinions of Company Counsel
required to be delivered pursuant Section 7(n) on or before the date on which such delivery of such
opinion is required pursuant to Section 7(n).




          (f) Comfort Letter. Wm Smith shall have received the Comfort Letter required to be
delivered pursuant Section 7(o) on or before the date on which such delivery of such opinion is
required pursuant to Section 7(o).




          (g) Representation Certificate. Wm Smith shall have received the certificate required
to be delivered pursuant to Section 7(m) on or before the date on which delivery of such
certificate is required pursuant to Section 7(m).




          (h) No Suspension. Trading in the Shares shall not have been suspended on the
Exchange.




          (i) Other Materials. On each date on which the Company is required to deliver a
certificate pursuant to Section 7(m), the Company shall have furnished to Wm Smith such appropriate
further information, certificates and documents as Wm Smith may reasonably request and as are
usually and customarily furnished pursuant to a securities offering. All such





23









 







opinions, certificates, letters and other documents will be in compliance with the provisions
hereof. The Company will furnish Wm Smith with such conformed copies of such opinions,
certificates, letters and other documents as Wm Smith shall reasonably request.




          (j) Securities Act Filings Made. All filings with the Commission required by Rule 424
under the Securities Act to have been filed prior to the issuance of any Placement Notice hereunder
shall have been made within the applicable time period prescribed for such filing by Rule 424.




          (k) Approval for Listing. The Placement Shares shall either have been approved for
listing on the Exchange, subject only to notice of issuance, or the Company shall have filed an
application for listing of the Placement Shares on the Exchange at, or prior to, the issuance of
any Placement Notice.




          (l) No Termination Event. There shall not have occurred any event that would permit
Wm Smith to terminate this Agreement pursuant to Section 12(a).




     10. Indemnification and Contribution.



          (a) Company Indemnification. The Company agrees to indemnify and hold harmless Wm
Smith, the directors, officers, partners, employees and agents of Wm Smith and each person, if any,
who (i) controls Wm Smith within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, or (ii) is controlled by or is under common control with Wm Smith (a “Wm
Smith Affiliate”) from and against any and all losses, claims, liabilities, expenses and
damages (including, but not limited to, any and all reasonable investigative, legal and other
expenses incurred in connection with, and any and all amounts paid in settlement (in accordance
with Section 10(c)) of, any action, suit or proceeding between any of the indemnified parties and
any indemnifying parties or between any indemnified party and any third party, or otherwise, or any
claim asserted), as and when incurred, to which Wm Smith, or any such person, may become subject
under the Securities Act, the Exchange Act or other federal or state statutory law or regulation,
at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise
out of or are based, directly or indirectly, on (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus or in any Issuer Free
Writing Prospectus or in any application or other document executed by or on behalf of the Company
or based on written information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Shares under the securities laws thereof or filed with the Commission, (ii)
the omission or alleged omission to state in any such document a material fact required to be
stated in it or necessary to make the statements in it not misleading or (iii) any breach by any of
the indemnifying parties of any of their respective representations, warranties and agreements
contained in this Agreement; provided, however, that this indemnity agreement shall not apply to
the extent that such loss, claim, liability, expense or damage arises from the sale of the
Placement Shares pursuant to this Agreement and is caused directly or indirectly by an untrue
statement or omission made in reliance on and in conformity with information relating to Wm Smith.
This indemnity agreement will be in addition to any liability that the Company might otherwise
have.





24












 





          (b) Wm Smith Indemnification. Wm Smith agrees to indemnify and hold harmless the
Company and its directors and each officer of the Company who signed the Registration Statement,
and each person, if any, who (i) controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act or (ii) is controlled by or is under common
control with the Company (a “Company Affiliate”) against any and all loss, liability, claim, damage
and expense described in the indemnity contained in Section 10(c), as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendments thereto) or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with information relating to Wm Smith and
furnished to the Company by Wm Smith.




          (c) Procedure. Any party that proposes to assert the right to be indemnified under
this Section 10 will, promptly after receipt of notice of commencement of any action against such
party in respect of which a claim is to be made against an indemnifying party or parties under this
Section 10, notify each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party will not relieve
the indemnifying party from (i) any liability that it might have to any indemnified party otherwise
than under this Section 10 and (ii) any liability that it may have to any indemnified party under
the foregoing provision of this Section 10 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such
action is brought against any indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and, to the extent that it
elects by delivering written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to
the indemnified party, and after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the indemnified party
for any legal or other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with the defense. The
indemnified party will have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) 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, (3) 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 (4) the indemnifying party has
not in fact employed counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All such fees,
disbursements and other charges will be reimbursed by the indemnifying party promptly as



25









 






they are incurred. An indemnifying party will not, in any event, be liable for any settlement
of any action or claim effected without its written consent. No indemnifying party shall, without
the prior written consent of each indemnified party, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding relating to the matters
contemplated by this Section 10 (whether or not any indemnified party is a party thereto), unless
such settlement, compromise or consent includes an unconditional release of each indemnified party
from all liability arising or that may arise out of such claim, action or proceeding.




          (d) Contribution. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing paragraphs of this Section
10 is applicable in accordance with its terms but for any reason is held to be unavailable from the
Company or Wm Smith, the Company and Wm Smith will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted, but after deducting any contribution received by the Company from persons
other than Wm Smith, such as persons who control the Company within the meaning of the Securities
Act, officers of the Company who signed the Registration Statement and directors of the Company,
who also may be liable for contribution) to which the Company and Wm Smith may be subject in such
proportion as shall be appropriate to reflect the relative benefits received by the Company on the
one hand and Wm Smith on the other. The relative benefits received by the Company on the one hand
and Wm Smith on the other hand shall be deemed to be in the same proportion as the total net
proceeds from the sale of the Placement Shares (before deducting expenses) received by the Company
bear to the total compensation received by Wm Smith (before deducting expenses) from the sale of
Placement Shares on behalf of the Company. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made
in such proportion as is appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand, and Wm Smith, on
the other, with respect to the statements or omission that resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information supplied by the
Company or Wm Smith, the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company and Wm Smith agree
that it would not be just and equitable if contributions pursuant to this Section 10(d) were to be
determined by pro rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, liability, expense, or damage, or action in
respect thereof, referred to above in this Section 10(d) shall be deemed to include, for the
purpose of this Section 10(d), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim to the extent
consistent with Section 10(c) hereof. Notwithstanding the foregoing provisions of this Section
10(d), Wm Smith shall not be required to contribute any amount in excess of the commissions
received by it under this Agreement and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section
10(d), any person who



26









 







controls a party to this Agreement within the meaning of the Securities Act, and any officers,
directors, partners, employees or agents of Wm Smith, will have the same rights to contribution as
that party, and each officer of the Company who signed the Registration Statement will have the
same rights to contribution as the Company, subject in each case to the provisions hereof. Any
party entitled to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made under this Section
10(d), will notify any such party or parties from whom contribution may be sought, but the omission
to so notify will not relieve that party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 10(d) except to the extent that the failure
to so notify such other party materially prejudiced the substantive rights or defenses of the party
from whom contribution is sought. Except for a settlement entered into pursuant to the last
sentence of Section 10(c) hereof, no party will be liable for contribution with respect to any
action or claim settled without its written consent if such consent is required pursuant to Section
10(c) hereof.




     11. Representations and Agreements to Survive Delivery. The indemnity and
contribution agreements contained in Section 10 of this Agreement and all representations and
warranties of the Company herein or in certificates delivered pursuant hereto shall survive, as of
their respective dates, regardless of (i) any investigation made by or on behalf of Wm Smith, any
controlling persons, or the Company (or any of their respective officers, directors or controlling
persons), (ii) delivery and acceptance of the Placement Shares and payment therefor or (iii) any
termination of this Agreement.



     12. Termination.



          (a) Wm Smith shall have the right by giving notice as hereinafter specified at any time to
terminate this Agreement if (i) any Material Adverse Effect, or any development that has actually
occurred and that is reasonably expected to cause a Material Adverse Effect has occurred that, in
the reasonable judgment of Wm Smith, may materially impair the ability of Wm Smith to sell the
Placement Shares hereunder, (ii) the Company shall have failed, refused or been unable to perform
any agreement on its part to be performed hereunder; provided, however, in the case of any failure
of the Company to deliver (or cause another person to deliver) any certification, opinion, or
letter required under Sections 7(m), 7(n), or 7(o), Wm Smith’s right to terminate shall not arise
unless such failure to deliver (or cause to be delivered) continues for more than thirty days from
the date such delivery was required; or (iii) any other condition of Wm Smith’s obligations
hereunder is not fulfilled, or (iv), any suspension or limitation of trading in the Placement
Shares or in securities generally on the Exchange shall have occurred. Any such termination shall
be without liability of any party to any other party except that the provisions of Section 7(g)
(Expenses), Section 9 (Indemnification), Section 11 (Survival of Representations), Section 17
(Applicable Law; Consent to Jurisdiction) and Section 18 (Waiver of Jury Trial) hereof shall remain
in full force and effect notwithstanding such termination. If Wm Smith elects to terminate this
Agreement as provided in this Section 12(a), Wm Smith shall provide the required notice as
specified in Section 13 (Notices).




          (b) The Company shall have the right, by giving 60 days notice as hereinafter specified to
terminate this Agreement in its sole discretion at any time after the date of this Agreement. Any
such termination shall be without liability of any party to any other party



27









 






except that the provisions of Section 7(g), Section 10, Section 11, Section 17 and Section 18
hereof shall remain in full force and effect notwithstanding such termination.




          (c) Wm Smith shall have the right, by giving 60 days notice as hereinafter specified to
terminate this Agreement in its sole discretion at any time after the date of this Agreement. Any
such termination shall be without liability of any party to any other party except that the
provisions of Section 7(g), Section 10, Section 11, Section 17 and Section 18 hereof shall remain
in full force and effect notwithstanding such termination.




          (d) Unless earlier terminated pursuant to this Section 12, this Agreement shall automatically
terminate upon the issuance and sale of all of the Placement Shares through Wm Smith on the terms
and subject to the conditions set forth herein; provided that the provisions of Section 7(g),
Section 10, Section 11, Section 17 and Section 18 hereof shall remain in full force and effect
notwithstanding such termination.




          (e) This Agreement shall remain in full force and effect unless terminated pursuant to
Sections 12(a), (b), (c), or (d) above or otherwise by mutual agreement of the parties; provided,
however, that any such termination by mutual agreement shall in all cases be deemed to provide that
Section 7(g), Section 10, Section 11, Section 17 and Section 18 shall remain in full force and
effect.




          (f) Any termination of this Agreement shall be effective on the date specified in such notice
of termination; provided, however, that such termination shall not be effective until the close of
business on the date of receipt of such notice by Wm Smith or the Company, as the case may be. If
such termination shall occur prior to the Settlement Date for any sale of Placement Shares, such
Placement Shares shall settle in accordance with the provisions of this Agreement.




     13. Notices. All notices or other communications required or permitted to be given by
any party to any other party pursuant to the terms of this Agreement shall be in writing, unless
otherwise specified, and if sent to Wm Smith, shall be delivered to:


Wm Smith & Co.

1700 Lincoln Street, Suite 2545

Denver, CO 80203

Attention: William S. Smith

Facsimile: 303-831-0881

 

with a copy to:

 

Holme Roberts & Owen LLP

1700 Lincoln Street, Suite 4100

Denver, CO 80203

Attention: Garth B. Jensen

Facsimile: 303-866-0200





28









 







and if to the Company, shall be delivered to:

 

Novavax, Inc.

9920 Belward Campus Drive

Rockville, MD 20850

Attention:

Facsimile:

 

with a copy to:

 

Ballard Spahr Andrews & Ingersoll, LLP

1735 Market Street, 51st Floor

Philadelphia, PA 19103

Attention: Jennifer Miller

Facsimile: 215-864-9073




     Each party to this Agreement may change such address for notices by sending to the parties to
this Agreement written notice of a new address for such purpose. Each such notice or other
communication shall be deemed given (i) when delivered personally or by verifiable facsimile
transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business
Day or, if such day is not a Business Day, on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to a nationally-recognized overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid). For purposes of this Agreement, “Business Day” shall
mean any day on which the Exchange and commercial banks in the City of New York are open for
business.



     An electronic communication (“Electronic Notice”) shall be deemed written notice for
purposes of this Section 13 if sent to the electronic mail address specified by the receiving party
under separate cover. Electronic Notice shall be deemed received at the time the party sending
Electronic Notice receives verification of receipt by the receiving party. Any party receiving
Electronic Notice may request and shall be entitled to receive the notice on paper, in a
nonelectronic form (“Nonelectronic Notice”) which shall be sent to the requesting party
within ten (10) days of receipt of the written request for Nonelectronic Notice.



     14. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the Company and Wm Smith and their respective successors and the affiliates,
controlling persons, officers and directors referred to in Section 10 hereof. References to any of
the parties contained in this Agreement shall be deemed to include the successors and permitted
assigns of such party. Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and permitted assigns any
rights, remedies, obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. Neither party may assign its rights or obligations under
this Agreement without the prior written consent of the other party; provided, however, that Wm



29









 







Smith may assign its rights and obligations hereunder to an affiliate of Wm Smith without
obtaining the Company’s consent.



     15. Adjustments for Stock Splits. The parties acknowledge and agree that all
share-related numbers contained in this Agreement shall be adjusted to take into account any stock
split, stock dividend or similar event effected with respect to the Shares.



     16. Entire Agreement; Amendment; Severability. This Agreement (including all
schedules and exhibits attached hereto and Placement Notices issued pursuant hereto) constitutes
the entire agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, among the parties hereto with regard to the subject matter
hereof. Neither this Agreement nor any term hereof may be amended except pursuant to a written
instrument executed by the Company and Wm Smith. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable as written by a court of competent jurisdiction, then such provision shall
be given full force and effect to the fullest possible extent that it is valid, legal and
enforceable, and the remainder of the terms and provisions herein shall be construed as if such
invalid, illegal or unenforceable term or provision was not contained herein, but only to the
extent that giving effect to such provision and the remainder of the terms and provisions hereof
shall be in accordance with the intent of the parties as reflected in this Agreement.



     17. Applicable Law; Consent to Jurisdiction. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado without regard to the
principles of conflicts of laws. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of Denver, for the adjudication of
any dispute hereunder or in connection with any transaction contemplated hereby, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof (certified or
registered mail, return receipt requested) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.



     18. Waiver of Jury Trial. The Company and Wm Smith each hereby irrevocably waives any
right it may have to a trial by jury in respect of any claim based upon or arising out of this
agreement or any transaction contemplated hereby.



     19. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument. Delivery of an executed Agreement by one party to the other may be made by facsimile
transmission.



[Remainder of Page Intentionally Blank]




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If the foregoing correctly sets forth the understanding between the Company and Wm Smith, please so
indicate in the space provided below for that purpose, whereupon this letter shall constitute a
binding agreement between the Company and Wm Smith.




	 	 	 	 	 
	 	Very truly yours,



NOVAVAX INC.

 	 
	 	By:  	/s/ Len Stigliano
 	 
	 	 	Name:  	Len Stigliano 	 
	 	 	Title:  	Vice Resident, Chief Financial

Officer and Treasurer 	 
	 
	 	ACCEPTED as of the date

first-above written:



WM SMITH & CO.

 	 
	 	By:  	/s/ Patrice McNicoll
 	 
	 	 	Name:  	Patrice McNicoll 	 
	 	 	Title:  	Managing Director 	 
	 




 











 





SCHEDULE 1




 






FORM OF PLACEMENT NOTICE




 






	 	 	 
	From:

	 	[          
                     ]
	 
	To:

	 	Wm Smith & Co.
	 

	 	Attention: William Smith and Patrice McNicoll
	 
	Subject:

	 	At Market Issuance—Placement Notice





Gentlemen:



Pursuant to the terms and subject to the conditions contained in the At Market Issuance Sales
Agreement between Novavax, Inc. (the “Company”), and Wm Smith & Co. (“Wm Smith”)
dated _________ ___, 2008, the Company hereby requests that Wm Smith sell up to _________ shares
of the Company’s common stock, par value $.01 per share, at a minimum market price of $_________  per
share, during the time period beginning [month, day, time] and ending [month, day,
time].




 









 








SCHEDULE 2




 






Compensation




 





The Company shall pay to Wm Smith in cash, upon each sale of Shares pursuant to this Agreement:




               (i) up and until such time as the cumulative gross proceeds of sales pursuant to this
Agreement total $25,000,000, an amount equal to 3% of the gross proceeds from each sale of Shares
pursuant to this Agreement, and



               (ii) thereafter, an amount equal to 2.5% of the gross proceeds from each sale of Shares pursuant to
this Agreement as it may be amended or any subsequent agreement.



 









 








EXHIBIT 7(m)




Form of Representation Date Certificate




     This Officers Certificate (this “Certificate”) is executed and delivered in connection
with Section 7(m) of the At Market Issuance Sales Agreement (the “Agreement”), dated
November __, 2008, and entered into between Novavax, Inc. (the “Company”) and Wm Smith &
Co. (“Wm Smith”). All capitalized terms used but not defined herein shall have the
meanings given to such terms in the Agreement



     The undersigned, a duly appointed and authorized officer of the Company, having made all
necessary inquiries to establish the accuracy of the statements below and having been authorized by
the Company to execute this certificate, hereby certifies as follows:



     1. As of the date of this Certificate, (i) the Registration Statement does not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading and (ii) neither the Prospectus
nor the Pricing Disclosure Materials contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading and (iii) no
event has occurred as a result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein not untrue or misleading.



     2. Each of the representations and warranties of the Company contained in the Agreement were,
when originally made, and are, as of the date of this Certificate, true and correct in all material
respects.



     3. Each of the covenants required to be performed by the Company in the Agreement on or prior
to the date of the Agreement, this Representation Date, and each such other date as set forth in
the Agreement, has been duly, timely and fully performed in all material respects and each
condition required to be complied with by the Company on or prior to the date of the Agreement,
this Representation Date, and each such other date as set forth in the Agreement or in the Waivers
has been duly, timely and fully complied with in all material respects.



     4. Subsequent to the date of the most recent financial statements in the Prospectus, there has
been no material adverse change.



     5. No stop order suspending the effectiveness of the Registration Statement or of any part
thereof has been issued, and no proceedings for that purpose have been instituted or are pending or
threatened by any securities or other governmental authority (including, without limitation, the
Commission).



     6. No order suspending the effectiveness of the Registration Statement or the qualification or
registration of the Shares under the securities or Blue Sky laws of any jurisdiction are in effect
and no proceeding for such purpose is pending before, or threatened, to



37









 




the Company’s knowledge or in writing by, any securities or other governmental authority
(including, without limitation, the Commission).




     The undersigned has executed this Officer’s Certificate as of the date first written above.



	 	 	 	 	 
	 	 	 
	 	  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



38









 






	 	 	 	 	 



EXHIBIT 7(n)(1)(A)




Form Of Legal Opinion





     Capitalized terms used and not defined herein shall have the meanings ascribed to them in the
Placement Agency Agreement



          (i) The authorized capital stock of the Company conforms in all material respects as to legal
matters to the descriptions thereof set forth in the Registration Statement, Prospectus and the
Prospectus Supplement. The Shares have been duly authorized and, when issued and delivered pursuant
to the terms of the Agreement, will be validly issued, fully paid and non-assessable; and will not
have been issued in violation of any preemptive rights granted under the Company’s Certificate of
Incorporation or under the corporate laws of the State of Delaware.




          (ii) The Company is a validly existing corporation in good standing under the laws of the
State of Delaware, the jurisdiction of its organization. The Company has the corporate power to
execute and deliver the Agreement and to issue, sell and deliver the Shares.




          (iii) The execution and delivery of the Agreement by the Company and the performance by the
Company of its obligations under the Agreement have been duly authorized by all requisite corporate
action on behalf of the Company. The Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.




          (iv) The sale and issuance by the Company of the Shares has been duly authorized by all
requisite corporate action on behalf of the Company.




          (v) The Registration Statement, Prospectus and the Prospectus Supplement (other than the
financial statements and schedules and other financial data included or incorporated by reference
therein, as to which we express no opinion), as of their respective effective and issue dates,
complied as to form in all material respects with the requirements of the Securities Act and the
rules and regulations thereunder.




     The opinion of counsel will be accompanied by a standard Rule 10b-5 negative assurance letter.



39









 





EXHIBIT 7(n)(1)(B)




Form Of Legal Opinion Delivered In Connection With Placement Notice




     Capitalized terms used and not defined herein shall have the meanings ascribed to them in the
Placement Agency Agreement



          (i) The Shares have been duly authorized and, when issued and delivered pursuant to the terms
of the Agreement, will be validly issued, fully paid and non-assessable; and will not have been
issued in violation of any preemptive rights granted under the Company’s Certificate of
Incorporation or under the corporate laws of the State of Delaware.




          (ii) The Company is a validly existing corporation in good standing under the laws of the
State of Delaware, the jurisdiction of its organization. The Company has the corporate power to
issue, sell and deliver the Shares.




     The opinion of counsel will be accompanied by a standard Rule 10b-5 negative assurance letter.




40