500,000 Units AMERICAN DG ENERGY INC. Common Stock PLACEMENT AGENCY AGREEMENT
Exhibit
1.1
500,000
Units
Common
Stock
December
9, 2010
Canaccord
Genuity Inc.
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Ladies
and Gentlemen:
American
DG Energy Inc., a Delaware corporation (the “Company”), proposes, subject
to the terms and conditions stated in this Placement Agency Agreement (this
“Agreement”) and the
Subscription Agreements in the form of Exhibit A attached
hereto (the “Subscription
Agreements”) entered into with the investors identified therein (each, an
“Investor” and
collectively, the “Investors”), to issue and
sell up to an aggregate of 500,000 units (the “Units”) with each Unit
consisting of (i) one share (a “Share,” collectively, the
“Shares”) of the
Company’s common stock, par value $0.001 per share (the “Common Stock”) and (ii) a
warrant to purchase one share of Common Stock (the “Warrants”). The
terms and conditions of the Warrants are set forth in the form of Exhibit B attached
hereto. The shares of Common Stock issuable upon exercise of the
Warrants are referred to herein as the “Warrant Shares” and, together
with the Units, the Shares and the Warrants, are referred to herein as the
“Securities”). The
Company hereby confirms its agreement with Canaccord Genuity Inc. (“Canaccord” or, the “Placement Agent”) as set
forth below. The Units are more fully described in the Prospectus (as
defined below).
1. Agreement to Act
as Placement Agent; Delivery and Payment. On the basis of the
representations, warranties and agreements of the Company herein contained, and
subject to the terms and conditions set forth in this Agreement:
(a) The
Company hereby engages Canaccord, as the exclusive agent of the Company, to, on
a commercially reasonable efforts basis, solicit offers to purchase Units from
the Company on the terms and subject to the conditions set forth in the
Subscription Agreements and Prospectus (as defined below). Canaccord
shall use commercially reasonable efforts to assist the Company in obtaining
performance by each Investor whose offer to purchase the Units was solicited by
Canaccord and accepted by the Company, but Canaccord shall not, except as
otherwise provided in this Agreement, have any liability to the Company in the
event any such purchase is not consummated for any reason. Under no
circumstances will Canaccord or any of its affiliates be obligated to underwrite
or purchase any of the Units for its own account or otherwise provide any
financing. Canaccord shall act solely as the Company’s agent and not as
principal. Canaccord shall not have any authority to bind the Company with
respect to any prospective offer to purchase Units and the Company shall have
the sole right to accept offers to purchase Units and may reject any such offer,
in whole or in part. Canaccord has the right, in its discretion,
without notice to the Company, to reject any offer to purchase Units received by
it, in whole or in part, and any such rejection shall not be deemed a breach of
this Agreement.
(b) As
compensation for services rendered by Canaccord hereunder, on the Closing Date
(as defined below), the Company shall pay or cause to be paid to Canaccord by
wire transfer of immediately available funds to an account or accounts
designated by Canaccord, an aggregate amount equal to six percent (6%) of the
gross proceeds received by the Company from the sale of the Units on such
Closing Date. Such amount may be deducted from the payment made by the
Investor(s) to the Company and paid directly to Canaccord on the Closing
Date (the “Agency
Fee”). Canaccord agrees that the foregoing compensation,
together with any expense reimbursement payable hereunder, constitutes all of
the compensation that Canaccord shall be entitled to receive in connection with
the offering contemplated hereby. Canaccord may allow concessions, or pay
commissions, to other dealers participating in the offering of the
Units.
(c) The
Units are being sold to the Investors at a price of $2.50 per Unit (the “Purchase Price”) as set forth
on the cover page of the Prospectus (as defined below). The purchases of Units
by the Investors shall be evidenced by the execution of the Subscription
Agreements by each of the parties thereto in the form attached hereto as Exhibit
A.
(d) Prior
to the earlier of (i) the date on which this Agreement is terminated and (ii)
the Closing Date, the Company shall not, without the prior written consent of
Canaccord, solicit or accept offers to purchase Units otherwise than through
Canaccord in accordance herewith.
(e) No
Units which the Company has agreed to sell pursuant to this Agreement and the
Subscription Agreements shall be deemed to have been purchased and paid for, or
sold by the Company, until such Units shall have been delivered to the Investor
purchasing such Units against payment therefor by such Investor. If the Company
shall default in its obligations to deliver Units to an Investor whose offer it
has accepted, the Company shall indemnify and hold Canaccord harmless against
any loss, claim, damage or liability directly or indirectly arising from or as a
result of the default by the Company in accordance with the procedures set forth
in Section 6(c)
hereof.
(f) Payment
of the purchase price for the Units, and delivery of the Shares and Warrants
shall be made at a closing (the “Closing”) at the offices of
▇▇▇▇▇▇▇▇ & Worcester LLP, counsel for the Company, located at ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., local time, on
December 14, 2010 or at such other time, date and place as Canaccord and the
Company determine pursuant to Rule 15c6-1(a) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) (such date of
payment and delivery being herein referred to as the “Closing
Date”). Unless otherwise specified in the applicable
Subscription Agreement, the Shares will be settled through delivery versus
payment (“DVP”) through
the facilities of The Depository Trust & Clearing
Corporation. The executed Warrants shall be delivered in accordance
with the terms thereof.
2. Representations
and Warranties of the Company. The Company represents and warrants to
Canaccord as of the date hereof, and as of the Closing Date and agrees with
Canaccord, as follows:
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(a) Filing of Registration
Statement. The Company has prepared and filed, in conformity with the
requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the
published rules and regulations thereunder (the “Rules and Regulations”)
adopted by the Securities and Exchange Commission (the “Commission”), a registration
statement, including a prospectus, on Form S-3 (File No. 333-167392), which
became effective as of October 6, 2010, relating to the Units and the offering
thereof (the “Offering”) from time to time
in accordance with Rule 415(a)(1)(x) of the Rules and Regulations, and such
amendments thereof as may have been required up to and including the date of
this Agreement. The term “Registration Statement” as
used in this Agreement means the aforementioned registration statement, as
amended at the time of such registration statement’s effectiveness for purposes
of Section 11 of the Securities Act, (the “Effective Time”), including
(i) all documents filed as a part thereof or incorporated or deemed to be
incorporated by reference therein and (ii) any information in the corresponding
Base Prospectus (as defined below) or a prospectus supplement filed with the
Commission pursuant to Rule 424(b) under the Securities Act, to the extent such
information is deemed pursuant to Rule 430A (“Rule 430A”), 430B (“Rule 430B”) or 430C
(“Rule 430C”)
under the Securities Act to be a part thereof at the Effective
Time. For purposes of this Agreement, all references to the
Registration Statement, the Base Prospectus, any Preliminary Prospectus (as
defined below), the Prospectus (as defined below) or any amendment or supplement
to any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System (“▇▇▇▇▇”). All
references in this Agreement to amendments or supplements to the Registration
Statement, the Base Prospectus, any Preliminary Prospectus or the Prospectus
shall be deemed to mean and include the subsequent filing of any document under
the Exchange Act and which is deemed to be incorporated therein by reference
therein or otherwise deemed to be a part thereof.
(b) Effectiveness of Registration
Statement; Certain Defined Terms. The Company and the transactions
contemplated by this Agreement meet the requirements and comply with the
conditions for the use of Form S-3 under the Securities Act. The
Registration Statement meets, and the offering and sale of the Units as
contemplated hereby complies with, the requirements of Rule 415 under the
Securities Act. The Company has complied with all requests of the Commission for
additional or supplemental information relating to the Registration Statement or
relating to any documents incorporated or deemed to be incorporated by reference
in the Registration Statement. No stop order preventing or suspending use of the
Registration Statement, any Preliminary Prospectus or the Prospectus or the
effectiveness of the Registration Statement has been issued by the Commission,
and no proceedings for such purpose pursuant to Section 8A of the Securities Act
against the Company or related to the Offering have been instituted or are
pending or, to the Company’s knowledge, are contemplated or threatened by the
Commission, and any request received by the Company on the part of the
Commission for additional information has been complied with. As used in this
Agreement:
(1)
“Base Prospectus” means the
prospectus dated October 6, 2010, 2010 included in the Registration Statement at
the Effective Time.
(2)
“Disclosure Package” means (i)
the Statutory Prospectus, (ii) each Issuer Free Writing Prospectus, if any,
filed or used by the Company on or before the Effective Time and listed on Schedule I hereto
(other than a roadshow that is an Issuer Free Writing Prospectus but is not
required to be filed under Rule 433 of the Rules and Regulations) and (iii) the
pricing and other information as set forth on Exhibit C hereto, all
considered together.
(3)
“Issuer Free Writing
Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of
the Rules and Regulations relating to the Units in the form filed or required to
be filed with the Commission or, if not required to be filed, in the form
retained in the Company’s records pursuant to Rule 433(g) of the Rules and
Regulations.
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(4)
“Preliminary Prospectus” means
any preliminary prospectus supplement, subject to completion, relating to the
Units, filed by the Company with the Commission pursuant to Rule 424(b) under
the Securities Act for use in connection with the offering and sale of the
Units, together with the Base Prospectus attached to or used with such
preliminary prospectus supplement.
(5)
“Prospectus” means the final
prospectus supplement, relating to the Units, filed by the Company with the
Commission pursuant to Rule 424(b) under the Securities Act on or before the
second business day after the date hereof (or such earlier time as may be
required under the Securities Act), in the form furnished by the Company to
Canaccord, for use in connection with the offering and sale of the Units that
discloses the public offering price and other final terms of the Units, together
with the Base Prospectus attached to or used with such final prospectus
supplement.
(6)
“Statutory Prospectus” means
the Preliminary Prospectus, if any, and the Base Prospectus, each as amended and
supplemented immediately prior to the Time of Sale, including any document
incorporated by reference therein and any prospectus
supplement.
(7)
“Time of Sale” means 8:30
a.m., New York City time, on the date of this Agreement.
(c)
Contents of Registration
Statement. The Registration Statement complied when it became effective,
complies as of the date hereof and, as amended or supplemented, at the Time of
Sale and at all times during which a prospectus is required by the Securities
Act to be delivered (whether physically or through compliance with Rule 172
under the Securities Act or any similar rule) in connection with any sale of
Units (the “Prospectus
Delivery Period”), will comply, in all material respects, with the
requirements of the Securities Act and the Rules and Regulations; the
Registration Statement did not, as of the Effective Time, contain an 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, provided,
that the Company makes no representation or warranty in this subsection (c) with
respect to statements in or omissions from the Registration Statement in
reliance upon, and in conformity with, written information furnished to the
Company by Canaccord specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agent’s Information (as defined
in Section 7
hereof).
(d) Contents of Prospectus. The
Prospectus will comply, as of the date that it is filed with the Commission, the
date of its delivery to Investors and at all times during the Prospectus
Delivery Period, in all material respects, with the requirements of the
Securities Act; at no time during the period that begins on the date the
Prospectus is filed with the Commission and ends at the end of the Prospectus
Delivery Period will the Prospectus, as then amended or supplemented, include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, provided, that the Company
makes no representation or warranty with respect to statements in or omissions
from the Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by Canaccord specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information. The Prospectus contains all required information
under the Securities Act with respect to the Units and the distribution of the
Units.
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(e) Incorporated Documents. Each
of the documents incorporated by reference in the Registration Statement, as
amended, at the time such document was filed with the Commission or at the time
such document became effective, as applicable, complied, in all material
respects, with the requirements of the Exchange Act, was filed on a timely basis
with the Commission and did not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein not misleading.
(f) Disclosure Package. The
Disclosure Package, as of the Time of Sale, did not, and at the Closing Date
will not, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, that the Company
makes no representations or warranties with respect to statements in or
omissions from the Disclosure Package in reliance upon, and in conformity with,
written information furnished to the Company by Canaccord specifically for
inclusion therein, which information the parties hereto agree is limited to the
Placement Agent’s Information.
(g) Distributed Materials; Conflict with
Registration Statement. Other than the Base Prospectus, any Preliminary
Prospectus and the Prospectus, the Company has not made, used, prepared,
authorized, approved or referred to and will not make, use, prepare, authorize,
approve or refer to any “written communication” (as defined in Rule 405 under
the Securities Act) that constitutes an offer to sell or a solicitation of an
offer to buy the Units other than (i) any document not constituting a prospectus
pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 under the
Securities Act or (ii) the documents listed on Schedule I hereto and
other written communications approved in advance by Canaccord.
(h) Issuer Free Writing
Prospectuses. Each Issuer Free Writing Prospectus, if any, conformed or
will conform in all material respects to the requirements of the Securities Act
and the Rules and Regulations 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 Rules and Regulations. Each Issuer Free
Writing Prospectus, if any, when considered together with the Disclosure
Package, as of its issue date and at all subsequent times through the completion
of the Prospectus Delivery Period did not, does not and will not include any
information that conflicted, conflicts or will conflict with the information
contained in the Registration Statement, the Statutory Prospectus or the
Prospectus, including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof that has not been superseded
or modified, or includes an untrue statement of a material fact or omitted or
would omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, that the Company
makes no representation or warranty with respect to statements in or omissions
from any Issuer Free Writing Prospectus in reliance upon, and in conformity
with, written information furnished to the Company by Canaccord specifically for
inclusion therein, which information the parties hereto agree is limited to the
Placement Agent’s Information.
(i) Not an Ineligible Issuer. (i)
At the earliest time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) under the Securities Act) of the Units and (ii) at the
date hereof, the Company was not and is not an “ineligible issuer,” as defined
in Rule 405 under the Securities Act (“Rule 405”).
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(j) Due Incorporation. The
Company has been duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with the corporate power and
authority to own its properties and to conduct its business as it is currently
being conducted and as described in the Registration Statement, the Prospectus
and the Disclosure Package. The Company is duly qualified to transact business
and is in good standing as a foreign corporation or other legal entity in each
other jurisdiction in which its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to be so
qualified or in good standing or have such power or authority would not (i)
have, individually or in the aggregate, a material adverse effect upon, the
general affairs, business, operations, prospects, properties, financial
condition, or results of operations of the Company and its subsidiaries, taken
as a whole, or (ii) impair in any material respect the power or ability of the
Company to perform its obligations under this Agreement or to consummate any
transactions contemplated by the Agreement and the Subscription Agreements,
including the issuance and sale of the Units (any such effect as described in
clauses (i) or (ii), a “Material Adverse
Effect”).
(k) Subsidiaries. Except for
American DG New York, LLC, a Delaware limited liability company, and
EuroSite Power Inc., the Company has no subsidiaries, and neither the Company
nor any of its subsidiaries owns any beneficial interest, directly or
indirectly, in any corporation, partnership, joint venture or other business
entity. Each subsidiary has been duly organized and is validly existing as a
corporation or limited liability company in good standing (or foreign equivalent
thereof) under the laws of its jurisdiction of organization. Each subsidiary is
duly qualified to transact business and is in good standing as a foreign
corporation or other legal entity in each other jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing
or have such power or authority would not have a Material Adverse
Effect.
(l) Due Authorization and
Enforceability. The Company has the full right, power and authority to
enter into this Agreement and the Subscription Agreements and the Warrants, and
to perform and discharge its obligations hereunder and thereunder; and each of
this Agreement and the Subscription Agreements has been duly authorized,
executed and delivered by the Company, and constitutes a valid, legal and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as rights to indemnity hereunder may be limited by
federal or state securities laws and except as such enforceability may be
limited by public policy and applicable bankruptcy, insolvency, reorganization
or similar laws affecting the rights of creditors generally and subject to
general principles of equity.
(m) The Shares and the Warrants.
The issuance of the Shares and Warrant Shares have been duly and validly
authorized by the Company and, the Shares, when issued, delivered and paid for
in accordance with the terms of this Agreement and the Subscription Agreements,
and the Warrant Shares, when issued, delivered and paid for in accordance with
the terms of the Warrants, will have been duly and validly issued and will be
fully paid and nonassessable, will not be subject to any statutory or
contractual preemptive rights or other rights to subscribe for or purchase or
acquire any shares of Common Stock of the Company that have not been waived or
complied with, and will conform in all material respects to the description
thereof contained in the Disclosure Package and the Prospectus and such
description conforms in all material respects to the rights set forth in the
instruments defining the same.
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(n) Capitalization. The
information regarding the capitalization of the Company contained in the
Statutory Prospectus and the Disclosure Package is fairly presented on a basis
consistent with the Company’s financial statements. Any certificates evidencing
shares of Common Stock are in due and proper legal form and have been duly
authorized for issuance by the Company. The authorized capital stock
of the Company conforms in all material respects as to legal matters to the
description thereof contained in the Prospectus and the Disclosure Package. The
issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, and have been
issued in compliance with all federal and state securities laws. None of the
outstanding shares of Common Stock was issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase or acquire any securities of the Company or any securities or other
ownership interests of any of its subsidiaries. There are no authorized or
outstanding shares of capital stock, options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable for, any capital stock or other
ownership interests of the Company or any of its subsidiaries other than those
described in the Prospectus and the Disclosure Package. The description of the
Company’s stock plans or arrangements, and the options or other rights granted
thereunder, as described in the Prospectus and the Disclosure Package,
accurately and fairly present in all material respects the information required
to be shown with respect to such plans, arrangements, options and
rights. The issued and outstanding membership interests or other
applicable ownership interests of each of the Company’s subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and are owned
directly by the Company or by another wholly-owned subsidiary of the Company
free and clear of any lien, encumbrance, security interest, claim or charge,
other than those described in, or incorporated by reference into the
Registration Statement and the Prospectus.
(o) No Conflict. The execution,
delivery and performance by the Company of this Agreement and the Subscription
Agreements, and the consummation of the transactions contemplated hereby and
thereby, including the issuance and sale of the Units by the Company, will not
conflict with or result in a breach or violation of, or constitute a default
under (nor constitute any event which with or without notice, lapse of time or
both would result in any breach or violation of or constitute a default under),
give rise to any right of termination or other right or the cancellation or
acceleration of any right or obligation or loss of a benefit under, or give rise
to the creation or imposition of any lien, encumbrance, security interest, claim
or charge upon any property or assets of the Company or its subsidiaries
pursuant to (i) any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which either the Company or its subsidiaries or any of their
properties may be bound or to which any of their property or assets is subject,
(ii) result in any violation of the provisions of the charter or by-laws of the
Company or any of its subsidiaries, or (iii) result in any violation of any
law, statute, rule, regulation, judgment, order or decree of any court or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or its subsidiaries or any of their properties or assets.
(p) No Consents Required. No
approval, authorization, consent or order of or filing, qualification or
registration with, any court or governmental agency or body, foreign or
domestic, which has not been made, obtained or taken and is not in full force
and effect, is required in connection with the Company’s execution, delivery and
performance of this Agreement or the Subscription Agreements, the consummation
by the Company of the transactions contemplated hereby or thereby or the
issuance and sale of the Units other than (i) as may be required under the
Securities Act, (ii) any necessary qualification of the Units under the
securities or blue sky laws of the various jurisdictions in which the Units are
being offered by Canaccord, (iii) under the rules and regulations of the
Financial Industry Regulatory Authority (“FINRA”) or (iv) the NYSE
Amex.
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(q) Preemptive Rights. There are
no preemptive rights or other similar rights (other than rights which have been
waived in writing in connection with the transactions contemplated by this
Agreement or otherwise satisfied) to subscribe for or to purchase any shares of
Common Stock or shares of any other capital stock or other equity interests of
the Company or any of its subsidiaries, or any agreement or arrangement between
the Company and any of the Company’s stockholders or between any of the
Company’s subsidiaries and any of such subsidiary’s stockholders or other
holders of ownership interests, or to the Company’s knowledge, between or among
any of the Company’s stockholders or any of its subsidiaries’ stockholders or
other holders of ownership interests, which grant special rights with respect to
any shares of the Company’s or any of its subsidiaries’ capital stock or other
holders of ownership interests or which in any way affect any stockholder’s or
other such holders’ ability or right to alienate freely or vote such shares or
other ownership interests.
(r) Registration Rights. There
are no contracts, agreements or understandings between the Company or any of its
subsidiaries and any person granting such person the right (other than rights
which have been waived in writing in connection with the transactions
contemplated by this Agreement or otherwise satisfied) to require the Company or
any of its subsidiaries to register any securities with the
Commission.
(s) Independent Accountants. To
the Company’s knowledge, each of ▇▇▇▇▇▇▇▇ and Company, P.C. and McGladrey and
▇▇▇▇▇▇, LLP, whose reports on the consolidated financial statements of the
Company are incorporated by reference in the Registration Statement, the
Prospectus and the Disclosure Package, is (i) an independent public accounting
firm within the meaning of the Securities Act, (ii) a registered public
accounting firm (as defined in Section 2(a)(12) of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002 (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act”)), and (iii) not in violation of the auditor independence
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. Except as disclosed in the
Registration Statement and as pre-approved in accordance with the requirements
set forth in Section 10A of the Exchange Act, neither ▇▇▇▇▇▇▇▇ and Company, P.C.
nor McGladrey and ▇▇▇▇▇▇, LLP has been engaged by the Company to perform any
“prohibited activities” (as defined in Section 10A of the Exchange
Act).
(t) Financial Statements. The
consolidated financial statements of the Company, together with the related
schedules and notes thereto, set forth or incorporated by reference in the
Registration Statement, the Prospectus and the Disclosure Package comply in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as applicable, and present fairly in all material respects (i) the
financial condition of the Company and its consolidated subsidiaries as of the
dates indicated and (ii) the consolidated results of operations, stockholders’
equity and changes in cash flows of the Company and its consolidated
subsidiaries for the periods therein specified; and such financial statements
and related schedules and notes thereto have been prepared in conformity with
United States generally accepted accounting principles, consistently applied
throughout the periods involved (except as otherwise stated therein and subject,
in the case of unaudited financial statements, to the absence of footnotes and
normal year-end adjustments). There are no other financial statements
(historical or pro forma) that are required to be included or incorporated by
reference in the Registration Statement, the Prospectus or the Disclosure
Package; and the Company does not have any liabilities or obligations, direct or
contingent (including any off-balance sheet obligations), that are required to
be disclosed in the Registration Statement, the Disclosure Package and the
Prospectus that have not been disclosed as required; and all disclosures
contained in the Registration Statement, the Disclosure Package and the
Prospectus regarding “non-GAAP financial measures” (as such term is defined by
the rules and regulations of the Commission) comply with Regulation G of the
Exchange Act and Item 10(e) of Regulation S-K under the Securities Act, to the
extent applicable, and present fairly in all material respects the information
shown therein and the Company’s basis for using such measures.
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(u) Absence of Material Changes.
Subsequent to the respective dates as of which information is given in the
Registration Statement, the Prospectus and the Disclosure Package, and except as
may be otherwise stated or incorporated by reference in the Registration
Statement, the Prospectus and the Disclosure Package, there has not been (i) any
Material Adverse Effect, (ii) any transaction which is material to the Company
or any of its subsidiaries, (iii) any obligation, direct or contingent
(including any off-balance sheet obligations), incurred by the Company or any of
its subsidiaries, which is material to the Company and its subsidiaries, (iv)
any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company, (v) any change in the capital stock or other ownership
interests (other than a change in the number of outstanding shares of Common
Stock due to the issuance of shares upon the exercise of outstanding options or
warrants or the conversion of convertible indebtedness), or material change in
the short-term debt or long-term debt of the Company or any of its subsidiaries
(other than upon conversion of convertible indebtedness, or other than in the
usual and customary operation and use of the Company’s existing credit line
facility) or any issuance of options, warrants, convertible securities or other
rights to purchase the capital stock or other ownership interests (other than
grants of stock options under the Company’s equity incentive plans existing on
the date hereof) of the Company or any of its subsidiaries.
(v) Legal Proceedings. There are
no legal or governmental actions, suits, claims or proceedings pending or, to
the Company’s knowledge, threatened or contemplated to which the Company or any
of its subsidiaries is or would be a party or of which any of their respective
properties is or would be subject at law or in equity, before or by any federal,
state, local or foreign governmental or regulatory commission, board, body,
authority or agency, or before or by any self-regulatory organization or other
non-governmental regulatory authority which are required to be described in the
Registration Statement, the Disclosure Package or the Prospectus or a document
incorporated by reference therein and are not so described therein, or which,
singularly or in the aggregate, if resolved adversely to the Company or such
subsidiary, would reasonably be likely to result in a Material Adverse Effect.
To the Company’s knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by other third parties.
(w) No Violation. Neither the
Company nor any of its subsidiaries is in breach or violation of or in default
(nor has any event occurred which with notice, lapse of time or both would
result in any breach or violation of, or constitute a default) (i) under the
provisions of its charter or bylaws (or analogous governing instrument, as
applicable) or (ii) in the performance or observance of any term, covenant,
obligation, agreement or condition contained in any indenture, mortgage, deed of
trust, bank loan or credit agreement or other evidence of indebtedness, or any
license, lease, contract or other agreement or instrument to which the Company
or such subsidiary is a party or by which any of its properties may be bound or
affected, or (iii) in the performance or observance of any statute, law, rule,
regulation, ordinance, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or such subsidiary or any of its properties, as
applicable, except, with respect to clauses (ii) and (iii) above, to the extent
any such contravention has been waived or would not result in a Material Adverse
Effect.
9
(x) Permits. The Company and each
of its subsidiaries have made all filings, applications and submissions required
by, and owns or possesses all approvals, licenses, certificates, certifications,
clearances, consents, exemptions, marks, notifications, orders, permits and
other authorizations issued by, the appropriate federal, state or foreign
regulatory authorities necessary to conduct its business as described in the
Disclosure Package, other than those that are immaterial (collectively, “Permits”), and is in
compliance in all material respects with the terms and conditions of all such
Permits. All such Permits are valid and in full force and effect. Neither the
Company nor any of its subsidiaries has received any notice of any proceedings
relating to revocation or modification of, any such Permit, which, individually
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect.
(y) Not an Investment Company.
The Company is not or, after giving effect to the offering and sale of the Units
and the application of the proceeds thereof as described in the Disclosure
Package and the Prospectus, will not be (i) required to register as an
“investment company” as defined in the Investment Company Act of 1940, as
amended (the “Investment
Company Act”), and the rules and regulations of the Commission thereunder
or (ii) a “business development company” (as defined in
Section 2(a)(48) of the Investment Company Act).
(z) No Price Stabilization.
Neither the Company nor any of its subsidiaries, or any of their respective
officers, directors, affiliates or controlling persons has taken or will take,
directly or indirectly, any action designed to or that might be reasonably
expected to cause or result in, or which has constituted or which might
reasonably be expected to constitute the stabilization or manipulation of the
price of any security of the Company to facilitate the sale of the Units or
resale of the Shares or Warrant Shares.
(aa) Good Title to Property. The
Company and each of its subsidiaries has good and valid title to all property
(whether real or personal) described in the Registration Statement, the
Disclosure Package and the Prospectus as being owned by it, in each case free
and clear of all liens, claims, security interests, other encumbrances or
defects (collectively, “Liens”), except such as are
described in the Registration Statement, the Disclosure Package and the
Prospectus and those that would not, individually or in the aggregate materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company or any of its
subsidiaries. All of the property described in the Registration Statement,
Disclosure Package and the Prospectus as being held under lease by the Company
or any of its subsidiaries is held thereby under valid, subsisting and
enforceable leases, without any liens, restrictions, encumbrances or claims,
except those that, individually or in the aggregate, are not material and
do not materially interfere with the use made and proposed to be made of such
property by the Company or such subsidiary.
10
(bb) Intellectual Property Rights.
The Company and each of its subsidiaries owns or possesses the right to use or
otherwise commercially exploit all patents, trademarks, trademark registrations,
service marks, service ▇▇▇▇ registrations, trade names, copyrights, licenses,
inventions, software, databases, know-how, Internet domain names, trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures, and other intellectual property
(collectively, “Intellectual
Property”) which the Company believes is necessary to carry on its
businesses as currently conducted, and as proposed to be conducted as described
in the Disclosure Package and the Prospectus, and the Company is not aware of
any claim to the contrary or any challenge by any other person to the rights of
the Company or any of its subsidiaries with respect to the foregoing except for
those that could not have a Material Adverse Effect. The Intellectual Property
licenses described in the Disclosure Package and the Prospectus are, to the
knowledge of the Company, valid, binding upon, and enforceable by or against the
parties thereto in accordance with their terms. The Company and each of its
subsidiaries has complied in all material respects with, and is not in breach
nor has received any asserted or threatened claim of breach of, any Intellectual
Property license, and the Company has no knowledge of any breach or anticipated
breach by any other person of any Intellectual Property license. The
Company’s and each of its subsidiaries’ business as now conducted and as
proposed to be conducted, to the knowledge of the Company, does not and will not
infringe or conflict with any patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other Intellectual Property or franchise
right of any person. Neither the Company nor any of its subsidiaries has
received notice of any claim against the Company or any of its subsidiaries, nor
does the Company or any of its subsidiaries have knowledge of any such claim,
alleging the infringement by the Company or any of its subsidiaries of any
patent, trademark, service ▇▇▇▇, trade name, copyright, trade secret, license in
or other intellectual property right or franchise right of any
person. All right, title and interest to the patents, patent
applications, trademarks, and service-marks in the name of the Company, and
applications and registrations thereof (together the “Company Registered IP”)
belong exclusively to the Company or its subsidiaries. The Company is
not aware of any third party infringing any of the Company Registered IP or
other proprietary Company Intellectual Property. All fees and
documents necessary to maintain the Company Registered IP have been paid and
filed. The Company and each of its subsidiaries has taken all
reasonable steps to protect, maintain and safeguard its rights in all
Intellectual Property, including the execution of appropriate nondisclosure and
confidentiality agreements. The consummation of the transactions contemplated by
this Agreement will not result in the loss or impairment of or payment of any
additional amounts with respect to, nor require the consent of any other person
in respect of, the Company’s or any of its subsidiaries’ right to own, use, hold
or otherwise commercially exploit any of the Intellectual Property as owned,
used, held or otherwise commercially exploited in the conduct of the businesses
as currently conducted. The Company and each of its subsidiaries has
duly and properly filed or caused to be filed with the United States Patent and
Trademark Office (the “PTO”) and applicable foreign
and international patent authorities all patent applications owned by the
Company and its subsidiaries, including any patent application which has
previously issued or granted into patent. To the knowledge of the Company, the
Company and each of its subsidiaries has complied with the PTO’s duty of candor
and disclosure for the patent applications owned by the Company or its
subsidiaries, including any patent application owned by the Company which has
previously issued or granted into a patent (together the “Company Patents”), and
has made no material misrepresentation in the Company Patents. The Company is
not aware of any information material to a determination of patentability
regarding the Company Patents not previously called to the attention of the PTO
or similar foreign authority which requires such submission. The Company is not
aware of any information not previously called to the attention of the PTO or
similar foreign authority that would preclude the grant of a patent for the
Company Patents. The Company has no knowledge of any information that would
preclude the Company or any of its subsidiaries from having clear title to the
Company Patents. To the knowledge of the Company, all of the issued
or granted Company Patents are valid and enforceable. All inventors
of the Company Patents have duly executed assignments assigning all their right,
title and interest in the Company Patents to the Company or its
subsidiaries. To the Company’s knowledge, no employee of the Company
or any of its subsidiaries is the subject of any claim or proceeding involving a
violation of any term of any employment contract, patent disclosure agreement,
invention assignment agreement, non-competition agreement, non-solicitation
agreement, nondisclosure agreement or any restrictive covenant to or with a
former employer where the basis of such violation relates to such employee’s
employment with the Company or any of the Company’s subsidiaries or actions
undertaken by the employee while employed with the Company or any of the
Company’s subsidiaries.
11
(cc) No Labor Disputes. No labor
problem or dispute with the employees of the Company or any of the Company’s
subsidiaries exists, or, to the Company’s knowledge, is threatened or imminent,
which would reasonably be expected to result in a Material Adverse Effect. The
Company is not aware that any key employee or significant group of employees of
the Company or any of the Company’s subsidiaries plans to terminate employment
with the Company or any of the Company’s subsidiaries. Neither the Company nor
any of its subsidiaries has engaged in any unfair labor
practice. Except for matters which would not, individually or in the
aggregate, result in a Material Adverse Effect, (i) there is (A) no unfair labor
practice complaint pending or, to the Company’s knowledge, threatened against
the Company or any of its subsidiaries before the National Labor Relations
Board, and no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending or to the Company’s knowledge,
threatened, (B) no strike, labor dispute, slowdown or stoppage pending or, to
the Company’s knowledge, threatened against the Company or any of its
subsidiaries and (C) no union representation dispute currently existing
concerning the employees of the Company or any of its subsidiaries and (ii) to
the Company’s knowledge, (A) no union organizing activities are currently taking
place concerning the employees of the Company or any of its subsidiaries and (B)
there has been no violation of any federal, state, local or foreign law relating
to discrimination in the hiring, promotion or pay of employees, any applicable
wage or hour laws or any provision of the Employee Retirement Income Security
Act of 1974 (“ERISA”)
or the rules and regulations promulgated thereunder concerning the employees of
the Company or any of its subsidiaries.
(dd) Taxes. The Company and each
of its subsidiaries (i) has timely filed all necessary federal, state, local and
foreign income and franchise tax returns (or timely filed applicable extensions
therefor) that have been required to be filed and (ii) is not in default in the
payment of any taxes which were payable pursuant to such returns or any
assessments with respect thereto, other than any which the Company or any of its
subsidiaries is contesting in good faith and for which adequate reserves have
been provided and reflected in the Company’s financial statements included in
the Registration Statement, the Disclosure Package and the Prospectus. Neither
the Company nor any of its subsidiaries has any tax deficiency that has been or,
to the knowledge of the Company, is reasonably likely to be asserted or
threatened against it that would result in a Material Adverse
Effect. Neither the Company nor any of its subsidiaries has engaged
in any transaction which is a corporate tax shelter or which could be
characterized as such by the Internal Revenue Service or any other taxing
authority.
(ee) ERISA. The Company and each
of its subsidiaries is in compliance in all material respects with all presently
applicable provisions of ERISA; no “reportable event” (as defined in ERISA) has
occurred with respect to any “pension plan” (as defined in ERISA) for which the
Company or any of its subsidiaries would have any liability; neither the Company
nor any of its subsidiaries has incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal from,
any “pension plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the “Code”); and each “pension
plan” for which the Company or any of its subsidiaries would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, which would cause the loss of such
qualification.
12
(ff) Compliance with Environmental
Laws. The Company and its subsidiaries are in compliance, in all material
respects, with all foreign, federal, state and local rules, laws and regulations
relating to the use, treatment, storage and disposal of hazardous or toxic
substances or waste and protection of health and safety or the environment which
are applicable to their businesses (“Environmental
Laws”). Except such as are described in the Registration
Statement, the Disclosure Package and the Prospectus or matters which would not,
individually or in the aggregate, result in a Material Adverse Effect, there has
been no storage, generation, transportation, handling, treatment, disposal,
discharge, emission, or other release of any kind of toxic or other wastes or
other hazardous substances by, due to, or caused by the Company or any of its
subsidiaries (or, to the Company’s knowledge, any other entity for whose acts or
omissions the Company or any of its subsidiaries is or may otherwise be liable)
upon any of the property now or previously owned or leased by the Company or any
of its subsidiaries, or upon any other property, in violation of any law,
statute, ordinance, rule, regulation, order, judgment, decree or permit or which
would, under any law, statute, ordinance, rule (including rule of common law),
regulation, order, judgment, decree or permit, give rise to any liability; and
except such as are described in the Registration Statement, the Disclosure
Package and the Prospectus or matters which would not, individually or in the
aggregate, result in a Material Adverse Effect, there has been no reportable
disposal, discharge, emission or other release of any kind onto such property or
into the environment surrounding such property of any toxic or other wastes or
other hazardous substances with respect to which the Company or any of its
subsidiaries has knowledge. In the ordinary course of business, the
Company and its subsidiaries conduct periodic reviews of the effect of
Environmental Laws on their business and assets, in the course of which they
identify and evaluate associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or permits issued
thereunder, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such reviews, the
Company has reasonably concluded that such associated costs and liabilities
would not have, singularly or in the aggregate, a Material Adverse
Effect.
(gg) Insurance. The Company and
each of its subsidiaries maintains or is covered by insurance provided by
recognized, financially sound and reputable institutions with insurance policies
in such amounts and covering such risks as the Company believes is (i) adequate
for the conduct of its business and the value of its properties and (ii)
customary for companies engaged in similar businesses in similar industries. All
such insurance is fully in force. The Company has no reason to believe that it
and its subsidiaries will not be able to renew their existing insurance coverage
as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries has been denied any material insurance policy or coverage for which
it has applied. Neither the Company nor any of its subsidiaries
insures risk of loss through any captive insurance, risk retention group,
reciprocal group or by means of any fund or pool of assets specifically set
aside for contingent liabilities other than as described in the Disclosure
Package.
(hh) Accounting Controls. Except
such as are described in the Registration Statement, the Disclosure Package and
the Prospectus, the Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management’s general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. Except such as are described in the
Registration Statement, the Disclosure Package and the Prospectus, there are no
significant deficiencies or material weaknesses in the design or operation of
internal controls which could adversely affect the Company’s ability to record,
process, summarize, or report financial data to management and the Board of
Directors of the Company. The Company is not aware of any fraud, whether or not
material, that involves management or other employees who have a role in the
Company’s internal controls; and since the date of the most recent evaluation of
such controls, there have been no significant changes in internal controls or in
other factors that could significantly affect internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
13
(ii) Disclosure Controls. The
Company has established, maintains and evaluates “disclosure controls and
procedures” (as such term is defined in Rule 13a-15(e) and 15d-15(e) under
the Exchange Act), which (i) are designed to ensure that material
information relating to the Company and its subsidiaries is made known to the
Company’s principal executive officer and its principal financial officer by
others within those entities, particularly during the periods in which the
periodic reports required under the Exchange Act are being prepared, (ii) have
been evaluated for effectiveness as of the end of the last fiscal period covered
by the Registration Statement; and (iii) such disclosure controls and procedures
are effective to perform the functions for which they were
established. The Audit Committee of the Board of Directors of the
Company (the “Audit
Committee”) is not reviewing or investigating, and neither the Company’s
independent auditors nor its internal auditors have recommended that the Audit
Committee review or investigate, (i) adding to, deleting, changing the
application of or changing the Company’s disclosure with respect to, any of the
Company’s material accounting policies, (ii) any manner which could result in a
restatement of the Company’s financial statements for any annual or interim
period during the current or prior three fiscal years, or (iii) a significant
deficiency, material weakness, change in internal control over financial
reporting or fraud involving management or other employees who have a
significant role in the internal control over financial reporting.
(jj) Minute Books. The
minute books of the Company and each of its subsidiaries have been made
available upon request to Canaccord and its counsel, and such books (i) contain
a complete summary of all meetings and actions of the board of directors
(including each board committee) and shareholders of the Company (or analogous
governing bodies and interest holders, as applicable), and each of its
subsidiaries since the time of its incorporation or organization through the
date of the latest meeting and action, and (ii) accurately in all material
respects reflect all transactions referred to in such minutes.
(kk) Contracts; Off-Balance Sheet
Interests. There is no document, contract, permit or instrument, or
off-balance sheet transaction (including without limitation, any “variable
interests” in “variable interest entities,” as such terms are defined in
Financial Accounting Standards Board Interpretation No. 46) of a character
required by the Securities Act or the Rules and Regulations to be described in
the Registration Statement or the Disclosure Package or to be filed as an
exhibit to the Registration Statement or document incorporated by reference
therein, which is not described or filed as required. Each
description of a document, contract, permit or instrument in the Registration
Statement or the Disclosure Package accurately reflects in all material respects
the terms of the underlying document, contract, permit or
instrument. The documents, contracts, permits and instruments
described in the immediately preceding sentence to which the Company is a party
have been duly authorized, executed and delivered by the Company, constitute
valid and binding agreements of the Company, are enforceable against and by the
Company in accordance with the terms thereof and are in full force and effect on
the date hereof. Neither the Company nor any of its subsidiaries, if
a subsidiary is a party, nor to the Company’s knowledge, any other party is in
default in the observance or performance of any term or obligation to be
performed by it under any such agreement, and no event has occurred which with
notice or lapse of time or both would constitute such a default, in any case
which default or event, individually or in the aggregate, would have a Material
Adverse Effect. No default exists, and no event has occurred which
with notice or lapse of time or both would constitute a default, in the due
performance and observance of any term, covenant or condition, by the Company or
a subsidiary, if a subsidiary is a party thereto, of any agreement or instrument
to which the Company or any of its subsidiaries is a party or by which the
Company or its properties or business or a subsidiary or the subsidiary’s
properties or business may be bound or affected which default or event,
individually or in the aggregate, would have a Material Adverse
Effect.
14
(ll) No Undisclosed Relationships.
No relationship, direct or indirect, exists between or among the Company on the
one hand and the directors, officers, stockholders, customers or suppliers of
the Company or any of their affiliates on the other hand, which is required to
be described in the Registration Statement, the Disclosure Package or the
Prospectus or a document incorporated by reference therein and which has not
been so described.
(mm) Brokers Fees. There are no
contracts, agreements or understandings between the Company and any person
(other than this Agreement) that would give rise to a claim against the Company
or Canaccord for a brokerage commission, finder’s fee or other like payment in
connection with the offering and sale of the Units.
(nn) Forward-Looking Statements.
No forward-looking statements (within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act) contained in either the
Disclosure Package or the Prospectus have been made or reaffirmed without a
reasonable basis therefor or have been disclosed other than in good
faith.
(oo) NYSE Amex; Exchange Act
Registration. The Common Stock is registered pursuant to Section 12(b) of
the Exchange Act and is listed on the NYSE Amex, and the Company has taken no
action designed to, or reasonably likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the NYSE Amex, nor has the Company received any notification that the
Commission or NYSE Amex is contemplating terminating such registration or
listing. The Company has complied in all material respects with the applicable
requirements of NYSE Amex for maintenance of inclusion of the Common Stock
thereon. The Company has filed an application for the listing of the Shares and
Warrant Shares with NYSE Amex.
(pp) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The
Company, and to its knowledge, each of the Company’s directors or officers, in
their capacities as such, is in compliance in all material respects with all
applicable effective provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and any related rules
and regulations promulgated by the Commission. Each of the principal executive
officer and the principal financial officer of the Company (and 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 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act with respect to all reports,
schedules, forms, statements and other documents required to be filed by him or
her with 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 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(qq) Foreign Corrupt Practices.
Neither the Company nor, to the Company’s knowledge, any other person associated
with or acting on behalf of the Company, including without limitation any
director, officer, agent or employee of the Company or any of its subsidiaries
has, directly or indirectly, while acting on behalf of the Company or any of its
subsidiaries (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity or
failed to disclose fully any contribution in violation of law, (ii) made any
payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof, (iii) violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
15
(rr) Affiliate
Transactions. There are no transactions, arrangements or other
relationships between and/or among the Company, any of its affiliates (as such
term is defined in Rule 405) and any unconsolidated entity, including, but not
limited to, any structured finance, special purpose or limited purpose entity
that could reasonably be expected to materially affect the Company’s liquidity
or the availability of or requirements for its capital resources required to be
described in the Disclosure Package and the Prospectus or a document
incorporated by reference therein which have not been described as
required. The Company does not, directly or indirectly, including
through any subsidiary, have any outstanding personal loans or other credit
extended to or for the benefit of any of its directors or executive
officers.
(ss) Statistical or Market-Related
Data. Any statistical, industry-related or market-related data included
or incorporated by reference in the Registration Statement, the Prospectus or
the Disclosure Package, are based on or derived from sources that the Company
reasonably and in good faith believes to be reliable and accurate, and such data
agree with the sources from which they are derived.
(tt) Money Laundering Laws. The
operations of the Company and its subsidiaries are and have been conducted at
all times in compliance in all material respects with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the USA PATRIOT Act, the money
laundering statutes of all jurisdictions, 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”) 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
against the Company or any of its subsidiaries.
(uu) OFAC. Neither the Company
nor, to the knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of its subsidiaries is currently subject to any
U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will
not directly or indirectly use the proceeds of the offering, or lend, contribute
or otherwise make available such proceeds to any affiliate, joint venture
partner or other person or entity, which, to the Company’s knowledge, will use
such proceeds for the purpose of financing the activities of any person
currently subject to any U.S. sanctions administered by OFAC.
(vv) Margin Securities. The
Company does not own any “margin securities” as that term is defined in
Regulation U of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and
none of the proceeds of the sale of the Units will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Units to be considered a “purpose credit” within the
meanings of Regulation T, U or X of the Federal Reserve Board;
16
(ww) Rated Securities. At the Time
of Sale there were, and as of the Closing Date there will be, no securities of
or guaranteed by the Company that are rated by a “nationally recognized
statistical rating organization,” as that term is defined in Rule 436(g)(2)
promulgated under the Act;
(xx) FINRA Affiliations. Except
such as are described in the Registration Statement, the Disclosure Package and
the Prospectus, there are no affiliations or associations between (i) any member
of the FINRA and (ii) the Company or any of the Company’s officers, directors
or, to the Company’s knowledge any 5% or greater securityholders or
any beneficial owner of the Company’s unregistered equity securities that were
acquired at any time on or after the one hundred eightieth (180th) day
immediately preceding the “required filing date” (as defined in FINRA
Rule 5110(a)(10)).
(yy)
Exchange Act
Requirements. The Company is subject to and in compliance in all material
respects with the reporting requirements of Section 13 or Section 15(d) of the
Exchange Act.
(zz) Trading Market. No approval
of the shareholders of the Company under the rules and regulations of any
trading market (including Section 713 of the NYSE Amex Company Guide) is
required for the Company to issue and deliver the Units to the
Investors.
Any
certificate signed by any officer of the Company and delivered to Canaccord or
to counsel for Canaccord in connection with the offering of the Units shall be
deemed a representation and warranty by the Company to Canaccord and the
Investors as to the matters covered thereby.
3. Covenants.
The Company covenants and agrees with Canaccord as follows:
(a) Reporting Obligations; Exchange Act
Compliance. The Company will file: (i) each Preliminary Prospectus, if
any, and the Prospectus with the Commission within the time periods specified by
Rule 424(b) and Rules 430A, 430B or 430C under the Securities Act, as
applicable, (ii) any Issuer Free Writing Prospectus to the extent required by
Rule 433 under the Securities Act, if applicable, (iii) all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus during the Prospectus
Delivery Period, and (iv) furnish copies of each Issuer Free Writing Prospectus,
if any, (to the extent not previously delivered) to Canaccord prior to 11:00
a.m. Eastern time, on the second business day next succeeding the date of this
Agreement in such quantities as Canaccord shall reasonably request.
(b) Continued Compliance with Securities
Law. If, at any time prior to the filing of the Prospectus pursuant to
Rule 424(b), any event occurs as a result of which the Disclosure Package as
then amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, the Company will (i) promptly notify Canaccord so that any use of
the Disclosure Package may cease until it is amended or supplemented and (ii)
amend or supplement the Disclosure Package to correct such statements or
omission. If, during the Prospectus Delivery 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 any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend the
Registration Statement or supplement the Prospectus to comply with the
Securities Act, the Company will (A) promptly notify Canaccord of such event and
(B) promptly prepare and file with the Commission and furnish, at its own
expense, to Canaccord and, to the extent applicable, the dealers and any other
dealers upon request of Canaccord, an amendment or supplement which will correct
such statement or omission or an amendment which will effect such
compliance. The Company will deliver promptly to Canaccord such
number of the following documents as Canaccord shall reasonably request:
(i) conformed copies of the Registration Statement as originally filed with
the Commission (in each case excluding exhibits), (ii) each Preliminary
Prospectus, (iii) any Issuer Free Writing Prospectus, (iii) the
Prospectus (the delivery of the documents referred to in clauses (i),
(ii) and (iii) of this subsection
(b) to be made not later than 10:00 a.m., New York time, on the
business day following the execution and delivery of this Agreement),
(iv) conformed copies of any amendment to the Registration Statement
(excluding exhibits), (v) any amendment or supplement to the Disclosure
Package or the Prospectus (the delivery of the documents referred to in clauses
(iv) and (v) of this subsection
(b) to be made not later than 10:00 a.m., New York City time,
on the business day following the date of such amendment or supplement) and
(vi) any document incorporated by reference in the Disclosure Package or
the Prospectus (excluding exhibits thereto) (the delivery of the documents
referred to in clause (v) of this subsection
(b) to be made not later than 10:00 a.m., New York City time,
on the business day following the date of such document).
17
(c) Issuer Free Writing
Prospectuses. The Company will (i) not make any offer relating to the
Units that would constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a “free writing prospectus” (as defined in Rule 405 under
the Securities Act) required to be filed by the Company with the Commission
under Rule 433 under the Securities Act unless Canaccord approves its use in
writing prior to first use (each, a “Permitted Free Writing
Prospectus”); provided, that the prior
written consent of Canaccord shall be deemed to have been given in respect of
any electronic road show; (ii) treat each Permitted Free Writing Prospectus as
an Issuer Free Writing Prospectus; (iii) comply with the requirements of Rules
164 and 433 under the Securities Act applicable to any Issuer Free Writing
Prospectus, including the requirements relating to filing timely with the
Commission, legending and record keeping; and (iv) not take any action that
would result in Canaccord or the Company being required to file with the
Commission pursuant to Rule 433(d) under the Securities Act a free writing
prospectus prepared by or on behalf of Canaccord that Canaccord otherwise would
not have been required to file thereunder. The Company will satisfy the
conditions in Rule 433 under the Securities Act to avoid a requirement to file
with the Commission any electronic road show.
(d) Conflicting Issuer Free Writing
Prospectus. If at any time following the issuance of an Issuer Free
Writing Prospectus there occurred or occurs an event or development as a result
of which such Issuer Free Writing Prospectus conflicted or would conflict with
the information contained in the Registration Statement relating to the Units or
included or would include an untrue statement of a material fact or omitted or
would omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances prevailing at that subsequent time,
not misleading, the Company promptly will notify Canaccord and will promptly
amend or supplement, at its own expense, such Issuer Free Writing Prospectus to
eliminate or correct such conflict, untrue statement or omission. The foregoing
sentence does not apply to statements in or omissions from any Issuer Free
Writing Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by Canaccord specifically for inclusion therein, which
information the parties hereto agree is limited to the Placement Agent’s
Information.
18
(e) Blue Sky Laws. The Company
will promptly take or cause to be taken, from time to time, such actions as
Canaccord may reasonably request to qualify the Units for offering and sale
under the state securities, or blue sky, laws of such states or other
jurisdictions as Canaccord may reasonably request and to maintain such
qualifications in effect so long as Canaccord may request for the distribution
of the Units, provided,
that in no event shall the Company be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to file a
general consent to service of process in any jurisdiction or subject itself to
taxation as doing business in any jurisdiction. The Company will advise
Canaccord promptly of the suspension of the qualification or registration of (or
any exemption relating to) the Units for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such purpose,
and in the event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its best efforts to obtain the
withdrawal thereof at the earliest possible moment.
(f) Earnings Statement. As soon
as practicable, the Company will make generally available to holders of its
securities and deliver to Canaccord, an earnings statement of the Company (which
need not be audited) covering a period of at least 12 months beginning after the
date of this Agreement that will satisfy the provisions of Section 11(a) of the
Securities Act and the Rules and Regulations (including, at the option of the
Company, Rule 158).
(g)
Use of Proceeds. The Company
will apply the net proceeds from the sale of the Units in the manner set forth
in the Prospectus under the heading “Use of Proceeds.”
(h)
Public
Communications. Prior to 9:00 a.m. New York City time on the business day
immediately subsequent to the date hereof, the Company shall issue a press
release (the “Press
Release”) reasonably acceptable to Canaccord disclosing the execution of
this Agreement, the Subscription Agreements and the transactions contemplated
hereby and thereby. Prior to the Closing Date, the Company covenants
not to issue any press release (other than the Press Release) or other
communication directly or indirectly or hold any press conference with respect
to the Company, its condition, financial or otherwise, or earnings, business
affairs or business prospects (except for routine oral marketing communications
in the ordinary course of business and consistent with the past practices of the
Company and of which Canaccord is notified), without the prior written consent
of Canaccord, unless in the judgment of the Company and its counsel, and after
notification to Canaccord, such press release or communication is required by
law.
(i) Stabilization. The Company
will not take directly or indirectly any action designed, or that might
reasonably be expected to cause or result in, or that will constitute,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale of the Units or resale of any of the Shares or Warrant
Shares.
(j) Transfer Agent. The Company
shall engage and maintain, at its expense, a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Shares and Warrant Shares.
(k) Listing. The Company shall
cause the Shares and Warrant Shares to be listed for quotation on the NYSE Amex
at the Closing Date and shall use its reasonable best efforts to maintain such
listing.
(l) Investment Company Act. The
Company shall not invest, or otherwise use the proceeds received by the Company
from its sale of the Units in such a manner as would require the Company to
register as an investment company under the Investment Company
Act.
19
(m) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The
Company will comply with all effective applicable provisions of the Sarbanes
Oxley Act as long as it has a class of capital stock registered under Section 12
of the Exchange Act.
(n) Periodic Reports. The Company
will use its reasonable best efforts to file with the Commission such periodic
reports required to be filed by it under the Exchange Act .
(o) Lock-Up
Period. That the Company will not, for a period of ninety (90)
days from the date of this Agreement, (the “Lock-Up Period”) without the
prior written consent of Canaccord, directly or indirectly offer, sell, assign,
transfer, pledge, contract to sell, or otherwise dispose of, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, (i) other than the Company’s sale of the Units hereunder and
the issuance of Common Stock or options to acquire Common Stock pursuant to the
Company’s employee benefit plans, qualified stock option plans or other director
or employee compensation plans as such plans are in existence on the date hereof
and described in the Prospectus and the issuance of Common Stock pursuant to the
valid exercises of options, warrants or rights outstanding on the date hereof
and (ii) issuance of securities in connection with the acquisition by the
Company, whether by stock purchase, merger or other transaction, not to exceed,
in the case of this clause (ii), 10% of the number of shares of Common Stock
outstanding on September 30, 2010. The Company will cause each executive
officer and director, and each shareholder listed in Schedule II to
furnish to Canaccord, prior to the date of this Agreement, a letter, in the form
of Exhibit D
hereto. The Company also agrees that during the Lock-Up Period, other than
for the sale of the Units hereunder, without prior written consent of Canaccord,
the Company will not file any registration statement, preliminary prospectus or
prospectus, or any amendment or supplement thereto, under the Securities Act for
any such transaction or which registers, or offers for sale, Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock,
except for a registration statement on Form S-8 relating to employee
benefit plans. The Company hereby agrees that, notwithstanding anything
herein to the contrary, (i) if it issues an earnings release or material
news, or if a material event relating to the Company occurs, during the last
seventeen (17) days of the Lock-Up Period, or (ii) if prior to the
expiration of the Lock-Up Period, the Company announces that it will release
earnings results during the sixteen (16)-day period beginning on the last day of
the Lock-Up Period, the restrictions imposed by this subsection (o) shall
continue to apply until the expiration of the eighteen (18)-day period beginning
on the issuance of the earnings release or the occurrence of the material news
or material event. The Company will provide Canaccord with prior notice of
any such announcement that gives rise to an extension of the Lock-Up
Period.
(p) Interim Financial
Statements. Prior to the Closing Date, to furnish to
Canaccord, copies of any unaudited interim consolidated financial statements of
the Company that have been prepared and are available for any periods subsequent
to the periods covered by the financial statements appearing in the Registration
Statement and the Prospectus.
4. Costs and
Expenses. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated, will pay or reimburse
Canaccord all actual and accountable expenses up to a maximum of $100,000
incident to the performance of the obligations of the Company under this
Agreement and in connection with the transactions contemplated hereby, including
the reasonable legal fees and expenses of counsel to Canaccord.
5. Conditions of
Placement Agent’s Obligations. The obligations of Canaccord hereunder and
the Investors under the Subscription Agreements are subject to the following
conditions:
20
(a) Filings with the Commission.
Each Issuer Free Writing Prospectus, if any, and the Prospectus shall have been
filed with the Commission within the applicable time period prescribed for such
filing by, and in compliance with, the Rules and Regulations and in accordance
with Section
3(a) hereof.
(b) No Stop Orders. Prior to the
Closing: (i) no stop order suspending the effectiveness of the Registration
Statement or any part thereof, preventing or suspending the use of the
Prospectus or any Issuer Free Writing Prospectus or any part thereof shall have
been issued under the Securities Act and no proceedings for that purpose or
pursuant to Section 8A under the Securities Act shall have been initiated or
threatened by the Commission, (ii) no order suspending the qualification or
registration of the Units under the securities or blue sky laws of any
jurisdiction shall be in effect and (iii) all requests for additional
information on the part of the Commission (to be included or incorporated by
reference in the Registration Statement, the Disclosure Package, the Prospectus
or any Issuer Free Writing Prospectus or otherwise) shall have been complied
with to the reasonable satisfaction of Canaccord. On or prior to the Closing
Date, the Registration Statement or any amendment thereof or supplement thereto
shall not contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and neither the Disclosure Package, nor any Issuer Free
Writing Prospectus nor the Prospectus nor any amendment thereof or supplement
thereto shall contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading.
(c) Action Preventing Issuance.
No action shall have been taken and no law, statute, rule, regulation or order
shall have been enacted, adopted or issued by any governmental agency or body
which would prevent the issuance or sale of the Units or materially and
adversely affect or potentially materially and adversely affect the business or
operations of the Company; and no injunction, restraining order or order of any
other nature by any federal or state court of competent jurisdiction shall have
been issued which would prevent the issuance or sale of the Units or materially
and adversely affect or potentially materially and adversely affect the business
or operations of the Company.
(d) Material Adverse Change.
Subsequent to the date of the latest audited financial statements included or
incorporated by reference in the Disclosure Package, (i) neither the Company nor
any of its subsidiaries has 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 dispute or court or governmental action, order
or decree, otherwise than as set forth in the Disclosure Package, and (ii) there
has not been any change in the capital stock (other than a change in the number
of outstanding shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options or warrants or the conversion of convertible
indebtedness), or material change in the short–term debt or long–term debt of
the Company (other than upon conversion of convertible indebtedness, or other
than in the usual and customary operation and use of the Company’s existing
credit line facility) or any material adverse change, in or affecting the
business, assets, general affairs, management, financial position, prospects,
stockholders’ equity or results of operations of the Company, otherwise than as
set forth in the Disclosure Package, the effect of which, in any such case
described in clause (i) or (ii) of this subsection (d), is, in the
reasonable judgment of Canaccord, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the Units
on the terms and in the manner contemplated in the Disclosure
Package.
21
(e) Representations and
Warranties. Each of the representations and warranties of the Company
contained herein shall be true and correct when made and on and as of the
Closing Date, as if made on such date (except that those representations and
warranties that address matters only as of a particular date shall remain true
and correct as of such date), and all covenants and agreements herein contained
to be performed on the part of the Company and all conditions herein contained
to be fulfilled or complied with by the Company at or prior to the Closing Date
shall have been duly performed, fulfilled or complied with.
(f) Opinions of Counsel to the
Company. Canaccord shall have received from ▇▇▇▇▇▇▇▇ & Worcester,
LLP, counsel to the Company, such counsel’s written opinion, addressed to
Canaccord and the Investors and dated the Closing Date, in form and substance
satisfactory to Canaccord and its counsel. Such counsel to the Company shall
also have furnished to Canaccord a written statement (“Negative Assurances”),
addressed to Canaccord and the Investors and dated the Closing Date, in form and
substance satisfactory to Canaccord and its counsel.
(g) Opinion of Counsel to the Placement
Agent. Canaccord shall have received from Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., counsel for the Placement Agent, such opinion
or opinions, dated the Closing Date, with respect to such matters as Canaccord
may reasonably require, and the Company shall have furnished to such counsel
such documents as it requests to enable it to pass upon such
matters.
(h) Accountant’s Comfort
Letter. On the date hereof, Canaccord shall have received a
letter dated the date hereof, (the “Comfort Letter”), addressed
to Canaccord and in form and substance reasonably satisfactory to Canaccord and
its counsel, from ▇▇▇▇▇▇▇▇ and Company, P.C., (i) confirming that they are
independent public accountants with respect to the Company within the meaning of
the Securities Act and the Rules and Regulations and (ii) stating, as of the
date hereof (or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is given in the
Disclosure Package, as of a date not more than three days prior to the date
hereof), the conclusions and findings of such firm with respect to the financial
information and other matters ordinarily covered by accountants’ “comfort
letters” to underwriters, delivered according to Statement of Auditing Standards
No. 72 and Statement of Auditing Standard No. 100 (or successor bulletins), in
connection with registered public offerings.
(i) Bring-Down Letter. On the
Closing Date, Canaccord shall have received from each of ▇▇▇▇▇▇▇▇ and Company,
P.C. and McGladrey and ▇▇▇▇▇▇, LLP a letter (the “Bring-Down Letter”), dated
the Closing Date, addressed to Canaccord and in form and substance reasonably
satisfactory to Canaccord and its counsel, (i) confirming that they are
independent public accountants with respect to the Company within the meaning of
the Securities Act and the Rules and Regulations, (ii) stating, as of the date
of the Bring-Down Letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Disclosure Package and the Prospectus, as of a date
not more than three days prior to the date of the Bring-Down Letter), the
conclusions and findings of such firm with respect to the financial information
and other matters covered by the Comfort Letter and (iii) confirming in all
material respects the conclusions and findings set forth in the Comfort
Letter.
(j) Officer’s Certificate.
Canaccord shall have received on the Closing Date a certificate, addressed to
Canaccord and dated the Closing Date, of the chief executive or chief operating
officer and the chief financial officer or chief accounting officer of the
Company in their capacities as such to the effect that:
22
(i) each
of the representations, warranties and agreements of the Company contained in
this Agreement were true and correct when originally made and are true and
correct as of the Time of Sale and the Closing Date as if made on each such date
(except that those representations and warranties that address matters only as
of a particular date remain true and correct as of each such date); and the
Company has complied with all agreements and satisfied all the conditions on its
part required under this Agreement to be performed or satisfied at or prior to
the Closing Date;
(ii) there
has not been, subsequent to the date of the most recent audited financial
statements included or incorporated by reference in the Disclosure Package, any
material adverse change in the financial position or results of operations of
the Company, or any change or development that, singularly or in the aggregate,
would involve a material adverse change or a prospective material adverse
change, in or affecting the condition (financial or otherwise), results of
operations, business, assets or prospects of the Company or its subsidiaries
except as set forth in the Prospectus;
(iii) no
stop order suspending the effectiveness of the Registration Statement or any
part thereof or any amendment thereof or the qualification of the Units for
offering or sale, nor suspending or preventing the use of the Disclosure
Package, the Prospectus or any Issuer Free Writing Prospectus shall have been
issued, and no proceedings for that purpose or pursuant to Section 8A under the
Securities Act shall be pending or to its knowledge, threatened by the
Commission or any state or regulatory body;
(iv)
the Registration Statement and each
amendment thereto, at the Time of Sale and as of the date of this Agreement and
as of the Closing Date did not include any untrue statement of a material fact
and did not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Disclosure
Package, as of the Time of Sale and as of the Closing Date, any Issuer Free
Writing Prospectus as of its date and as of the Closing Date, the Prospectus and
each amendment or supplement thereto, as of the respective date thereof and as
of the Closing Date, did not include any untrue statement of a material fact and
did not omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances in which they were made, not
misleading; and
(v)
no event has occurred as a result of which it is necessary to
amend or supplement the Registration Statement, the Prospectus or the Disclosure
Package in order to make the statements therein not untrue or misleading in any
material respect.
(k) The NYSE Amex. The Shares and
Warrant Shares shall have been listed and authorized for trading on the NYSE
Amex, and satisfactory evidence of such actions shall have been provided to
Canaccord.
(l) No FINRA Objection. Canaccord
shall have not have received any unresolved objection from the FINRA as to the
fairness and reasonableness of the amount of compensation allowable or payable
to Canaccord in connection with the issuance and sale of the Units.
(m) Subscription Agreements. The
Company shall have entered into the Subscription Agreements with each of the
Investors, and such agreement shall be in full force and effect on the Closing
Date.
23
(n) Lock-Up
Letters. Canaccord shall have received the written agreements,
in the form of Exhibit D
hereto, of the executive officers, directors and certain other stockholders of
the Company listed in Schedule II to this
Agreement.
(o) Additional Documents. Prior
to the Closing Date, the Company shall have furnished to Canaccord such further
information, certificates or documents as Canaccord shall have reasonably
requested.
All
opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.
If any
condition specified in this Section 5 is not
satisfied when and as required to be satisfied, this Agreement may be terminated
by Canaccord by notice to the Company at any time prior to the Closing Date,
which termination shall be without liability on the part of any party to any
other party, except that Section 4, Section 6 and Section 8 hereof
shall at all times be effective and shall survive such termination.
6. Indemnification
and Contribution.
(a) Indemnification of the Placement
Agent. The Company agrees to indemnify, defend and hold harmless
Canaccord, its affiliates and each of its and their respective directors,
officers, members, employees, representatives and agents and any person who
controls Canaccord within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and the successors and assigns of all of the
foregoing persons, from and against any losses, claims, damages, expenses or
liabilities, joint or several, to which such person may become subject, under
the Securities Act, the Exchange Act, or other federal or state statutory law or
regulation, the common law or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company), insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Disclosure Package, the Prospectus,
or any amendment or supplement thereto, any Issuer Free Writing Prospectus or in
any materials or information provided to Investors by, or with the approval of,
the Company in connection with the marketing of the offering of the Common Stock
(“Marketing
Materials”), including any roadshow or investor presentations made to
Investors by the Company (whether in person or electronically) or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein, or (iii) in
whole or in part upon any failure of the Company to perform its obligations
hereunder or under law, and will reimburse Canaccord for any legal or other
expenses reasonably incurred by it in connection with investigating or defending
against such loss, claim, damage, liability, expense or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, expense, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, any Preliminary Prospectus, the Disclosure
Package, the Prospectus, or any such amendment or supplement, any Issuer Free
Writing Prospectus or in any Marketing Materials, in reliance upon and in
conformity with written information furnished to the Company by Canaccord,
specifically for use in the preparation thereof, which information the parties
hereto agree is limited to the Placement Agent’s Information.
24
(b) Indemnification of the
Company. Canaccord agrees to indemnify, defend and hold harmless the
Company against any losses, claims, damages, expenses or liabilities to which
the Company may become subject, under the Securities Act, the Exchange Act, or
other federal or state statutory law or regulation, the common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of Canaccord), insofar as such losses, claims, damages,
expenses or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Disclosure Package, the Prospectus, or any amendment or supplement thereto or
any Issuer Free Writing Prospectus or Marketing Materials, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, any Preliminary Prospectus, the Disclosure
Package, the Prospectus, Marketing Materials or any such amendment or supplement
thereto, or any Issuer Free Writing Prospectus in reliance upon and in
conformity with written information furnished to the Company by Canaccord,
specifically for use in the preparation thereof, which information the parties
hereto agree is limited to the Placement Agent’s Information, and will reimburse
the Company for any legal or other expenses reasonably incurred by the Company
in connection with investigating or defending against any such loss, claim,
damage, liability or action. Notwithstanding the provisions of this Section 6(b), in no
event shall any indemnity by Canaccord under this Section 6(b) exceed
the total compensation received by Canaccord in accordance with Section 1(b)
hereof.
(c) Notice and Procedures. If any
action, suit or proceeding (each, a “Proceeding”) is brought
against a person (an “Indemnified Party”) in
respect of which indemnity may be sought against the Company or Canaccord (as
applicable, the “Indemnifying
Party”) pursuant to subsections
(a) or (b) above,
respectively, of this Section 6, such
Indemnified Party shall promptly notify such Indemnifying Party in writing of
the institution of such Proceeding and such Indemnifying Party shall have the
right to assume the defense of such Proceeding, including the employment of
counsel reasonably satisfactory to such Indemnified Party (who shall not, except
with the consent of the Indemnified Party, be counsel to the Indemnifying Party)
and payment of all fees and expenses; provided, however, that the
omission to so notify such Indemnifying Party shall not relieve such
Indemnifying Party from any liability which such Indemnifying Party may have to
any Indemnified Party or otherwise, except to the extent the Indemnifying Party
has been materially prejudiced by such failure; and provided, further, that the
failure to notify the Indemnifying Party shall not relieve it from any liability
that it may have to an Indemnified Party otherwise than under subsection (a) or
(b) above. The
Indemnified Party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the Indemnifying Party in
connection with the defense of such Proceeding, (ii) the Indemnifying Party
shall not have, within a reasonable period of time in light of the
circumstances, employed counsel to defend the Indemnified Party in such
Proceeding or (iii) such Indemnified Party or parties shall have reasonably
concluded upon written advice of counsel that there may be one or more legal
defenses available to it or them which are different from, additional to or in
conflict with those available to such Indemnifying Party (in which case such
Indemnifying Party shall not have the right to direct that portion of the
defense of such Proceeding on behalf of the Indemnified Party or parties, but
such Indemnifying Party or parties may employ counsel and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of the Indemnifying Party), in any of which events such reasonable fees
and expenses shall be borne by such Indemnifying Party and paid as incurred (it
being understood, however, that such Indemnifying Party shall not be liable for
the expenses of more than one separate counsel (in addition to any local
counsel) in any one Proceeding or series of related Proceedings in the same
jurisdiction representing the Indemnified Parties who are parties to such
Proceeding). An Indemnifying Party shall not be liable for any settlement of any
Proceeding effected without its written consent but, if settled with its written
consent, such Indemnifying Party agrees to indemnify and hold harmless the
Indemnified Party or parties from and against any loss or liability by reason of
such settlement. Notwithstanding the foregoing sentence, if at any time an
Indemnified Party shall have requested an Indemnifying Party to reimburse the
Indemnified Party for fees and expenses of counsel as contemplated by the second
sentence of this Section 6(c),
then the Indemnifying Party agrees that it shall be liable for any settlement of
any Proceeding effected without its written consent if (i) such settlement
is entered into more than 60 days after receipt by such Indemnifying Party of
the aforesaid request, (ii) such Indemnifying Party shall not have fully
reimbursed the Indemnified Party in accordance with such request prior to the
date of such settlement and (iii) such Indemnified Party shall have given
the Indemnifying Party at least 30 days’ prior notice of its intention to
settle. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement, compromise or consent to the entry of
judgment in any pending or threatened Proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding and does not include an admission
of fault or culpability or a failure to act by or on behalf of such Indemnified
Party.
25
(d) Contribution. If the
indemnification provided for in this Section 6 is
unavailable to an Indemnified Party under subsections
(a) or (b) of this
Section 6
or insufficient to hold an Indemnified Party harmless in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of the losses, claims, damages, liabilities or expenses referred to in
subsections (a)
or (b) above,
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Indemnifying Party or parties on the one hand and the
Indemnified Party or parties on the other hand from the offering of the Units or
(ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative
fault of the Indemnifying Party or parties on the one hand and the Indemnified
Party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and Canaccord on the other hand
shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Units (before deducting expenses) received by
the Company bear to the discounts and commissions received by Canaccord. The
relative fault of the Company on the one hand and Canaccord on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company, on the
one hand, or by Canaccord, on the other hand, and the parties’ relevant intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement, omission, act or failure to act; provided that the parties
hereto agree that the written information furnished to the Company by Canaccord
for use in the Registration Statement or the Prospectus, or in any amendment or
supplement thereto, consists solely of the Placement Agent’s
Information.
26
(e) Allocation. The Company and
Canaccord agree that it would not be just and equitable if contribution pursuant
to subsection
(d) above were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the first sentence of subsection (d) above.
Notwithstanding the provisions of this Section 6(e),
Canaccord shall not be required to contribute any amount in excess of the total
commissions received by Canaccord in accordance with Section 1(b) less the
amount of any damages which Canaccord has otherwise paid or become liable to pay
by reason of any untrue or alleged untrue statement, omission or alleged
omission, act or alleged act or failure to act or alleged failure to act. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section
6 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any Indemnified Party at law or in
equity.
(f) Representations and Agreements to
Survive Delivery. The obligations of the Company under this Section 6 shall
be in addition to any liability which the Company may otherwise have. The
indemnity and contribution agreements contained in this Section 6 and
the covenants, agreements, warranties and representations of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of Canaccord, any person who controls Canaccord within the
meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act or any affiliate of Canaccord, or by or on behalf of the
Company, its directors or officers or any person who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act, and (iii) the issuance and delivery of the Units. The
Company and Canaccord agree promptly to notify each other of the commencement of
any Proceeding against it and, in the case of the Company, against any of the
Company’s officers or directors in connection with the issuance and sale of the
Units, or in connection with the Registration Statement, the Disclosure Package
or the Prospectus.
7. Information
Furnished by Placement Agents. The parties hereto acknowledge and agree
that, for all purposes of this Agreement, the “Placement Agent’s Information”
consists solely of the statements concerning the Placement Agent in the first
paragraph under the heading “Plan of Distribution.”
8. Termination. Canaccord shall have the
right to terminate this Agreement by giving notice as hereinafter specified at
any time at or prior to the Closing Date, without liability on the part of
Canaccord to the Company, if (i) prior to delivery and payment for the Units (A)
trading in securities generally shall have been suspended on or by the New York
Stock Exchange, the NYSE Amex, the NASDAQ Global Market, the NASDAQ Capital
Market or in the over the counter market (each, a “Trading Market”),
(B) trading in the Common Stock of the Company shall have been suspended on
any Trading Market or by the Commission, (C) a general moratorium on
commercial banking activities shall have been declared by federal or New York
state authorities or a material disruption shall have occurred in commercial
banking or securities settlement or clearance services in the United States,
(D) there shall have occurred any outbreak or material escalation of
hostilities or acts of terrorism involving the United States or there shall have
been a declaration by the United States of a national emergency or war, (E)
there shall have occurred any other calamity or crisis or any material change in
general economic, political or financial conditions in the United States or
elsewhere, if the effect of any such event specified in clause (D) or (E), in
the reasonable judgment of Canaccord, is material and adverse and makes it
impractical or inadvisable to proceed with the completion of the sale of and
payment for the Units on the Closing Date on the terms and in the manner
contemplated by this Agreement, the Disclosure Package and the Prospectus, (ii)
since the time of execution of this Agreement or the earlier respective dates as
of which information is given in the Disclosure Package or incorporated by
reference therein, there has been any Material Adverse Effect, (iii) the Company
shall have failed, refused or been unable to comply with the terms or perform
any agreement or obligation of this Agreement or any Subscription Agreements,
other than by reason of a default by Canaccord, or (iv) any condition of
Canaccord’s obligations hereunder is not fulfilled. Any such termination shall
be without liability of any party to any other party except that the provisions
of Section 4, Section 6, and
Section 12
hereof shall at all times be effective notwithstanding such
termination.
27
9. Notices.
All statements, requests, notices and agreements hereunder shall be in writing
or by facsimile, and:
(a) if
to Canaccord, shall be delivered or sent by mail, telex or facsimile
transmission as follows:
Canaccord
Genuity Inc.
▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile
No.: ▇▇▇-▇▇▇-▇▇▇▇
with a
copy (which shall not constitute notice) to:
Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
Sahir Surmeli
Facsimile
No.: 617-542-2241
(b) if
to the Company shall be delivered or sent by mail, telex or facsimile
transmission to:
▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer
Facsimile
No.: ▇▇▇-▇▇▇-▇▇▇▇
with a
copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇
& Worcester, LLP
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Facsimile
No.: ▇▇▇-▇▇▇-▇▇▇▇
Any such
statements, requests, notices or agreements shall be effective only upon
receipt. Any party to this Agreement may change such address for notices by
sending to the parties to this Agreement written notice of a new address for
such purpose.
28
10. Persons Entitled
to Benefit of Agreement. This Agreement shall inure to the benefit of and
shall be binding upon Canaccord, the Company, and their respective successors
and assigns. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person other than the persons mentioned in the
preceding sentence any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person, except that (i) the representations, warranties, covenants, agreements
and indemnities of the Company contained in this Agreement shall also be for the
benefit of the controlling persons, officers and directors referred to in Section 6(a) hereof
and the indemnities of Canaccord shall also be for the benefit of the
controlling persons, officers and directors referred to in Section 6(b) hereof;
and (ii) the Investors are relying on the representations made by the Company
under, and are intended third party beneficiaries of, this Agreement. The term
“successors and assigns” as herein used shall not include any purchaser of
Securities by reason merely of such purchase.
11. Governing Law;
Submission to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, without giving effect to the conflicts of laws provisions thereof. Except
as set forth below, no Proceeding may be commenced, prosecuted or continued in
any court other than the courts of State of New York located in the City and
County of New York or the United States District Court for the Southern District
of New York, which courts shall have jurisdiction over the adjudication of such
matters, and the Company hereby consents to the jurisdiction of such courts and
personal service with respect thereto. The Company hereby consents to personal
jurisdiction, service and venue in any court in which any Proceeding arising out
of or in any way relating to this Agreement is brought by any third party
against Canaccord. The Company hereby waives all right to trial by jury in any
Proceeding (whether based upon contract, tort or otherwise) in any way arising
out of or relating to this Agreement. The Company agrees that a final judgment
in any such Proceeding brought in any such court shall be conclusive and binding
upon the Company and may be enforced in any other courts in the jurisdiction of
which the Company is or may be subject, by suit upon such judgment.
12. No Fiduciary
Relationship. The Company hereby acknowledges and agrees
that:
(a) No Other Relationship.
Canaccord has been retained solely to act as the exclusive placement agent in
connection with the offering of the Company’s securities. The Company further
acknowledges that Canaccord is acting pursuant to a contractual relationship
created solely by this Agreement entered into on an arm’s length basis and in no
event do the parties intend that Canaccord act or be responsible as a fiduciary
to the Company, its management, stockholders, creditors or any other person in
connection with any activity that Canaccord may undertake or has undertaken in
furtherance of the offering of the Company’s securities, either before or after
the date hereof, irrespective of whether Canaccord has advised or is advising
the Company on other matters. Canaccord hereby expressly disclaims any fiduciary
or similar obligations to the Company, either in connection with the
transactions contemplated by this Agreement or any matters leading up to such
transactions, and the Company hereby confirms its understanding and agreement to
that effect.
(b) Arm’s-Length Negotiations.
The price of the Units set forth in this Agreement was established by the
Company following discussions and arms-length negotiations with the Investors
and Canaccord, and the Company is capable of evaluating and understanding, and
understands and accepts, the terms, risks and conditions of the transactions
contemplated by this Agreement.
29
(c) Absence of Obligation to
Disclose. The Company has been advised that Canaccord and its affiliates
are engaged in a broad range of transactions which may involve interests that
differ from those of the Company and that Canaccord has no obligation to
disclose such interests or transactions to the Company by virtue of any
fiduciary, advisory or agency relationship.
(d) Waiver. The Company hereby
waives and releases, to the fullest extent permitted by law, any claims that the
Company may have against Canaccord with respect to any breach or alleged breach
of any fiduciary or similar duty to the Company in connection with the
transactions contemplated by this Agreement or any matters leading up to such
transactions and agrees that Canaccord shall have no liability (whether direct
or indirect) to the Company in respect of such a fiduciary duty claim to any
person asserting a fiduciary duty claim on behalf of the Company, including
stockholders, employees or creditors of the Company.
13. Headings.
The Section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.
14. Amendments and
Waivers. No supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. The failure
of a party to exercise any right or remedy shall not be deemed or constitute a
waiver of such right or remedy in the future. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (regardless of whether similar), nor shall any such waiver
constitute a continuing waiver unless otherwise expressly provided.
15. Counterparts.
This Agreement may be executed in one or more counterparts and, if executed in
more than one counterpart, the executed counterparts shall each be deemed to be
an original and all such counterparts shall together constitute one and the same
instrument. Delivery of an executed counterpart by fax or portable document
format (.pdf) shall be effective as delivery of a manually executed counterpart
thereof.
16. Research Analyst
Independence. The Company acknowledges that Canaccord’s research analysts
and research department are required to be independent from its investment
banking division and are subject to certain regulations and internal policies,
and that Canaccord’s research analysts may hold views and make statements or
investment recommendations and/or publish research reports with respect to the
Company and/or the offering that differ from the views of their investment
banking division. The Company hereby waives and releases, to the fullest extent
permitted by law, any claims that the Company may have against Canaccord with
respect to any conflict of interest that may arise from the fact that the views
expressed by its independent research analysts and research departments may be
different from or inconsistent with the views or advice communicated to the
Company by Canaccord’s investment banking division. The Company acknowledges
that Canaccord is a full service securities firm and as such from time to time,
subject to applicable securities laws, rules and regulations, may effect
transactions for its own account or the account of its customers and hold long
or short positions in debt or equity securities of the Company; provided, however, that nothing in this
Section 16
shall relieve Canaccord of any responsibility or liability it may otherwise bear
in connection with activities in violation of applicable securities laws, rules
or regulations.
17. Entire
Agreement. This Agreement constitutes the entire agreement of the parties
to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
30
18. Partial
Unenforceability. The invalidity or unenforceability of any section,
paragraph, clause or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph, clause or provision hereof.
If any section, paragraph, clause or provision of this Agreement is for any
reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to make
it valid and enforceable.
19. Effectiveness.
This Agreement shall become effective upon the execution and delivery hereof by
the parties hereto.
[Signature
page follows.]
31
If the
foregoing is in accordance with your understanding of the agreement between the
Company and Canaccord, kindly indicate your acceptance in the space provided for
that purpose below.
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Very
truly yours,
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
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Title: Chief
Financial
Officer
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Accepted
as of
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the
date first above written:
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CANACCORD
GENUITY INC.
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By:
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/s/ ▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇
▇▇▇▇▇
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Title: Managing
Director
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32
Schedule
I
Issuer
Free Writing Prospectuses
None.
33
Schedule
II
List
of Officers, Directors and other Holders Subject to Section 3(n)
▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇.
▇▇▇▇▇
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇
34
Exhibit
A
Form
of Subscription Agreement
SUBSCRIPTION
AGREEMENT
▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
The undersigned (the “Investor”) hereby confirms its
agreement with American DG Energy Inc., a Delaware corporation (the “Company”), as
follows:
1. This
Subscription Agreement, including the Terms and Conditions for Purchase of Units
attached hereto as Annex I
(collectively, this “Agreement”) is made as of the
date set forth below between the Company and the Investor.
2. The
Company has authorized the sale and issuance to certain investors of up to an
aggregate of 500,000 units (the “Units”), with each Unit
consisting of (i) one share (a “Share,” collectively, the
“Shares”) of its Common
Stock, par value $0.001 per share (the “Common Stock”) and (ii) one
warrant (a “Warrant,”
collectively, the “Warrants”) to purchase one
share of Common Stock (and the fractional amount being the “Warrant Ratio”) in
substantially the form attached hereto as Exhibit B, subject to
adjustment by the Company’s Board of Directors or a committee thereof, for a
purchase price of $2.50 per Unit (the “Purchase
Price”). Units will not be issued or
certificated. The Shares and Warrants are immediately separable and
will be issued separately. The shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the “Warrant Shares” and, together
with the Units, the Shares and the Warrants, are referred to herein as the
“Offered
Securities”).
3. The
offering and sale of the Units (the “Offering”) are being made
pursuant to (a) an effective Registration Statement on Form S-3 (File No.
333-167392) (the “Registration
Statement”) filed by the Company with the Securities and Exchange
Commission (the “Commission”), including the
Prospectus dated October 6, 2010 filed pursuant to Rule 424(b)(3) under the
Securities Act of 1933, as amended (the “Act”) (the “Base Prospectus”), (b) if
applicable, certain “free writing prospectuses” (as that term is defined in Rule
405 under the Act), that have been or will be filed with the Commission and
delivered to the Investor on or prior to the date hereof (the “Issuer Free Writing
Prospectus”), containing certain supplemental information regarding the
Units, the terms of the Offering and the Company, and (c) a Prospectus
Supplement (the “Prospectus
Supplement” and, together with the Base Prospectus, the “Prospectus”) containing
certain supplemental information regarding the Units and terms of the Offering
that has been or will be filed with the Commission and delivered to the Investor
(or made available to the Investor by the filing by the Company of an electronic
version thereof with the Commission).
A-1
4. The
Company and the Investor agree that the Investor will purchase from the Company
and the Company will issue and sell to the Investor the Units set forth below
for the aggregate purchase price set forth below. The Units shall be
purchased pursuant to the Terms and Conditions for Purchase of Units attached
hereto as Annex
I and incorporated herein by this reference as if fully set forth
herein. The Investor acknowledges that the Offering is not being
underwritten by the placement agent (the “Placement Agent”) named in the
Prospectus Supplement and that there is no minimum offering amount.
5. The
manner of settlement of the Shares included in the Units purchased by the
Investor shall be determined by such Investor as follows (check
one):
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[___] A.
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Delivery
versus payment (“DVP”) through The
Depository Trust & Clearing Corporation (“DTC”) (i.e., on the
Closing Date (as defined in Section 3.1 of Annex I), the Company shall
deliver Shares registered in the Investor’s name and address as set forth
below and released by the Transfer Agent to the Investor through DTC at
the Closing directly to the account at Canaccord Genuity Inc. (“Canaccord”) identified
by the Investor; upon receipt of such
Shares, Canaccord shall promptly electronically
deliver such Shares to the Investor, and simultaneously therewith payment
shall be made by Canaccord by wire transfer to the
Company). NO
LATER THAN ONE (1) BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY
THE INVESTOR AND THE COMPANY, THE INVESTOR
SHALL:
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(I)
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NOTIFY CANACCORD OF THE ACCOUNT
OR ACCOUNTS AT CANACCORD TO BE CREDITED WITH THE SHARES BEING
PURCHASED BY SUCH INVESTOR,
AND
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(II)
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CONFIRM
THAT THE ACCOUNT OR ACCOUNTS AT CANACCORD TO BE CREDITED WITH THE UNITS
BEING PURCHASED BY THE INVESTOR HAVE A MINIMUM BALANCE EQUAL TO THE
AGGREGATE PURCHASE PRICE FOR THE UNITS BEING PURCHASED BY THE
INVESTOR.
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— OR
—
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[___]
B.
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Delivery
by wire transfer to the Company. NO LATER THAN ONE (1) BUSINESS
DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY,
THE INVESTOR SHALL REMIT BY WIRE TRANSFER THE AMOUNT OF FUNDS EQUAL TO THE
AGGREGATE PURCHASE PRICE FOR THE UNITS BEING PURCHASED BY THE INVESTOR TO
THE ACCOUNT DESIGNATED BY THE COMPANY IN ACCORDANCE WITH THE WIRE
INSTRUCTIONS PROVIDED TO THE
INVESTOR.
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IT IS THE INVESTOR’S
RESPONSIBILITY TO (A) MAKE THE NECESSARY WIRE TRANSFER OR CONFIRM THE PROPER
ACCOUNT BALANCE IN A TIMELY MANNER AND (B) ARRANGE FOR SETTLEMENT BY WAY OF DVP
OR WIRE TRANSFER TO THE COMPANY IN A TIMELY MANNER. IF THE INVESTOR
DOES NOT DELIVER THE AGGREGATE PURCHASE PRICE FOR THE UNITS OR DOES NOT MAKE
PROPER ARRANGEMENTS FOR SETTLEMENT IN A TIMELY MANNER, THE UNITS MAY NOT BE
DELIVERED AT CLOSING TO THE INVESTOR OR THE INVESTOR MAY BE EXCLUDED FROM THE
CLOSING ALTOGETHER.
6. The
executed Warrant shall be delivered in accordance with the terms
thereof.
A-2
7. The
Investor represents that, except as set forth below, (a) it has had no position,
office or other material relationship within the past three years with the
Company or persons known to it to be affiliates of the Company, (b) it is not a
FINRA member or an Associated Person (as such term is defined under the NASD
Membership and Registration Rules Section 1011) as of the Closing, and (c)
neither the Investor nor any group of Investors (as identified in a public
filing made with the Commission) of which the Investor is a part in connection
with the Offering of the Units, acquired, or obtained the right to acquire, 20%
or more of the Common Stock (or securities convertible into or exercisable for
Common Stock) or the voting power of the Company on a post-transaction
basis. Exceptions:
(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)
8. The
Investor represents that it has received (or otherwise had made available to it
by the filing by the Company of an electronic version thereof with the
Commission) the Base Prospectus, the documents incorporated by reference therein
and any free writing prospectus (collectively, the “Disclosure Package”), prior to
or in connection with the receipt of this Agreement. The Investor
acknowledges that, prior to the delivery of this Agreement to the Company, the
Investor will receive certain additional information regarding the Offering,
including pricing information (the “Offering Information”). Such
information may be provided to the Investor by any means permitted under the
Act, including the Prospectus Supplement, a free writing prospectus and oral
communications.
9. No
offer by the Investor to buy Units will be accepted and no part of the Purchase
Price will be delivered to the Company until the Investor has received the
Offering Information and the Company has accepted such offer by countersigning a
copy of this Agreement, and any such offer may be withdrawn or revoked, without
obligation or commitment of any kind, at any time prior to the Company (or
Placement Agent on behalf of the Company) sending (orally, in writing or by
electronic mail) notice of its acceptance of such offer. An
indication of interest will involve no obligation or commitment of any kind
until the Investor has been delivered the Offering Information and this
Agreement is accepted and countersigned by or on behalf of the
Company.
[Remainder of Page Left Blank
Intentionally. Signature Page Follows.]
A-3
Number of
Units:__________________________________
Purchase
Price Per Unit: $___________________________
Aggregate
Purchase Unit: $__________________________
Please confirm that the foregoing
correctly sets forth the agreement between us by signing in the space provided
below for that purpose.
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Dated
as of: December __, 2010
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INVESTOR
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By:
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Print Name:
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Title:
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Address:
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Agreed
and Accepted
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this
___ day of December, 2010:
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By:
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Title:
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A-4
ANNEX I
TERMS
AND CONDITIONS FOR PURCHASE OF UNITS
1. Authorization and Sale of the
Units. Subject to the terms and conditions of this Agreement,
the Company has authorized the sale of the Units.
2. Agreement
to Sell and Purchase the Units; Placement Agent.
2.1 At
the Closing (as defined in Section 3.1), the
Company will sell to the Investor, and the Investor will purchase from the
Company, upon the terms and conditions set forth herein, the number of Units set
forth on the last page of the Agreement to which these Terms and Conditions for
Purchase of Units are attached as Annex I (the “Signature Page”) for the
aggregate purchase price therefor set forth on the Signature Page.
2.2 The
Company proposes to enter into substantially this same form of Subscription
Agreement with certain other investors (the “Other Investors”) and expects to complete
sales of Units to them. The Investor and the Other Investors are
hereinafter sometimes collectively referred to as the “Investors,” and this Agreement
and the Subscription Agreements executed by the Other Investors are hereinafter
sometimes collectively referred to as the “Agreements.”
2.3 Investor
acknowledges that the Company has agreed to pay Canaccord Genuity Inc. (the
“Placement Agent”) a fee
(the “Placement Fee”) in
respect of the sale of Units to the Investor.
2.4 The
Company has entered into a Placement Agency Agreement, dated December 9, 2010
(the “Placement
Agreement”), with the Placement Agent that contains certain
representations, warranties, covenants and agreements of the Company that may be
relied upon by the Investor, which shall be a third party beneficiary
thereof. Except with respect to the material terms and conditions of
the transactions contemplated by this Agreement, the Placement Agreement and any
other documents or agreements contemplated hereby or thereby, the Company
confirms that neither it nor any other person acting on its behalf has provided
the Investor or any Other Investor or its respective agents or counsel with any
information that it believes constitutes or might constitute material,
non-public information which is not otherwise disclosed in or incorporated by
reference into the Prospectus Supplement.
3. Closings
and Delivery of the Units and Funds.
3.1 Closing. The completion of
the purchase and sale of the Units (the “Closing”) shall occur at a
place and time (the “Closing
Date”) to be specified by the Company and the Placement Agent, and of
which the Investors will be notified in advance by the Placement Agent, in
accordance with Rule 15c6-1 promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange
Act”). At the Closing, (a) the Company shall cause the
Transfer Agent to deliver to the Investor the number of Shares included in the
Units as set forth on the Signature Page registered in the name of the Investor
or, if so indicated on the Investor Questionnaire attached hereto as Exhibit A, in the
name of a nominee designated by the Investor, (b) the Company shall cause to be
delivered to the Investor a Warrant to purchase a number of whole Warrant Shares
determined by multiplying the number of Shares included in the Units as set
forth on the signature page by the Warrant Ration and rounding down to the
nearest whole number and (c) the aggregate purchase price for the
Units being purchased by the Investor will be delivered by or on behalf of the
Investor to the Company.
I-1
3.2 Conditions to the
Obligations of the Parties.
(a) Conditions
to the Company’s Obligations. The Company’s
obligation to issue and sell the Units to the Investor shall be subject to: (i)
the receipt by the Company of the purchase price for the Units being purchased
hereunder as set forth on the Signature Page and (ii) the accuracy of the
representations and warranties made by the Investor and the fulfillment of those
undertakings of the Investor to be fulfilled prior to the Closing
Date.
(b) Conditions
to the Investor’s Obligations. The Investor’s
obligation to purchase the Units will be subject to the accuracy of the
representations and warranties made by the Company and the fulfillment of those
undertakings of the Company to be fulfilled prior to the Closing Date, including
without limitation, those contained in the Placement Agreement, and to the
condition that the Placement Agent shall not have: (i) terminated the Placement
Agreement pursuant to the terms thereof or (ii) determined that the conditions
to the closing in the Placement Agreement have not been
satisfied. The Investor’s obligations are expressly not conditioned
on the purchase by any or all of the Other Investors of the Units that they have
agreed to purchase from the Company. The Investor understands and
agrees that, in the event that the Placement Agent in its sole discretion
determines that the conditions to closing in the Placement Agreement have not
been satisfied or if the Placement Agreement may be terminated for any other
reason permitted by such Agreement, then the Placement Agent may, but shall not
be obligated to, terminate such Agreement, which shall have the effect of
terminating this Subscription Agreement pursuant to Section 14
below.
3.3 Delivery
of Funds.
(a) Delivery Versus Payment
through DTC. If the Investor elects to settle the Shares
included in the Units purchased by such Investor by delivery versus payment
through DTC, no later
than one (1) business day after the execution of this Agreement by the Investor
and the Company, the Investor shall confirm that the account at Canaccord
Genuity Inc. (“Canaccord”) to be credited
with the Units being purchased by the Investor have a minimum balance equal to
the aggregate purchase price for the Units being purchased by the
Investor.
(b) Wire Transfer
Delivery. If the Investor elects to settle the Shares included
in the Units purchased by such Investor through wire transfer to the Company,
no
later than one (1) business day after the execution of this Agreement by the
Investor and the Company, the Investor shall confirm the remittance by
wire transfer of the amount of funds equal to the aggregate purchase price for
the Units being purchased by the Investor to the account designated by the
Company in accordance with the wire instructions provided to the
Investor.
3.4 Delivery
of Shares included in the Units.
(a) Delivery Versus Payment
through DTC. If the Investor elects to settle the Shares
included in the Units purchased by such Investor by delivery versus payment
through DTC, no later
than one (1) business day after the execution of this Agreement by the Investor
and the Company, the Investor shall notify Canaccord of the account at
Canaccord to be credited with the Shares included in the Units being purchased
by such Investor. On the Closing Date, the Company shall deliver the
Shares to the Investor through DTC directly to the account at Canaccord
identified by Investor and simultaneously therewith payment shall be made by
Canaccord by wire transfer to the Company.
I-2
(b) Wire Transfer
Delivery. If the Investor elects to settle the Shares included
in the Units purchased by such Investor through wire transfer delivery, no later
than one (1) business day after the execution of this Agreement by the Investor
and the Company, the Investor shall notify the Company of the account to
be credited with the Shares included in the Units being purchased by such
Investor. On the Closing Date, the Company shall deliver the Shares
to the Investor directly to the account identified by the Investor upon
confirmation by the Company of the remittance to it of the funds equal to the
aggregate purchase price for the Units being purchased.
4. Representations,
Warranties and Covenants of the Investor.
The Investor acknowledges, represents
and warrants to, and agrees with, the Company and the Placement Agent
that:
4.1 The
Investor (a) is knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to, investments in securities
presenting an investment decision like that involved in the purchase of the
Units, including investments in securities issued by the Company and investments
in comparable companies, (b) has answered all questions on the Signature Page
and the Investor Questionnaire and the answers thereto are true and correct as
of the date hereof and will be true and correct as of the Closing Date and (c)
in connection with its decision to purchase the number of Units set forth on the
Signature Page, has received and is relying only upon the Disclosure Package and
the documents incorporated by reference therein and the Offering
Information.
4.2 (a)
No action has been or will be taken in any jurisdiction outside the United
States by the Company or the Placement Agent that would permit an offering of
the Units, or possession or distribution of offering materials in connection
with the issue of the Units in any jurisdiction outside the United States where
action for that purpose is required, (b) if the Investor is outside the United
States, it will comply with all applicable laws and regulations in each foreign
jurisdiction in which it purchases, offers, sells or delivers Offered Securities
or has in its possession or distributes any offering material, in all cases at
its own expense and (c) the Placement Agent is not authorized to make or has not
made any representation, disclosure or used any information in connection with
the issue, placement, purchase and sale of the Units, except as set forth in the
Disclosure Package and the documents incorporated by reference therein and the
Offering Information.
4.3 (a)
The Investor has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement, and (b) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
to the enforceability of any rights to indemnification or contribution that may
be violative of the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or
regulation).
I-3
4.4 The
Investor understands that nothing in this Agreement, the Prospectus or any other
materials presented to the Investor in connection with the purchase and sale of
the Units constitutes legal, tax or investment advice. The Investor
has consulted such legal, tax and investment advisors and made such
investigation as it, in its sole discretion, has deemed necessary or appropriate
in connection with its purchase of Units.
4.5 Since
the first date on which the Placement Agent contacted the Investor about the
Offering, the Investor has not disclosed any information regarding the Offering
to any third parties (other than its legal, accounting and other advisors) and
has not engaged in any transactions involving the securities of the Company
(including, without limitation, any Short Sales (as defined herein) involving
the Company’s securities). The Investor covenants that it will not
engage in any transactions in the securities of the Company (including Short
Sales) prior to the time that the transactions contemplated by this Agreement
are publicly disclosed. The Investor agrees that it will not use any
of the Shares or Warrants acquired pursuant to this Agreement to cover any short
position in the Common Stock if doing so would be in violation of applicable
securities laws. For purposes hereof, “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act, whether or not against the box, and all
types of direct and indirect stock pledges, forward sales contracts, options,
puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule
16a-1(h) under the Exchange Act) and similar arrangements (including on a total
return basis), and sales and other transactions through non-US broker dealers or
foreign regulated brokers.
5. Survival of Representations,
Warranties and Agreements; Third Party
Beneficiary. Notwithstanding any investigation made by any
party to this Agreement or by the Placement Agent, all covenants, agreements,
representations and warranties made by the Company and the Investor herein will
survive the execution of this Agreement, the delivery to the Investor of the
Shares and Warrants included in the Units being purchased and the payment
therefor. The Placement Agent shall be a third party beneficiary with
respect to the representations, warranties and agreements of the Investor in
Section 4 hereof.
6. Notices. All
notices, requests, consents and other communications hereunder will be in
writing, will be mailed (a) if within the domestic United States by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, or by facsimile or (b) if delivered from outside the
United States, by International Federal Express or facsimile, and (c) will be
deemed given (i) if delivered by first-class registered or certified mail
domestic, three business days after so mailed, (ii) if delivered by nationally
recognized overnight carrier, one business day after so mailed, (iii) if
delivered by International Federal Express, two business days after so mailed
and (iv) if delivered by facsimile, upon electric confirmation of receipt and
will be delivered and addressed as follows:
|
|
(a)
|
if to the Company,
to:
|
▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, President and COO
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
I-4
with copies
to:
▇▇▇▇▇▇▇▇
& Worcester LLP
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
(b) if
to the Investor, at its address on the Signature Page hereto, or at such other
address or addresses as may have been furnished to the Company in
writing.
7. Changes. This
Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Investor.
8. Headings. The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and will not be deemed to be part of this
Agreement.
9. Severability. In
case any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein will not in any way be affected or
impaired thereby.
10. Governing Law. This
Agreement will be governed by, and construed in accordance with, the internal
laws of the State of New York, without giving effect to the principles of
conflicts of law that would require the application of the laws of any other
jurisdiction.
11. Counterparts. This
Agreement may be executed in two or more counterparts, each of which will
constitute an original, but all of which, when taken together, will constitute
but one instrument, and will become effective when one or more counterparts have
been signed by each party hereto and delivered to the other
parties. The Company and the Investor acknowledge and agree that the
Company shall deliver its counterpart to the Investor along with the Prospectus
Supplement (or the filing by the Company of an electronic version thereof with
the Commission).
12. Confirmation of
Sale. The Investor acknowledges and agrees that such
Investor’s receipt of the Company’s signed counterpart to this Agreement,
together with the Prospectus Supplement (or the filing by the Company of an
electronic version thereof with the Commission), shall constitute written
confirmation of the Company’s sale of Units to such Investor.
13. Press Release. The
Company and the Investor agree that the Company shall issue a press release
announcing the Offering and disclosing all material information regarding
the Offering prior to the opening of the financial markets in New
York City on the business day immediately after the date hereof; provided that
the Company shall not issue any press release or other announcement naming the
Investor without the Investor’s prior approval.
14. Termination. In the
event that the Placement Agreement is terminated by the Placement Agent pursuant
to the terms thereof, this Agreement shall terminate without any further action
on the part of the parties hereto.
I-5
Exhibit
A
INVESTOR
QUESTIONNAIRE
Pursuant
to Section 3 of
Annex I to the
Agreement, please provide us with the following information:
|
1.
|
The
exact name that your Shares and Warrants are to be registered in.
You
|
||
| may use a nominee name if appropriate: | |||
|
2.
|
The
relationship between the Investor and the registered holder listed in
|
||
| response to item 1 above: | |||
|
3.
|
The
mailing address of the registered holder listed in response to
|
||
| item 1 above: | |||
|
4.
|
The
Social Security Number or Tax Identification Number of the registered
|
||
| holder listed in the response to item 1 above: | |||
|
5.
|
Name
of DTC Participant (broker-dealer at which the account or
accounts
|
||
| to be credited with the Shares are maintained): | |||
|
6.
|
DTC
Participant Number:
|
||
|
7.
|
Name
of Account at DTC Participant being credited with the
Shares:
|
||
|
8.
|
Account
Number at DTC Participant being credited with the Shares:
|
A-1
Exhibit
B
Form
of Warrant
WARRANT
TO PURCHASE COMMON STOCK
To
Purchase [_______] Shares of Common Stock
Date of
Issuance: December 14, 2010
VOID AFTER DECEMBER 14,
2015
THIS
CERTIFIES THAT, for value received, [______________], or permitted registered
assigns (the “Holder”),
is entitled to subscribe for and purchase at the Exercise Price (defined below)
from American DG Energy Inc., a Delaware corporation (the “Company”), up to
[____________] shares of the common stock of the Company, par value $0.001 per
share (the “Common
Stock”). This warrant is one of a series of warrants issued by
the Company as of the date hereof (individually a “Warrant”; collectively, the
“Warrants”) pursuant to
those certain subscription agreements between the Company and the investors
identified therein, dated as of December 9, 2010 (collectively, the “Subscription
Agreement”).
1. DEFINITIONS. Capitalized
terms used herein but not otherwise defined herein shall have their respective
meanings as set forth in the Subscription Agreement. As used herein,
the following terms shall have the following respective meanings:
(A) “Eligible Market” means any of
the New York Stock Exchange, the NYSE Amex, The NASDAQ Global Market, The NASDAQ
Global Select Market or The NASDAQ Capital Market.
(B) “Exercise Period” shall mean
the period commencing six (6) months after the date hereof and ending 5:00 P.M.
New York City time on December 14, 2010, unless sooner terminated as provided
below.
(C) “Exercise Price” shall mean
$3.25 per share, subject to adjustment pursuant to Section 4
below.
(D) “Exercise Shares” shall mean
the shares of Common Stock issuable upon exercise of this Warrant.
(E) “Trading Day” shall mean (a)
any day on which the Common Stock is listed or quoted and traded on its primary
Trading Market, (b) if the Common Stock is not then listed or quoted and traded
on any Eligible Market, then a day on which trading occurs on the OTC Bulletin
Board (or any successor thereto), or (c) if trading does not occur on the OTC
Bulletin Board (or any successor thereto), any Business Day.
B-1
(F) “Trading Market” shall mean the
NYSE Amex or any other Eligible Market, or any national securities exchange,
market or trading or quotation facility on which the Common Stock is then listed
or quoted.
2. EXERCISE OF
WARRANT. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Company at its address set forth on the
signature page hereto (or at such other address as it may designate by notice in
writing to the Holder):
(A) An
executed Notice of Exercise in the form attached hereto;
(B) Payment
of the Exercise Price either (i) in cash or by check, or (ii) pursuant to Section 2.1 below;
and
(C) This
Warrant.
Execution
and delivery of the Notice of Exercise shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Exercise Shares, if
any.
Certificates
for Exercise Shares purchased hereunder shall be transmitted by the Company’s
transfer agent (the “Transfer
Agent”) to the Holder by crediting the account of the Holder’s prime
broker with the Depository Trust & Clearing Corporation through its Deposit
Withdrawal Agent Commission system if the Company is a participant in such
system, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise within three (3) business days from the
delivery to the Company of the Notice of Exercise, surrender of this Warrant and
payment of the aggregate Exercise Price as set forth above. This
Warrant shall be deemed to have been exercised on the date the latest of the
Warrant, Notice of Exercise and Exercise Price are received by the
Company.
The
person in whose name any certificate or certificates for Exercise Shares are to
be issued upon exercise of this Warrant shall be deemed to have become the
holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
Subject
to Section 2.4,
to the extent permitted by law, the Company’s obligations to issue and deliver
Exercise Shares in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any person or entity or any action to enforce
the same, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder or any other person or entity of any
obligation to the Company or any violation or alleged violation of law by the
Holder or any other person or entity, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with the issuance of Exercise Shares. Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver Exercise Shares upon exercise of this Warrant as required
pursuant to the terms hereof.
B-2
2.1 NET
EXERCISE. If during the Exercise Period, the Holder is not
permitted to sell Exercise Shares pursuant to the Registration Statement (as
defined in the Subscription Agreement) or pursuant to another registration
statement that has been declared effective under Securities Act of 1933, as
amended, and the fair market value of one share of the Common Stock is greater
than the Exercise Price (at the date of calculation as set forth below), in lieu
of exercising this Warrant by payment of cash or by check, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Notice of
Exercise in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
|
X
=
|
Y (A-B)
|
|
A
|
Where X =
the number of Exercise Shares to be issued to the Holder
|
|
Y
=
|
the
number of shares of Common Stock purchasable under this Warrant or, if
only a portion of this Warrant is being exercised, the portion of this
Warrant being canceled (at the date of such
calculation)
|
|
|
A
=
|
the
fair market value of one share of the Company’s Common Stock (at the date
of such calculation)
|
|
|
B
=
|
Exercise
Price (as adjusted to the date of such
calculation)
|
For
purposes of the above calculation, the “fair market value” of one share of
Common Stock shall mean (i) the average of the closing sales prices for the
shares of Common Stock on the NYSE Amex or other Eligible Market where the
Common Stock is listed or traded as reported by Bloomberg Financial Markets (or
a comparable reporting service of national reputation selected by the Company
and reasonably acceptable to the Holder if Bloomberg Financial Markets is not
then reporting sales prices of such security) (collectively, “Bloomberg”) for the five (5)
consecutive trading days immediately prior to the Exercise Date, or (ii) if the
NYSE Amex is not the principal Trading Market for the shares of Common Stock,
the average of the reported sales prices reported by Bloomberg on the principal
Trading Market for the Common Stock during the same period, or, if there is no
sales price for such period, the last sales price reported by Bloomberg for such
period, or (iii) if neither of the foregoing applies, the last sales price of
such security in the over-the-counter market on the pink sheets or bulletin
board for such security as reported by Bloomberg, or if no sales price is so
reported for such security, the last bid price of such security as reported by
Bloomberg or (iv) if fair market value cannot be calculated as of such date on
any of the foregoing bases, the fair market value shall be as determined by the
Board of Directors of the Company in the exercise of its good faith
judgment.
B-3
2.2 ISSUANCE OF NEW
WARRANTS. Upon any partial exercise of this Warrant, the
Company, at its expense, will forthwith and, in any event within five business
days, issue and deliver to the Holder a new warrant or warrants of like tenor,
registered in the name of the Holder, exercisable during the balance of the
Exercise Period, in the aggregate, for the balance of the number of shares of
Common Stock remaining available for purchase under this Warrant.
2.3 PAYMENT OF TAXES AND
EXPENSES. The Company shall pay any recording, filing, stamp
or similar tax which may be payable in respect of any transfer involved in the
issuance of, and the preparation and delivery of certificates (if applicable)
representing, (i) any Exercise Shares purchased upon exercise of this Warrant
and/or (ii) new or replacement warrants in the Holder’s name or the name of any
transferee of all or any portion of this Warrant; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance, delivery or registration of any
certificates for Exercise Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability
that may arise as a result of holding or transferring this Warrant or receiving
Exercise Shares upon exercise hereof.
2.4 EXERCISE LIMITATIONS;
HOLDER’S RESTRICTIONS. A Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance after
exercise, such Holder (together with such Holder’s affiliates), as set forth on
the applicable Notice of Exercise, would beneficially own in excess of 9.9% of
the number of shares of the Common Stock outstanding immediately after giving
effect to such issuance. For purposes of this Section 2.4, the
number of shares of Common Stock beneficially owned by such Holder and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) exercise of the remaining, nonexercised portion
of this Warrant beneficially owned by such Holder or any of its affiliates and
(B) exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Company (including, without limitation, any other shares
of Common Stock or Warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by such Holder
or any of its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2.4,
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act, it being acknowledged by a Holder that the Company is not
representing to such Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and such Holder is solely responsible for any
schedules required to be filed in accordance therewith. To the extent
that the limitation contained in this Section 2.4 applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of a Holder, and the submission of a
Notice of Exercise shall be deemed to be each Holder’s determination
of whether this Warrant is exercisable (in relation to other securities owned by
such Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 2.4, in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the Company
or the Company’s Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing to such
Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by such Holder or its affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported. The provisions of this Section 2.4 may be
waived by such Holder, at the election of such Holder, upon not less than 61
days’ prior notice to the Company, and the provisions of this Section 2.4 shall
continue to apply until such 61st day (or such later date, as determined by such
Holder, as may be specified in such notice of waiver).
B-4
3. COVENANTS OF THE
COMPANY.
3.1 COVENANTS AS TO EXERCISE
SHARES. The Company covenants and agrees that all Exercise
Shares that may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be validly issued and outstanding, fully paid and
nonassessable, and free from all taxes, liens (other than those imposed by the
Holder) and charges with respect to the issuance thereof. The Company
further covenants and agrees that the Company will at all times during the
Exercise Period, have authorized and reserved, free from preemptive rights, a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant. If at any time during the
Exercise Period the number of authorized but unissued shares of Common Stock
shall not be sufficient to permit exercise of this Warrant, the Company will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
3.2 NO
IMPAIRMENT. Except and to the extent as waived or consented to
by the holder of the Warrants representing at least a majority of the number of
shares of Common Stock then subject to outstanding Warrants, the Company will
not, by amendment of its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such
action as may be necessary or appropriate in order to protect the exercise
rights of the Holder against impairment.
3.3 NOTICES OF RECORD DATE AND
CERTAIN OTHER EVENTS. In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, the Company shall mail to the Holder, at least twenty (20)
days prior to the date on which any such record is to be taken for the purpose
of such dividend or distribution, a notice specifying such date. In
the event of any voluntary dissolution, liquidation or winding up of the
Company, the Company shall mail to the Holder, at least twenty (20) days prior
to the date of the occurrence of any such event, a notice specifying such
date. In the event the Company authorizes or approves, enters into
any agreement contemplating, or solicits stockholder approval for any
Fundamental Transaction, as defined in Section 6 herein, the
Company shall mail to the Holder, at least twenty (20) days prior to the date of
the occurrence of such event, a notice specifying such date.
B-5
4. ADJUSTMENT OF EXERCISE PRICE
AND SHARES.
(A) In
the event of changes in the outstanding Common Stock of the Company by reason of
stock dividends, split-ups, recapitalizations, reclassifications, combinations
or exchanges of shares, separations, reorganizations, liquidations,
consolidation, acquisition of the Company (whether through merger or acquisition
of substantially all the assets or stock of the Company), or the like, the
number, class and type of shares available under this Warrant in the aggregate
and the Exercise Price shall be correspondingly adjusted to give the Holder of
this Warrant, on exercise for the same aggregate Exercise Price, the total
number, class, and type of shares or other property as the Holder would have
owned had this Warrant been exercised prior to the event and had the Holder
continued to hold such shares until the event requiring
adjustment. The form of this Warrant need not be changed because of
any adjustment in the number of Exercise Shares subject to this
Warrant.
(B)
If at any time or from time to time the holders of all outstanding shares of
Common Stock of the Company (or any shares of stock or other securities at the
time receivable upon the exercise of this Warrant) pursuant to a dividend or
distribution declared by the Company (other than a dividend or distribution
covered in Section
4(A) above), shall have received or become entitled to receive, without
payment therefor:
(I) Common
Stock or any shares of stock or other securities which are at any time directly
or indirectly convertible into or exchangeable for Common Stock, or any rights
or options to subscribe for, purchase or otherwise acquire any of the foregoing
by way of dividend or other distribution;
(II) any
cash paid or payable otherwise than as a cash dividend; or
(III) Common
Stock or additional stock or other securities or property (including cash) by
way of spinoff, split-up, reclassification, combination of shares or similar
corporate rearrangement, then and in each such case, the Holder hereof will,
upon the exercise of this Warrant, be entitled to receive, in addition to the
number of shares of Common Stock receivable thereupon, and without payment of
any additional consideration therefor, the amount of stock and other securities
and property (including cash in the cases referred to in clauses (II) and (III)
above) which such Holder would hold on the date of such exercise had such Holder
been the holder of record of such Common Stock as of the date on which holders
of Common Stock received or became entitled to receive such shares or all other
additional stock and other securities and property.
B-6
(C) Upon
the occurrence of each adjustment pursuant to this Section 4, the
Company at its expense will, at the written request of the Holder, promptly
compute such adjustment in accordance with the terms of this Warrant and prepare
a certificate setting forth such adjustment, including a statement of the
adjusted Exercise Price and adjusted number or type of Exercise Shares or other
securities issuable upon exercise of this Warrant (as applicable), describing
the transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the
Company will promptly deliver a copy of each such certificate to the Holder and
to the transfer agent for the Warrants, if other than the
Company.
5. FRACTIONAL
SHARES. No fractional shares shall be issued upon the exercise
of this Warrant as a consequence of any adjustment pursuant
hereto. All Exercise Shares (including fractions) issuable upon
exercise of this Warrant may be aggregated for purposes of determining whether
the exercise would result in the issuance of any fractional
share. If, after aggregation, the exercise would result in the
issuance of a fractional share, the Company shall, in lieu of issuance of any
fractional share, pay the Holder otherwise entitled to such fraction a sum in
cash equal to the product resulting from multiplying the then current fair
market value of an Exercise Share by such fraction.
6. FUNDAMENTAL
TRANSACTIONS. If, at any time while this Warrant is
outstanding, (i) the Company effects any merger of the Company with or into
another entity and the Company is not the surviving entity, (ii) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (iii) any tender offer or exchange offer (whether by the
Company or by another individual or entity and approved by the Company) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares of Common Stock for other securities, cash or property or
(iv) the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (other than
as a result of a subdivision or combination of shares of Common Stock covered by
Section 4
above) (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the
right to receive the number of shares of Common Stock of the successor or
acquiring corporation or of the Company and any additional consideration (the
“Alternate
Consideration”) receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event (disregarding any limitation on exercise
contained herein solely for the purpose of such determination). For
purposes of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. Notwithstanding anything to the
contrary, in the event of a Fundamental Transaction, then the Company or any
successor entity shall at the Holder’s option, exercisable at any time
concurrently with or within thirty (30) days after the consummation of the
Fundamental Transaction, purchase this Warrant from the Holder by paying to the
Holder an amount of cash equal to the value of this Warrant as determined in
accordance with the Black Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg L.P. using (i) a price per share of Common Stock equal to
the Volume-Weighted Average Price of the Common Stock for the Trading Day
immediately preceding the date of consummation of the applicable Fundamental
Transaction, (ii) a risk-free interest rate corresponding to the U.S. Treasury
rate for a period equal to the remaining term of this Warrant as of the date of
consummation of the applicable Fundamental Transaction and (iii) an expected
volatility equal to the lesser of (1) the thirty (30) day volatility obtained
from the “HVT” function on Bloomberg L.P. determined as of the end of the
Trading Day immediately following the public announcement of the applicable
Fundamental Transaction or (2) 70%. The terms of any agreement pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 6 and
ensuring that this Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
B-7
7. NO STOCKHOLDER
RIGHTS. Other than as provided in Section 3.3 or
otherwise herein, this Warrant in and of itself shall not entitle the Holder to
any voting rights or other rights as a stockholder of the Company.
8. TRANSFER OF
WARRANT. Subject to applicable laws and the restriction on
transfer set forth in the Subscription Agreement, this Warrant and all rights
hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder. The transferee shall
sign an investment letter in form and substance reasonably satisfactory to the
Company and its counsel. Any proposed transfer of all or any portion of this
Warrant in violation of the provisions of this warrant or the Subscription
Agreement shall be null and void. Upon surrender of this Warrant and
delivery of an assignment, the Company shall execute and deliver a new Warrant
or Warrants in the name of the transferee or transferees, as applicable, and in
the denomination or denominations specified in such instrument of assignment,
and shall issue to the transferor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled.
9. LOST, STOLEN, MUTILATED OR
DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated
or destroyed, the Company may, on such terms as to indemnity or otherwise as it
may reasonably impose (which shall, in the case of a mutilated Warrant, include
the surrender thereof), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall
constitute an original contractual obligation of the Company.
10. NOTICES,
ETC. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to
the Company at the address listed on the signature page hereto and to Holder at
the applicable address set forth on the applicable signature page to
the Subscription Agreement or at such other address as the Company or Holder may
designate by ten (10) days advance written notice to the other parties
hereto.
B-8
11. ACCEPTANCE. Receipt
of this Warrant by the Holder shall constitute acceptance of and agreement to
all of the terms and conditions contained herein.
12. GOVERNING
LAW. This Warrant and all rights, obligations and liabilities
hereunder shall be governed by, and construed in accordance with, the internal
laws of the State of New York, without giving effect to the principles of
conflicts of law that would require the application of the laws of any other
jurisdiction.
13. AMENDMENT OR
WAIVER. Any term of this Warrant may be amended or waived
(either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of the
Warrants representing at least two-thirds of the number of shares of Common
Stock then subject to outstanding Warrants. Notwithstanding the
foregoing, (a) this Warrant may be amended and the observance of any term
hereunder may be waived without the written consent of the Holder only in a
manner which applies to all Warrants in the same fashion and (b) the number of
Exercise Shares subject to this Warrant and the Exercise Price of this Warrant
may not be amended, and the right to exercise this Warrant may not be waived,
without the written consent of the Holder. The Company shall give
prompt written notice to the Holder of any amendment hereof or waiver hereunder
that was effected without the Holder’s written consent. No waivers of
any term, condition or provision of this Warrant, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
[REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK]
B-9
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly
authorized officer as of December __, 2010.
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AMERICAN
DG ENERGY INC.
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By:
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Name:
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Title:
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B-10
NOTICE OF
EXERCISE
TO: AMERICAN
DG ENERGY INC.
(1) [_] The
undersigned hereby elects to purchase [__________] shares of the common stock,
par value $0.001 (the “Common
Stock”), of AMERICAN DG ENERGY INC. (the “Company”) pursuant to the
terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
[_] The
undersigned hereby elects to purchase [___________] shares of Common Stock of
the Company pursuant to the terms of the net exercise provisions set forth in
Section 2.1 of
the attached Warrant, and shall tender payment of all applicable transfer taxes,
if any.
(2) Please
issue the certificate for shares of Common Stock in the name of, and pay any
cash for any fractional share to:
Print or
type name
Social
Security or other Identifying Number
Street
Address
City
State Zip Code
(3) If
such number of shares shall not be all the shares purchasable upon the exercise
of the Warrants evidenced by this Warrant, a new warrant certificate for the
balance of such Warrants remaining unexercised shall be registered in the name
of and delivered to:
Please
insert social security or other identifying
number: ___________________________
(Please
print name and address)
Dated:
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(Signature)
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(Print
name)
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B-11
ASSIGNMENT
FORM
(To
assign the foregoing Warrant, execute this form and supply required
information. Do not use this form to purchase shares.)
FOR VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
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Name:
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(Please
Print)
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Address:
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(Please
Print)
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Dated:
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Holder’s Signature:
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Holder’s Address:
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NOTE: The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
B-12
Exhibit
C
Pricing
Information
Price per
Unit: $2.50
Units: 500,000,
each Unit consisting of one share of Common Stock and a Warrant to purchase one
share of Common Stock
Warrants: exercisable
for $3.25 per share beginning six months from the date of issuance for a period
of five years from the date they become exercisable
C-1
Exhibit
D
Form
of Lock-Up Agreement
November__,
2010
CANACCORD
GENUITY INC.
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Re: American DG Energy Inc.
Offering of Common Stock
Dear
Sirs:
In order
to induce Canaccord Genuity Inc. (“Canaccord”) to enter in to a
certain placement agency agreement (the “Placement Agreement”) with
American DG Energy Inc., a Delaware corporation (the “Company”), with respect to the
public offering (the “Offering”) of shares of the
Company’s Common Stock, par value $0.001 per share (“Common Stock”), the
undersigned hereby agrees that for a period of ninety (90) days following the
date of the Placement Agreement (the “lock-up period”), the
undersigned will not, without the prior written consent of Canaccord, directly
or indirectly, (i) offer, sell, assign, transfer, pledge, contract to sell,
or otherwise dispose of, or announce the intention to otherwise dispose of, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (including, without limitation, shares of Common
Stock or any such securities which may be deemed to be beneficially owned by the
undersigned in accordance with the rules and regulations promulgated under the
Securities Act of 1933, as the same may be amended or supplemented from time to
time (such shares or securities, the “Beneficially Owned Shares”),
(ii) enter into any swap, hedge or other agreement or arrangement that transfers
in whole or in part, the economic risk of ownership of any Beneficially Owned
Shares, Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock, or (iii) engage in any short selling of any
Beneficially Owned Shares, Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock.
If
(i) the Company issues an earnings release or material news or a material
event relating to the Company occurs during the last seventeen (17) days of
the lock-up period, or (ii) prior to the expiration of the lock-up period,
the Company announces that it will release earnings results during the sixteen
(16)-day period beginning on the last day of the lock-up period, the
restrictions imposed by this Agreement shall continue to apply until the
expiration of the eighteen (18)-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event,
unless in either case Canaccord waives such provision in
writing.
D-1
Notwithstanding
the foregoing, the undersigned may transfer Beneficially Owned Shares (i) as a
bona fide gift or gifts, (ii) to any trust for the direct or indirect benefit of
the undersigned or the immediate family of the undersigned, or (iii) by will or
intestate succession; provided, that in the case of each of clauses (i), (ii)
and (iii) above, (A) each donee, transferee or distributee shall execute and
deliver a letter substantially in the form hereof agreeing to be bound by the
terms hereof and (B) neither the undersigned nor any other party to the
applicable transaction shall be required to file, or voluntarily file, a report
under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), other than a filing on Form 5 made after the expiration of the
lock-up period, or, where the undersigned is required to file a report under
Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership
of Common Stock during the lock-up period (as the same may be extended as
described above), only if the undersigned shall include a statement in such
report to the effect that such transfer or distribution is not a transfer for
value and, that such transfer is being made as a gift or by will or intestacy,
as the case may be. For purposes of this agreement, the term
“immediate family” shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin.
In
addition, notwithstanding the foregoing, the restrictions set forth herein shall
not apply to the establishment of a trading plan that complies with Rule 10b5-1
under the Exchange Act; provided however, that the
restrictions shall apply in full force such that no sales will be made pursuant
to a trading plan during the lock-up period.
In
addition, the undersigned hereby waives, from the date hereof until the
expiration of the lock-up period, any and all rights, if any, to request or
demand registration pursuant to the Securities Act of 1933, as amended, of any
shares of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock that are registered in the name of the undersigned
or that are Beneficially Owned Shares. In order to enable the aforesaid
covenants to be enforced, the undersigned hereby consents to the placing of
legends and/or stop-transfer orders with the transfer agent of the Common Stock
with respect to any shares of Common Stock, securities convertible into or
exercisable or exchangeable for Common Stock or Beneficially Owned Shares owned
by the undersigned.
Notwithstanding
anything to the contrary contained herein, in the event that the Offering is not
consummated on or before December 31, 2010, then the terms of this Agreement
shall be of no further force and effect.
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Name:
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D-2