TORCHLIGHT ENERGY RESOURCES, INC. UNDERWRITING AGREEMENT
EXHIBIT
1.1
TORCHLIGHT ENERGY RESOURCES, INC.
January
14, ▇▇▇▇
▇▇▇▇▇
Capital Corp.
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
As Representative of
the
Several Underwriters Named
on Schedule I hereto
Ladies
and Gentlemen:
The
undersigned, Torchlight Energy Resources, Inc., a company
incorporated under the laws of Nevada (collectively with its
subsidiaries and affiliates, including, without limitation, all
entities disclosed or described in the Registration Statement as
being subsidiaries or affiliates of Torchlight Energy Resources,
Inc., the “Company”), hereby
confirms its agreement (this “Agreement”) with the
several underwriters (such underwriters, including the
Representative, the “Underwriters” and each an
“Underwriter”) named
in Schedule
I hereto for which Aegis Capital Corp. is acting as
representative (the “Representative,” and if
there are no Underwriters other than the Representative, references
to multiple Underwriters shall be disregarded and the term
Representative as used herein shall have the same meaning as
Underwriter) on the terms and conditions set forth herein.
It is
understood that the several Underwriters are to make a public
offering of the Public Shares as soon as the Representative deems
it advisable to do so. The Public Shares are to be initially
offered to the public at the initial public offering price set
forth in the Prospectus Supplement.
It is
further understood that you will act as the Representative for the
Underwriters in the offering and sale of the Closing Shares and, if
any, the Option Shares in accordance with this
Agreement.
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
“Action” shall have the
meaning ascribed to such term in Section 3.1(k).
“Affiliate” means with
respect to any Person, any other Person that, directly or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such Person as such
terms are used in and construed under Rule 405 under the Securities
Act.
“Board of Directors” means
the board of directors of the Company.
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“Closing” means the
closing of the purchase and sale of the Closing Shares pursuant to
Section 2.1 or the Option Shares pursuant to Section
2.2.
“Closing Date” means, with
respect to the Closing Shares, the second (or if the Closing
Shares are priced, as contemplated by Rule 15c6-1(c) under the
Exchange Act, after 4:30 p.m. Eastern time, the third) full
Business Day following the date hereof, or at such other time and
date as the Representative and the Company determine pursuant to
Rule 15c6-1(a) under the Exchange
Act.
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“Closing Purchase Price”
shall have the meaning ascribed to such term in Section 2.1(b),
which aggregate purchase price shall be net of the underwriting
discounts and commissions.
“Closing Shares” shall
have the meaning ascribed to such term in Section
2.1(a).
“Code” means the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
common stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
“Company Auditor” means
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Co., with offices located at ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
#▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
“Company Counsel” means
▇▇▇▇▇▇▇ & ▇▇▇▇▇, with offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
“Effective Date” shall
have the meaning ascribed to such term in Section
3.1(f).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Execution Date” shall
mean the date on which the parties execute and enter into this
Agreement.
“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.
“FINRA” means the
Financial Industry Regulatory Authority.
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(i).
“Indebtedness” means (a)
any liabilities for borrowed money or amounts owed in excess of
$50,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of indebtedness of others,
whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (c) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP.
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Lock-Up Agreements” means
the lock-up agreements that are delivered on the date hereof by
each of the Company’s officers and directors, in the form of
Exhibit A attached
hereto.
“Material Adverse Effect”
means (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business, prospects or
condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole or (iii) a material adverse effect
on the Company’s ability to perform in any material respect
on a timely basis its obligations under any Transaction
Document.
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“NMRS” means ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Scarborough LLP, with offices located at ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇.
“Offering” shall have the
meaning ascribed to such term in Section 2.1(c).
“Option” shall have the
meaning ascribed to such term in Section 2.2(a).
“Option Closing Date”
shall have the meaning ascribed to such term in Section
2.2(c).
“Option Closing Purchase
Price” shall have the meaning ascribed to such term in
Section 2.2(b), which aggregate purchase price shall be net of the
underwriting discounts and commissions.
“Option Shares” shall have
the meaning ascribed to such term in Section 2.2(a).
“Permitted Free Writing
Prospectus” shall have the meaning ascribed to such
term in Section 4.2(d).
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Preliminary Prospectus
Supplement” means, if any, any preliminary prospectus
relating to the Public Shares included in the Registration
Statement or filed with the Commission pursuant to Rule
424(b).
“Proceeding” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
“Prospectus” means the
base prospectus, dated September 28, 2017, which is a part of the
Registration Statement.
“Prospectus Supplement”
means the final prospectus supplement to the Prospectus to be used
in connection with the Offering filed or to be filed with the
Commission pursuant to Rule 424(b) of the Securities
Act.
“Public Shares” means,
collectively, the Closing Shares and, if any, the Option
Shares.
“Registration Statement”
means, collectively, the various parts of the registration
statement prepared by the Company on Form S-3 (File No. 333-220181)
with respect to the Public Shares, each as amended as of the date
hereof, including the Prospectus and the Prospectus Supplement, if
any, the Preliminary Prospectus Supplement, if any, and all
exhibits filed with or incorporated by reference into such
registration statement.
“Required Approvals” shall
have the meaning ascribed to such term in Section
3.1(e).
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“SEC Reports” shall have
the meaning ascribed to such term in Section 3.1(i).
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Share Purchase Price”
shall have the meaning ascribed to such term in Section
2.1(b).
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“Subsidiary” means any
subsidiary of the Company and shall, where applicable, also include
any direct or indirect subsidiary of the Company formed or acquired
after the date hereof.
“Trading Day” means a day
on which the principal Trading Market is open for
trading.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing).
“Transaction Documents”
means this Agreement, the Lock-Up Agreements, and any other
documents or agreements executed in connection with the
transactions contemplated hereunder.
“Transfer Agent” means
American Stock Transfer & Trust Company , LLC, the current
transfer agent of the Company, with a mailing address of ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and any successor transfer agent of the
Company.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
(a) Upon
the terms and subject to the conditions set forth herein, the
Company agrees to sell in the aggregate 3,285,715 shares of Common
Stock, and each Underwriter agrees to purchase, severally and not
jointly, at the Closing, the number of shares of Common Stock (the
“Closing
Shares”) set forth opposite the name of such
Underwriter on Schedule I hereof;
and
(b) The
aggregate purchase price for the Closing Shares shall equal the sum
of the amounts set forth opposite the name of each Underwriter
on Schedule
I hereto (the “Closing Purchase Price”).
The price for one Closing Share shall be $0.644 (the
“Share Purchase
Price”); and
(c)
At the Closing, the Representative shall deliver or cause to be
delivered to the Company, via wire transfer, immediately available
funds equal to the Closing Purchase Price, against delivery of the
certificates for the Closing Shares to the Representative through
the facilities of The Depository Trust Company for the respective
accounts of the Underwriters, and the Company shall deliver the
other items required pursuant to Section 2.3 deliverable at the
Closing. Upon satisfaction of the covenants and conditions set
forth in Sections 2.3 and 2.4, the Closing shall occur at the
offices of NMRS or such other location as the Company and
Representative shall mutually agree. The Public Shares are to be
offered initially to the public at the offering price set forth on
the cover page of the Prospectus Supplement (the
“Offering”).
2.2 Option
to Purchase Additional Shares.
(a) The
Representative is hereby granted an option (the “Option”) to purchase, in
the aggregate, up to 492,857 shares of Common Stock (the
“Option
Shares”) which may be purchased at the Share Purchase
Price, solely for the purpose of covering over-allotments, if
any.
(b) In
connection with an exercise of the Option, the purchase price to be
paid for the Option Shares shall be equal to the product of the
Share Purchase Price multiplied by the number of Option Shares to
be purchased (the aggregate purchase price to be paid on an Option
Closing Date, the “Option Closing Purchase
Price”).
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(c) The
Option granted pursuant to this Section 2.2 may be exercised by the
Representative as to all (at any time) or any part (from time to
time) of the Option Shares within 45 days after the Execution Date.
An Underwriter will not be under any obligation to purchase any
Option Shares prior to the exercise of the Option by the
Representative. The Option granted hereby may be exercised by the
giving of oral notice to the Company from the Representative, which
must be confirmed in writing by overnight mail or facsimile or
other electronic transmission setting forth the number of Option
Shares to be purchased and the date and time for delivery of and
payment for the Option Shares (each, an “Option Closing Date”),
which will not be later than two (2) full Trading Days after the
date of the notice or such other time as shall be agreed upon by
the Company and the Representative, at the offices of NMRS or at
such other place (including remotely by facsimile or other
electronic transmission) as shall be agreed upon by the Company and
the Representative. Upon exercise of the Option, the Company will
become obligated to convey to the Underwriters, and, subject to the
terms and conditions set forth herein, the Underwriters will become
obligated to purchase, the number of Option Shares specified in
such notice. The Representative may cancel the Option at any time
prior to the expiration of the Option by written notice to the
Company.
2.3 Deliveries.
The Company shall deliver or cause to be delivered to the
Representative the following:
(i) At
the Closing Date, the Closing Shares and, as to each Option Closing
Date, if any, the applicable Option Shares, which shares shall be
delivered via The Depository Trust Company Deposit or Withdrawal at
Custodian system for the accounts of the several
Underwriters;
(ii) At
the Closing Date, a legal opinion of Company Counsel addressed to
the Underwriters, including a negative assurance statement, in each
case, in form and substance reasonably satisfactory to the
Representative and as to each Option Closing Date, if any, a
bring-down legal opinion of Company Counsel addressed to the
Underwriters, and a negative assurance letter, in each case, in
form and substance reasonably satisfactory to the
Representative;
(iii) Contemporaneously
herewith, a cold comfort letter, addressed to the Underwriters and
in form and substance reasonably satisfactory in all respects to
the Representative from the Company Auditor dated, respectively, as
of the date of this Agreement and a bring-down letter dated as of
the Closing Date and each Option Closing Date, if any;
(iv) On
the Closing Date and on each Option Closing Date, the duly executed
and delivered Officer’s Certificate, in form and substance
reasonably satisfactory in all respects to the
Representative;
(v) On
the Closing Date and on each Option Closing Date, the duly executed
and delivered Secretary’s Certificate, in form and substance
reasonably satisfactory in all respects to the Representative;
and
(vi) Contemporaneously
herewith, the duly executed and delivered Lock-Up
Agreements.
2.4 Closing
Conditions. The respective obligations of each Underwriter
hereunder in connection with the Closing and each Option Closing
Date are subject to the following conditions being met, unless
waived by the Representative:
(i) the
accuracy in all material respects when made and on the date in
question (other than representations and warranties of the Company
already qualified by materiality, which shall be true and correct
in all respects) of the representations and warranties of the
Company contained herein (unless as of a specific date
therein);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the date in question shall have been
performed;
(iii) the
delivery by the Company of the items set forth in Section 2.3 of
this Agreement;
(iv) the
Registration Statement shall be effective on the date of this
Agreement and at each of the Closing Date and each Option Closing
Date, if any, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings
for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with
to the reasonable satisfaction of the Representative;
(v) by
the Execution Date, if required by FINRA, the Underwriters shall
have received a “no-objection” letter from FINRA as to
the amount of compensation payable to the Underwriters as described
in the Registration Statement;
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(vi) the
Closing Shares and the Option Shares have been approved for listing
on the Trading Market;
(vii) on
each Closing Date, the Reserve Engineer (as defined below) shall
have furnished to the Underwriter, letters, dated the respective
dates of delivery thereof and addressed to the Underwriter, in form
and substance reasonably satisfactory to the Underwriter,
containing statements and information of the type customarily
included in reserve engineers’ “confirmation
letters” to underwriters with respect to the reserve reports,
estimates of proved reserves and other reserve information included
in the Registration Statement and the Prospectus; and
(viii) prior
to and on the Closing Date and each Option Closing Date, if any:
(i) except as set forth in the Registration Statement, the
Prospectus, the Preliminary Prospectus Supplement and the
Prospectus Supplement, there shall have been no material adverse
change in the condition or the business activities, financial or
otherwise, of the Company; (ii) no action, suit or proceeding,
at law or in equity, shall be pending or threatened against the
Company or any Affiliate of the Company before or by any court or
federal or state commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially
adversely affect the business, operations, prospects or financial
condition of the Company, except as set forth in the Registration
Statement, the Prospectus, the Preliminary Prospectus Supplement
and the Prospectus Supplement; (iii) no stop order shall have
been issued under the Securities Act and no proceedings therefor
shall have been initiated or threatened by the Commission; and
(iv) the Registration Statement, the Prospectus, the
Preliminary Prospectus Supplement and the Prospectus Supplement
shall contain all material statements which are required to be
stated therein in accordance with the Securities Act and the rules
and regulations thereunder and shall conform in all material
respects to the requirements of the Securities Act and the rules
and regulations thereunder, and none of the Registration Statement,
the Prospectus, the Preliminary Prospectus Supplement or the
Prospectus Supplement shall contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. The Company represents and
warrants to the Underwriters as of the Execution Date, as of the
Closing Date and as of each Option Closing Date, if any, as
follows:
(a) Subsidiaries.
All of the direct and indirect Subsidiaries of the Company are set
forth in the SEC Reports. Except as otherwise set forth in the
Registration Statement, the Prospectus, the Preliminary Prospectus
Supplement and the Prospectus Supplement, the Company owns,
directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all
of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights to subscribe for or
purchase securities. If the Company has no Subsidiaries, all other
references to the Subsidiaries or any of them in the Transaction
Documents shall be disregarded.
(b) Organization
and Qualification. The Company and each of the Subsidiaries
is an entity organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, with the
requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither
the Company nor any Subsidiary is in violation or default of any of
the provisions of its respective organizational documents. Each of
the Company and the Subsidiaries is duly qualified to conduct
business and is in good standing as a foreign entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not have or reasonably be expected to result in
a Material Adverse Effect and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking
to revoke, limit or curtail such power and authority or
qualification.
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(c) Authorization;
Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction
Documents to which it is a party and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of
this Agreement and each of the other Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company and no further
corporate action is required by the Company, the Board of Directors
or the Company’s shareholders in connection herewith or
therewith other than in connection with the Required Approvals.
This Agreement and each other Transaction Document to which the
Company is a party has been (or upon delivery will have been) duly
executed by the Company and, assuming they have been duly and
properly executed by the other parties thereto, when delivered in
accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(d) No
Conflicts. The execution, delivery and performance by the
Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Public Shares and
the consummation by it of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time
or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment,
anti-dilution or similar adjustments, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.
(e) Filings,
Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other
than: (i) the filing with the Commission of the Preliminary
Prospectus Supplement and the Prospectus Supplement, (ii) such
consents, approvals, authorizations, orders and registrations or
qualifications as may be required by FINRA and the Trading Market,
and (iii) such filings as are required to be made under applicable
state securities laws (collectively, the “Required
Approvals”).
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(f) Registration
Statement. The Company has filed with the Commission the
Registration Statement under the Securities Act, which became
effective on September 28, 2017 (the “Effective Date”), for the
registration under the Securities Act of the Public Shares. At the
time of such filing, the Company met the requirements of Form S-3
under the Securities Act. The Registration Statement meets the
requirements set forth in Rule 415(a)(1)(x) under the Securities
Act and complies with said Rule and the Prospectus Supplement will
meet the requirements set forth in Rule 424(b). The Company has
advised the Representative of all further information (financial
and otherwise) with respect to the Company required to be set forth
in the Registration Statement and Prospectus Supplement. Any
reference in this Agreement to the Registration Statement, the
Prospectus, the Preliminary Prospectus Supplement or the Prospectus
Supplement shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Exchange Act, on or before the date of
this Agreement, or the issue date of the Prospectus, the
Preliminary Prospectus Supplement or the Prospectus Supplement, as
the case may be; and any reference in this Agreement to the terms
“amend,” “amendment” or
“supplement” with respect to the Registration
Statement, the Prospectus, the Preliminary Prospectus Supplement or
the Prospectus Supplement shall be deemed to refer to and include
the filing of any document under the Exchange Act after the date of
this Agreement, or the issue date of the Prospectus, the
Preliminary Prospectus Supplement or the Prospectus Supplement, as
the case may be, deemed to be incorporated therein by reference.
All references in this Agreement to financial statements and
schedules and other information which is “contained,”
“included,” “described,”
“referenced,” “set forth” or
“stated” in the Registration Statement, the Prospectus,
the Preliminary Prospectus Supplement or the Prospectus Supplement
(and all other references of like import) shall be deemed to mean
and include all such financial statements and schedules and other
information which is or is deemed to be incorporated by reference
in the Registration Statement, the Prospectus, the Preliminary
Prospectus Supplement or the Prospectus Supplement, as the case may
be. No stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus, the Preliminary Prospectus
Supplement or the Prospectus Supplement has been issued, and no
proceeding for any such purpose is pending or has been initiated
or, to the Company’s knowledge, is threatened by the
Commission. For purposes of this Agreement, “free writing
prospectus” has the meaning set forth in Rule 405 under the
Securities Act. The Company will not, without the prior consent of
the Representative, prepare, use or refer to, any free writing
prospectus.
(g) Issuance
of Public Shares. The Public Shares are duly authorized and,
when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the
Company. The Public Shares conform in all material respects
to all statements with respect thereto contained in the
Registration Statement.
(h) Capitalization.
The capitalization of the Company at September 30, 2019 is as set
forth in the SEC Reports. Except as referenced in the SEC Reports,
since September 30, 2019 the Company has issued no shares of common
stock other than the issuance by the Company of 600,000 shares of
common stock on January 6, 2020 to an individual investor for a
total purchase price of $360,000, in a private offering, along with
the issuance to that investor a five-year warrant to purchase
600,000 shares of common stock at an exercise price of $0.80 per
share. Since September 30, 2019 through the date hereof, the
Company has issued and sold no shares of Common Stock pursuant to
the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic
report under the Exchange Act or as set forth in any Current Report
on Form 8-K. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.
Except (i) as set forth in the SEC Reports, (ii) 600,000 stock
options issued by the Company to certain directors pursuant to the
Company’s existing stock option plan and (iii) the warrants
issued by the Company to an investor in connection with the January
6, 2020 private placement transaction referenced above, there are
no outstanding options, warrants, scrip rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe
for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents. The issuance and sale of
the Public Shares will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the
Underwriters). Except as set forth in the SEC Reports, there are no
outstanding securities or instruments of the Company or any
Subsidiary with any provision that adjusts the exercise,
conversion, exchange or reset price of such security or instrument
upon an issuance of securities by the Company or any Subsidiary.
All of the outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid and nonassessable, have
been issued in compliance with all federal and state securities
laws, and none of such outstanding shares was issued in violation
of any preemptive rights or similar rights to subscribe for or
purchase securities. The authorized shares of the Company conform
in all material respects to all statements relating thereto
contained in the Registration Statement and the Prospectus. The
offers and sales of the Company’s securities were at all
relevant times either registered under the Securities Act and the
applicable state securities or Blue Sky laws or, based in part on
the representations and warranties of the purchasers, exempt from
such registration requirements. Except for the Required Approvals,
no further approval or authorization of any stockholder, the Board
of Directors or others is required for the issuance and sale of the
Public Shares. Except as set forth in the SEC Reports, there are no
stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s
stockholders.
8
(i) SEC
Reports; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period
as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, together with the
Prospectus, the Preliminary Prospectus Supplement and the
Prospectus Supplement, being collectively referred to herein as the
“SEC
Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted 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. The Company has not
been an issuer subject to Rule 144(i) under the Securities Act in
the past 12 months. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles
(“GAAP”), applied on a
consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. The agreements and
documents described in the Registration Statement and the SEC
Reports conform in all material respects to the descriptions
thereof contained therein and there are no agreements or other
documents required by the Securities Act and the rules and
regulations thereunder to be described in the Registration
Statement or the SEC Reports or to be filed with the Commission as
exhibits to the Registration Statement, that have not been so
described or filed. Each agreement or other instrument (however
characterized or described) to which the Company is a party or by
which it is or may be bound or affected and (i) that is
referred to in the Registration Statement or the SEC Reports, or
(ii) is material to the Company’s business, has been
duly authorized and validly executed by the Company, is in full
force and effect in all material respects and is enforceable
against the Company and, to the Company’s knowledge, the
other parties thereto, in accordance with its terms, except
(x) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting
creditors’ rights generally, (y) as enforceability of
any indemnification or contribution provision may be limited under
the federal and state securities laws, and (z) that the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefore may
be brought. None of such agreements or instruments has been
assigned by the Company, and neither the Company nor, to the best
of the Company’s knowledge, any other party is in default
thereunder and, to the best of the Company’s knowledge, no
event has occurred that, with the lapse of time or the giving of
notice, or both, would constitute a default thereunder. To the best
of the Company’s knowledge, performance by the Company of the
material provisions of such agreements or instruments will not
result in a violation of any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or
court, domestic or foreign, having jurisdiction over the Company or
any of its assets or businesses, including, without limitation,
those relating to environmental laws and regulations, except for
such violations that would not reasonably be expected to result in
a Material Adverse Effect.
9
(j) Material
Changes; Undisclosed Events, Liabilities or Developments.
Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in the
Registration Statement or a subsequent SEC Report filed prior to
the date hereof, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the ordinary course
of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock, (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans or as set forth in
a Current Report on Form 8-K and (vi) no officer or director of the
Company has resigned from any position with the Company. The
Company does not have pending before the Commission any request for
confidential treatment of information. Except for the issuance of
the Public Shares contemplated by this Agreement, no event,
liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, prospects, properties, operations, assets or financial
condition that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is
made or deemed made that has not been publicly disclosed at least
one (1) Trading Day prior to the date that this representation is
made.
(k) Litigation.
There is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Public
Shares or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect.
Except as set forth in the SEC Reports, neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the knowledge
of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or, to the
Company’s knowledge, any current or former director or
officer of the Company.
(l) Labor
Relations. No labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a
Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates
to such employee’s relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and
its Subsidiaries believe that their relationships with their
employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the
continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all applicable U.S. federal,
state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(m) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material
Adverse Effect.
10
(n) Environmental
Laws. Except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the
Company nor any of the Subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products, asbestos-containing materials,
mold or any hazardous materials as defined by or regulated under
any Environmental Laws, as defined below (collectively,
“Hazardous
Materials”) or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials (collectively, “Environmental Laws”), (B)
the Company and the Subsidiaries have all permits, authorizations
and approvals required under any applicable Environmental Laws and
are each in compliance with their requirements, and (C) there are
no pending or known threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of the
Subsidiaries.
(o) Regulatory
Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits could not
reasonably be expected to result in a Material Adverse Effect
(each, a “Material
Permit”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation
or modification of any Material Permit. The disclosures in the
Registration Statement concerning the effects of Federal, State,
local and all foreign regulation on the Company’s business as
currently contemplated are correct in all material
respects.
(p) Title
to Personal Property. Each of
the Company and the Subsidiaries have good and marketable title to all of its
assets and personal property owned by it, free and clear of
all liens, encumbrances and
defects, except such as are described in the Registration
Statement, the Prospectus, the
Preliminary Prospectus Supplement and
the Prospectus Supplement or
such as do not 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 and the
Subsidiaries; and all assets and
personal property held under lease by the Company and the
Subsidiaries are held by it under
valid, subsisting and enforceable leases, with such exceptions as
do not materially interfere with the use made and proposed to be
made of such assets by the Company and the Subsidiaries
and the Company does not have notice
of any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company and the Subsidiaries
under any such leases or affecting or
questioning the rights of the Company and the Subsidiaries
to be in the continued possession of
the leased premises under such leases.
(q) Mortgages;
Deeds of Trust. Except as
described in the Registration Statement, the Prospectus, the Preliminary
Prospectus Supplement and the
Prospectus Supplement, the Company has
not issued any debt and has no debt outstanding. Except as
described in the Registration Statement, the Prospectus, the
Preliminary Prospectus Supplement, the Prospectus Supplement and
the SEC Reports, none of the properties owned by the Company or
the Subsidiaries is encumbered
by any credit agreements, mortgages, deeds of trust, guaranties,
side letters, and other documents evidencing, securing or otherwise
relating to any secured or unsecured indebtedness
of the Company or any of the
Subsidiaries.
11
(r) Intellectual
Property. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or required for use in
connection with their respective businesses as described in the SEC
Reports and which the failure to do so could have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”). None of, and neither the Company nor any
Subsidiary has received a written notice that any of, the
Intellectual Property Rights has expired, terminated or been
abandoned, or is expected to expire or terminate or be abandoned,
within two (2) years from the date of this Agreement, except as
could not, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect. Neither the Company nor
any Subsidiary has received, since the date of the latest audited
financial statements included within the SEC Reports, a written
notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of
any Person, except as could not, individually or in the aggregate,
have or reasonably be expected to have a Material Adverse Effect.
To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights, except
as could not, individually or in the aggregate, have or reasonably
be expected to have a Material Adverse Effect. The Company and the
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(s) Insurance.
The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage.
Neither the Company nor any Subsidiary has any reason to believe
that it will not be able to renew its 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
without a significant increase in cost.
(t) Transactions
With Affiliates and Employees. Except as set forth in the
Registration Statement and the SEC Reports, none of the officers or
directors of the Company or any Subsidiary and, to the knowledge of
the Company, none of the employees of the Company or any Subsidiary
is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, providing for the
borrowing of money from or lending of money to or otherwise
requiring payments to or from, any officer, director or such
employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(u) Certain
Fees. Except as set forth in the Preliminary Prospectus
Supplement and the Prospectus Supplement, no brokerage or
finder’s fees or commissions are or will be payable by the
Company, any Subsidiary or Affiliate of the Company to any broker,
financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. To the
Company’s knowledge, there are no other arrangements,
agreements or understandings of the Company or, to the
Company’s knowledge, any of its stockholders that may affect
the Underwriters’ compensation, as determined by FINRA. The
Company has not made any direct or indirect payments (in cash,
securities or otherwise) in connection with the offering of the
Public Shares to: (i) any person, as a finder’s fee,
consulting fee or otherwise, in consideration of such person
raising capital for the Company or introducing to the Company
persons who raised or provided capital to the Company; (ii)
any FINRA member; or (iii) any person or entity that has any
direct or indirect affiliation or association with any FINRA
member, within the twelve months prior to the Execution Date. None
of the net proceeds of the Offering will be paid by the Company to
any participating FINRA member or its affiliates, except as
specifically authorized herein.
(v) Investment
Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Public Shares will not
be or be an Affiliate of, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that
it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as
amended.
12
(w) Registration
Rights. No Person has any right to cause the Company or any
Subsidiary to effect the registration under the Securities Act of
any securities of the Company or any Subsidiary that has not
previously been waived or satisfied.
(x) Listing
and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. Except as set forth in the SEC Reports, the Company
has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has
been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such
Trading Market. The Common Stock is currently eligible for
electronic transfer through the Depository Trust Company or another
established clearing corporation and the Company is current in
payment of the fees of the Depository Trust Company (or such other
established clearing corporation) in connection with such
electronic transfer.
(y) No
Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would cause this offering of the Public Shares to be integrated
with prior offerings by the Company for purposes of any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.
(z) Solvency.
The SEC Reports sets forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments.
(aa) Payment
of Taxes. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i)
has made or filed all United States federal, state and local income
and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside
on its books provision reasonably adequate for the payment of all
material taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company or of any
Subsidiary know of no basis for any such claim. The provisions for
taxes payable, if any, shown on the financial statements filed with
or as part of the Registration Statement are sufficient for all
accrued and unpaid taxes, whether or not disputed, and for all
periods to and including the dates of such consolidated financial
statements. The term “taxes” mean all federal, state,
local, foreign, and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or
charges of any kind whatsoever, together with any interest and any
penalties, additions to tax, or additional amounts with respect
thereto. The term “returns” means all returns,
declarations, reports, statements, and other documents required to
be filed in respect to taxes.
(bb) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary, has
(i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) which is
in violation of law, or (iv) violated in any material respect any
provision of the FCPA. The Company has taken reasonable steps to
ensure that its accounting controls and procedures are sufficient
to cause the Company to comply in all material respects with the
FCPA.
13
(cc) Accountants.
To the knowledge and belief of the Company, the Company Auditor (i)
is an independent registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to
the financial statements to be included in the Company’s
Annual Report for the fiscal year ending December 31, 2019. The
Company Auditor has not, during the periods covered by the
financial statements included in the SEC Reports, provided to the
Company any non-audit services, as such term is used in Section
10A(g) of the Exchange Act.
(dd) Office
of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company’s knowledge, any director,
officer, agent, employee or affiliate of the Company or any
Subsidiary is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Treasury
Department.
(ee) U.S.
Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon the
Representative’s request.
(ff) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent (25%) or more
of the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(gg) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (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 or any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any
Subsidiary, threatened.
(hh) D&O
Questionnaires. To the Company’s knowledge, all
information contained in the questionnaires completed by each of
the Company’s directors and officers immediately prior to the
Offering is true and correct in all respects and the Company has
not become aware of any information which would cause the
information disclosed in such questionnaires become inaccurate and
incorrect.
(ii) FINRA
Affiliation. No officer, director or, to the Company’s
knowledge, any beneficial owner of 5% or more of the
Company’s unregistered securities has any direct or indirect
affiliation or association with any FINRA member (as determined in
accordance with the rules and regulations of FINRA) that is
participating in the Offering.
(jj) Officers’
Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to the Representative or NMRS
shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(kk) Board
of Directors. The Board of Directors is comprised of the
persons set forth in the Company’s latest Form 10-K included
within the SEC Reports under the heading captioned “Item 10.
Directors, Executive Officers and Corporate Governance.” To
the Company’s knowledge, the qualifications of the persons
serving as board members and the overall composition of the Board
of Directors comply with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the
rules promulgated thereunder applicable to the Company and the
rules of the Trading Market. At least one member of the Board of
Directors qualifies as a “financial expert” as such
term is defined under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules
promulgated thereunder and the rules of the Trading Market. In
addition, at least a majority of the persons serving on the Board
of Directors qualify as “independent” under the rules
of the Trading Market.
14
(ll) ▇▇▇▇▇▇▇▇-▇▇▇▇▇;
Internal Accounting Controls. The Company and the
Subsidiaries are in compliance with any and all applicable
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and
regulations promulgated by the Commission thereunder that are
effective as of the date hereof and as of the Closing Date. The
Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company and the Subsidiaries have established disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the disclosure
controls and procedures of the Company and the Subsidiaries as of
the end of the period covered by the most recently filed periodic
report under the Exchange Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the internal control
over financial reporting (as such term is defined in the Exchange
Act) of the Company and its Subsidiaries that have materially
affected, or is reasonably likely to materially affect, the
internal control over financial reporting of the Company and its
Subsidiaries.
(mm) Estimates
of Reserves. The information underlying the estimates of the
reserves of the Company and its subsidiaries, which was supplied by
the Company to PeTech Enterprises, Inc. (the “Reserve
Engineer”), for purposes of preparing the reserve reports
incorporated by reference into the Registration Statement and the
Prospectus (the “Reserve Reports”), including
production and costs of operation and estimates of future capital
expenditures and other future exploration and development costs,
was true and correct in all material respects on the dates such
estimates were made, and such information was supplied and prepared
in good faith, with a reasonable basis and in accordance with
customary industry practices. other than normal production of the
reserves, the impact of changes in prices and costs, and
fluctuations in demand for oil and natural gas, and except as
disclosed in or contemplated by each of the Registration Statement
and the Prospectus, the Company is not aware of any facts or
circumstances that would in the aggregate result in a material
adverse change in the aggregate net proved reserves, or the
aggregate present value or the standardized measure of the future
net cash flows therefrom, as described in each of the Registration
Statement and the Prospectus and as reflected in the Reserve
Reports. and the estimates of such reserves and the standardized
measure of such reserves as described in each of the Registration
Statement and the Prospectus and reflected in the Reserve Reports
referenced therein have been prepared in good faith and in a manner
that complies with the applicable requirements of the rules under
the Securities Act with respect to such estimates. The Reserve
Engineer was, as of the respective dates of the Reserve Reports
prepared by it, and is, as of the date hereof, an independent
petroleum engineer with respect to the Company and its
subsidiaries.
(nn) Oil
and Gas Leases. As of the date hereof, (i) all royalties,
rentals, deposits and other amounts owed under the oil and gas
leases constituting the oil and gas properties of the Company and
its subsidiaries have been properly and timely paid (other than
amounts held in suspense accounts pending routine payments or
related to disputes about the proper identification of royalty
owners), and no amount of proceeds from the sale or production
attributable to the oil and gas properties of the Company and its
subsidiaries are currently being held in suspense by any purchaser
thereof, except where such amounts due could not, individually or
in the aggregate, have a Material Adverse Effect, and (ii) there
are no claims under take-or-pay contracts pursuant to which natural
gas purchasers have any makeup rights affecting the interests of
the Company, and its subsidiaries in their oil and gas properties,
except where such claims could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
15
(oo) Property.
(i) The Company and the Subsidiaries have good and marketable fee
simple title (or in the case of ground leases, a valid leasehold
interest) to all real property owned by them and the improvements
(exclusive of improvements owned by tenants or by landlords, if
applicable) located thereon, in each case, free and clear of all
mortgages, pledges, liens, security interests, claims, restrictions
or encumbrances of any kind, except such as (A) are described in
the Registration Statement, the Prospectus, the Preliminary
Prospectus Supplement and the Prospectus Supplement, (B) will not,
singly or in the aggregate, materially affect the value of such
property and do not interfere in any material respect with the use
made and proposed to be made of such property by the Company or any
of the Subsidiaries, or (C) would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect. (ii) except as otherwise set forth in or described in the
Registration Statement, the Prospectus, the Preliminary Prospectus
Supplement and the Prospectus Supplement and except as would not,
individually or in the aggregate, reasonably be expected have a
Material Adverse Effect, all of the leases and subleases of the
Company and the Subsidiaries, considered as one enterprise, and
under which the Company or any of the Subsidiaries hold properties
described in the Registration Statement, the Prospectus, the
Preliminary Prospectus Supplement and the Prospectus Supplement,
are in full force and effect, and neither the Company nor any
Subsidiary has any notice of any claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any
Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such
Subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease. (iii) none of the
Company or any of the Subsidiaries has received from any
governmental authority to which the Company or a Subsidiary is
subject any written notice of any condemnation of or zoning change
affecting the properties of the Company and the Subsidiaries or any
part thereof, and none of the Company or any of the Subsidiaries
knows of any condemnation or zoning change affecting the properties
of the Company and the Subsidiaries which is threatened and, in
each case, which if consummated would reasonably be expected to,
individually or in the aggregate, to have a Material Adverse
Effect. (iv) each of the properties of the Company and the
Subsidiaries complies with all applicable codes, ordinances, laws
and regulations (including without limitation, building and zoning
codes, laws and regulations and laws relating to access to the
properties of the Company and the Subsidiaries), except for
failures to the extent disclosed in the Registration Statement, the
Prospectus, the Preliminary Prospectus Supplement and the
Prospectus Supplement and except for such failures to comply that
would not individually or in the aggregate reasonably be expected
to have a Material Adverse Effect. (v) neither the Company nor any
Subsidiary has received written notice of proposed material special
assessment or any proposed change in any property tax, zoning or
land use law or availability of water affecting any property that
would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. and (vi) to the knowledge of the
Company and the Subsidiaries, except as set forth in or described
in the Registration Statement, the Prospectus, the Preliminary
Prospectus Supplement and the Prospectus Supplement or reflected in
the pro forma financial statements, and except as would not,
individually or in the aggregate, reasonably be expected have a
Material Adverse Effect, there are no uncured events of default, or
events that with the giving of notice or passage of time, or both,
would constitute an event of default, by any tenant under any of
the terms and provisions of the leases.
(pp) No
Acquisitions or Dispositions. (A) There are no contracts,
letters of intent, term sheets, agreements, arrangements or
understandings with respect to the direct or indirect acquisition
or disposition by any of the Company or the Subsidiaries of
interests in assets or real property that are required to be
described in the Registration Statement, the Prospectus, the
Preliminary Prospectus Supplement and the Prospectus Supplement
that are not so described. and (B) neither the Company nor any of
the Subsidiaries has sold any real property to a third party during
the immediately preceding twelve calendar months except as
described in the Registration Statement, the Prospectus, the
Preliminary Prospectus Supplement and the Prospectus
Supplement.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Amendments
to Registration Statement. The Company has delivered, or
will as promptly as practicable deliver, to the Underwriters
complete conformed copies of the Registration Statement and of each
consent and certificate of experts, as applicable, filed as a part
thereof, the Prospectus, the Preliminary Prospectus Supplement and
the Prospectus Supplement, in such quantities and at such places as
an Underwriter reasonably requests. Documents filed with the
Commission pursuant to its ▇▇▇▇▇ system shall be deemed to have
been delivered to the Underwriters pursuant to this Section.
Neither the Company nor any of its directors and officers has
distributed and none of them will distribute, prior to the Closing
Date, any offering material in connection with the offering and
sale of the Public Shares other than the Registration Statement,
Prospectus, the Preliminary Prospectus Supplement and the
Prospectus Supplement, and copies of the documents incorporated by
reference therein. The Company shall not file any such amendment or
supplement to which the Representative shall reasonably object in
writing.
16
4.2 Federal
Securities Laws.
(a) Compliance.
During the time when a prospectus is required to be delivered under
the Securities Act, the Company will use its reasonable best
efforts to comply with all requirements imposed upon it by the
Securities Act and the rules and regulations thereunder and the
Exchange Act and the rules and regulations thereunder, as from time
to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Public Shares in accordance with the
provisions hereof and the Prospectus Supplement. If at any time
when a prospectus relating to the Public Shares is required to be
delivered under the Securities Act, any event shall have occurred
as a result of which, in the opinion of counsel for the Company or
counsel for the Underwriters, the Prospectus Supplement, as then
amended or supplemented, includes an untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus Supplement to
comply with the Securities Act, the Company will notify the
Underwriters promptly and prepare and file with the Commission,
subject to Section 4.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Securities
Act.
(b) Filing
of Final Prospectus Supplement. The Company will file the
Prospectus Supplement (in form and substance satisfactory to the
Representative) with the Commission pursuant to the requirements of
Rule 424.
(c) Exchange
Act Registration. For a period of three years from the
Execution Date, the Company will use its reasonable best efforts to
maintain the registration of the Closing Shares and, to the extent
sold, the Option Shares, under the Exchange Act. The Company will
not deregister the Closing Shares and, to the extent sold, the
Option Shares, under the Exchange Act without the prior written
consent of the Representative. Nothing in this Section 4.2(c) or
Section 4.17 is intended to prevent the Company from completing a
change of control or similar transaction even though it may have
the effects described in such sections.
(d) Free
Writing Prospectuses. The Company represents and agrees that
it has not made and will not make any offer relating to the Public
Shares that would constitute an issuer free writing prospectus, as
defined in Rule 433 of the rules and regulations under the
Securities Act, without the prior written consent of the
Representative. Any such free writing prospectus consented to by
the Representative is herein referred to as
a “Permitted
Free Writing Prospectus.” The Company represents that
it will treat each Permitted Free Writing Prospectus as an
“issuer free writing prospectus” as defined in rule and
regulations under the Securities Act, and has complied and will
comply with the applicable requirements of Rule 433 of the
Securities Act, including timely Commission filing where required,
legending and record keeping.
4.3 Effectiveness
and Events Requiring Notice to the Underwriters. The Company
will promptly notify the Underwriters and confirm the notice in
writing: (i) of the effectiveness of the Registration
Statement and any amendment thereto; (ii) of the issuance by
the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose; (iii) of the
issuance by any state securities commission of any proceedings for
the suspension of the qualification of the Public Shares for
offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose; (iv) of the
mailing and delivery to the Commission for filing of any amendment
or supplement to the Registration Statement or Prospectus;
(v) of the receipt of any comments or request for any
additional information from the Commission; and (vi) of the
happening of any event during the period described in this Section
4.3 that, in the judgment of the Company, makes any statement of a
material fact made in the Registration Statement or the Prospectus
untrue or that requires the making of any changes in the
Registration Statement or the Prospectus in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. If the Commission or any state
securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
17
4.4 Review
of Financial Statements. For a period of three (3) years
from the Execution Date, the Company, at its expense, shall cause
its regularly engaged independent registered public accountants to
review (but not audit) the Company’s financial statements for
each of the first three fiscal quarters prior to the announcement
of quarterly financial information.
4.5 Reports
to the Underwriters.
(a) Periodic
Reports, etc. For a period of three years from the Execution
Date, the Company will furnish to the Representative copies of such
financial statements and other periodic and special reports as the
Company from time to time furnishes generally to holders of any
class of its securities and also promptly furnish to the
Underwriters: (i) a copy of each periodic report the Company shall
be required to file with the Commission; (ii) a copy of every press
release and every news item and article with respect to the Company
or its affairs which was released by the Company; (iii) a copy of
each Form 8-K prepared and filed by the Company; (iv) a copy of
each registration statement filed by the Company under the
Securities Act; and (v) such additional documents and information
with respect to the Company and the affairs of any future
Subsidiaries of the Company as the Representative may from time to
time reasonably request; provided that the Underwriters shall each
sign, if requested by the Company, a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to the
Representative in connection with such Underwriter’s receipt
of such information. Documents filed with the Commission pursuant
to its ▇▇▇▇▇ system or otherwise disseminated widely to the public
shall be deemed to have been delivered to the Underwriters pursuant
to this Section.
(b) General
Expenses Related to the Offering. The Company hereby agrees
to pay all expenses incident to the performance of the obligations
of the Company under this Agreement, including, but not limited to:
(A) all expenses incurred in connection with the delivery to the
Underwriters of the Public Shares (including all fees and expenses
of the registrar and transfer agent of the Public Shares, and the
cost of preparing and printing stock certificates), (B) all
expenses and fees (including, without limitation, fees and expenses
of the Company’s counsel) in connection with the preparation,
printing, filing, delivery, and shipping of the Registration
Statement (including the financial statements therein and all
amendments, schedules, and exhibits thereto), the Public Shares,
the Preliminary Supplement, the Prospectus Supplement and any
Permitted Free Writing Prospectus and any amendment thereof or
supplement thereto, (C) all reasonable filing fees and reasonable
fees and disbursements of the Underwriters’ counsel incurred
in connection with the qualification of the Public Shares for
offering and sale by the Underwriters or by dealers under the
securities or blue sky laws of the states and other jurisdictions
that the Representative shall designate, (D) the reasonable
filing fees, if any, payable to FINRA in connection with the
Offering, (E) listing fees, if any, and (F) all other costs and
expenses incident to the performance of its obligations hereunder
that are not otherwise specifically provided for herein. The
Company will reimburse the Representative for the
Underwriters’ reasonable out-of-pocket expenses, including
“road show,” diligence, legal fees and disbursements,
in connection with the purchase and sale of the Public Shares
contemplated hereby up to an aggregate of $50,000 (including
amounts payable pursuant to clauses (C) and (D)
above).
4.6 Application
of Net Proceeds. The Company will apply the net proceeds
from the Offering received by it in a manner consistent with the
application described under the caption “Use of
Proceeds” in the Prospectus.
4.7 Delivery
of Earnings Statements to Security Holders. The Company will
make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full
calendar month following the Execution Date, an earnings statement
(which need not be certified by independent public or independent
certified public accountants unless required by the Securities Act
or the Rules and Regulations under the Securities Act, but which
shall satisfy the provisions of Rule 158(a) under Section 11(a) of
the Securities Act) covering a period of at least twelve
consecutive months beginning after the Execution Date, provided
that filings of the Company’s reports, schedules, forms,
statements and other documents required to be filed by the Company
under the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof (including the exhibits thereto
and documents incorporated by reference therein), after the
Execution Date shall be deemed to constitute delivery.
18
4.8 Stabilization.
Neither the Company, nor, to its knowledge, any of its employees,
directors or shareholders (without the consent of the
Representative) has taken or will take, directly or indirectly, any
action designed to or that has constituted or that might reasonably
be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Public Shares.
4.9 Internal
Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with
management’s general or specific authorization;
(ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with GAAP and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or
specific authorization; and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals
and appropriate action is taken with respect to any
differences.
4.10 Accountants.
The Company shall continue to retain a nationally recognized
independent certified public accounting firm for a period of at
least three years after the Execution Date. The Underwriters
acknowledge that the Company Auditor is acceptable to the
Underwriters.
4.11 FINRA.
The Company shall advise the Underwriters (who shall make an
appropriate filing with FINRA) if it is aware that any 5% or
greater shareholder of the Company becomes an affiliate or
associated person of an Underwriter.
4.12 No
Fiduciary Duties. The Company acknowledges and agrees that
the Underwriters’ responsibility to the Company is solely
contractual and commercial in nature, based on arms-length
negotiations and that neither the Underwriters nor their affiliates
or any selected dealer shall be deemed to be acting in a fiduciary
capacity, or otherwise owes any fiduciary duty to the Company or
any of its affiliates in connection with the Offering and the other
transactions contemplated by this Agreement. Notwithstanding
anything in this Agreement to the contrary, the Company
acknowledges that the Underwriters may have financial interests in
the success of the Offering that are not limited to the difference
between the price to the public and the purchase price paid to the
Company by the Underwriters for the shares and the Underwriters
have no obligation to disclose, or account to the Company for, any
of such additional financial interests. The Company hereby waives
and releases, to the fullest extent permitted by law, any claims
that the Company may have against the Underwriters with respect to
any breach or alleged breach of fiduciary duty.
4.13 Board
Composition and Board Designations. The Company shall ensure
that: (i) the qualifications of the persons serving as board
members and the overall composition of the Board of Directors
comply with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules
promulgated thereunder and with the listing requirements of the
Trading Market and (ii) if applicable, at least one member of
the Board of Directors qualifies as a “financial
expert” as such term is defined under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of 2002 and the rules promulgated thereunder.
4.14 Securities
Laws Disclosure; Publicity. At the request of the
Representative, at the time requested by the Representative, the
Company shall issue a press release disclosing the material terms
of the Offering. The Company and the Representative shall consult
with each other in issuing any other press releases with respect to
the Offering, and neither the Company nor any Underwriter shall
issue any such press release or otherwise make any public statement
without the prior consent of the Company, with respect to any press
release of such Underwriter, or without the prior consent of such
Underwriter, with respect to any press release of the Company,
which consent shall not unreasonably be withheld or delayed, except
if such disclosure is required by law, in which case the disclosing
party shall promptly provide the other party with prior notice of
such public statement or communication.
4.15 Shareholder
Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that
any Underwriter of the Public Shares is an “Acquiring
Person” under any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or similar anti-takeover plan or arrangement in effect
or hereafter adopted by the Company, or that any Underwriter of the
Public Shares could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Public
Shares.
19
4.16 Reservation
of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, a sufficient
number of shares of Common Stock for the purpose of enabling the
Company to issue Option Shares pursuant to the Option.
4.17 Listing
of Common Stock. The Company hereby agrees to use its
reasonable best efforts to maintain the listing or quotation of the
Common Stock on the Trading Market on which it is currently listed,
and concurrently with the Closing, the Company shall apply to list
or quote all of the Closing Shares and Option Shares on such
Trading Market and promptly secure the listing of all of the
Closing Shares and Option Shares on such Trading Market. The
Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will then include in
such application all of the Closing Shares and Option Shares, and
will take such other action as is reasonably necessary to cause all
of the Closing Shares and Option Shares to be listed or quoted on
such other Trading Market as promptly as possible. The Company will
then take all action reasonably necessary to continue the listing
and trading of its Common Stock on a Trading Market and will comply
in all respects with the Company’s reporting, filing and
other obligations under the bylaws or rules of the Trading Market.
The Company agrees to maintain the eligibility of the Common Stock
for electronic transfer through the Depository Trust Company or
another established clearing corporation, including, without
limitation, by timely payment of fees to the Depository Trust
Company or such other established clearing corporation in
connection with such electronic transfer.
4.18 Subsequent
Equity Sales. The Company hereby agrees that, without the
prior written consent of the Representative, it will not, during
the period beginning on the date hereof and ending ninety (90) days
after the date hereof (the “Lock-Up Period”), (i)
offer, pledge, issue, sell, contract to sell, purchase, contract to
purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock,
in a public offering; or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) above is
to be settled by delivery of Common Stock or such other securities,
in cash or otherwise, in a public offering; or (iii) file any
registration statement with the Commission relating to the offering
of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock. The restrictions
contained in the preceding sentence shall not apply to (i) any
private placement or other transaction not involving any public
offering; (ii) the issuance of employee stock options and/or
restricted stock awards pursuant to equity incentive plans or the
filing of a Registration Statement on Form S-8 therefore; (iii) the
issuance of securities in connection with an acquisition or a
strategic relationship; or (iv) a public offering in which the
Representative participates as an underwriter or placement
agent.
4.19 Research
Independence. The Company acknowledges that each
Underwriter’s research
analysts and research departments, if any, are required to be
independent from their respective investment banking divisions and
are subject to certain regulations and internal policies, and that
such Underwriter’s
research analysts may hold 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 its
investment bankers. The Company hereby waives and releases, to the
fullest extent permitted by law, any claims that the Company may
have against such Underwriter with respect to any conflict of
interest that may arise from the fact that the views expressed by
their independent research analysts and research departments may be
different from or inconsistent with the views or advice
communicated to the Company by such Underwriter’s investment banking divisions. The
Company acknowledges that the Representative is a full service
securities firm and as such from time to time, subject to
applicable securities laws, may effect transactions for its own
account or the account of its customers and hold long or short
position in debt or equity securities of the Company.
20
ARTICLE V.
DEFAULT BY UNDERWRITERS
If on
the Closing Date or any Option Closing Date, if any, any
Underwriter shall fail to purchase and pay for the portion of the
Closing Shares or Option Shares, as the case may be, which such
Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the
Company), the Representative, or if the Representative is the
defaulting Underwriter, the non-defaulting Underwriters, shall use
their reasonable best efforts to procure within 36 hours thereafter
one or more of the other Underwriters, or any others, to purchase
from the Company such amounts as may be agreed upon and upon the
terms set forth herein, the Closing Shares or Option Shares, as the
case may be, which the defaulting Underwriter or Underwriters
failed to purchase. If during such 36 hours the Representative
shall not have procured such other Underwriters, or any others, to
purchase the Closing Shares or Option Shares, as the case may be,
agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of Closing Shares or
Option Shares, as the case may be, with respect to which such
default shall occur does not exceed 10% of the Closing Shares or
Option Shares, as the case may be, covered hereby, the other
Underwriters shall be obligated, severally, in proportion to the
respective numbers of Closing Shares or Option Shares, as the case
may be, which they are obligated to purchase hereunder, to purchase
the Closing Shares or Option Shares, as the case may be, which such
defaulting Underwriter or Underwriters failed to purchase, or (b)
if the aggregate number of Closing Shares or Option Shares, as the
case may be, with respect to which such default shall occur exceeds
10% of the Closing Shares or Option Shares, as the case may be,
covered hereby, the Company will have the right to terminate this
Agreement without liability on the part of the non-defaulting
Underwriters or of the Company except to the extent provided in
Article VI hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Article V, the applicable
Closing Date may be postponed for such period, not exceeding seven
days, as the Representative, or if the Representative is the
defaulting Underwriter, the non-defaulting Underwriters, may
determine in order that the required changes in the Prospectus or
in any other documents or arrangements may be effected. The term
“Underwriter” includes any person substituted for a
defaulting Underwriter. Any action taken under this Section shall
not relieve any defaulting Underwriter from liability in respect of
any default of such Underwriter under this Agreement.
ARTICLE VI.
INDEMNIFICATION
6.1 Indemnification
of the Underwriters. Subject to the conditions set forth
below, the Company agrees to indemnify and hold harmless the
Underwriters, and each dealer selected by each Underwriter that
participates in the offer and sale of the Public Shares (each a
“Selected
Dealer”) and each of their respective directors,
officers and employees and each Person, if any, who controls such
Underwriter or any Selected Dealer (“Controlling Person”)
within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, against any and all loss, liability, claim,
damage and expense whatsoever (including but not limited to any and
all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, whether arising out of any
action between such Underwriter and the Company or between such
Underwriter and any third party or otherwise) to which they or any
of them may become subject under the Securities Act, the Exchange
Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained
in (i) the Registration Statement, the Prospectus, the Preliminary
Prospectus Supplement or the Prospectus Supplement (as from time to
time each may be amended and supplemented); (ii) any materials or
information provided to investors by, or with the approval of, the
Company in connection with the marketing of the offering of the
Public Shares, including any “road show” or investor
presentations made to investors by the Company (whether in person
or electronically); or (iii) any application or other document or
written communication (in this Article VI, collectively called
“application”) executed by
the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Public Shares
under the securities laws thereof or filed with the Commission, any
state securities commission or agency, Trading Market or any
securities exchange; or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, unless such statement or
omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to the applicable
Underwriter by or on behalf of such Underwriter expressly for use
in the Preliminary Prospectus Supplement or the Prospectus
Supplement, or any amendment or supplement thereto, or in any
application, as the case may be. With respect to any untrue
statement or omission or alleged untrue statement or omission made
in the Preliminary Prospectus, if any, the indemnity agreement
contained in this Section 6.1 shall not inure to the benefit of an
Underwriter to the extent that any loss, liability, claim, damage
or expense of such Underwriter results from the fact that a copy of
the Preliminary Prospectus Supplement or the Prospectus Supplement
was not given or sent to the Person asserting any such loss,
liability, claim or damage at or prior to the written confirmation
of sale of the Public Shares to such Person as required by the
Securities Act and the rules and regulations thereunder, and if the
untrue statement or omission has been corrected in the Preliminary
Prospectus Supplement or the Prospectus Supplement, unless such
failure to deliver the Preliminary Prospectus Supplement or the
Prospectus Supplement was a result of non-compliance by the Company
with its obligations under this Agreement. The Company agrees
promptly to notify each Underwriter of the commencement of any
litigation or proceedings against the Company or any of its
officers, directors or Controlling Persons in connection with the
issue and sale of the Public Shares or in connection with the
Registration Statement, the Prospectus the Preliminary Prospectus
Supplement or the Prospectus Supplement.
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6.2 Procedure.
If any action is brought against an Underwriter, a Selected Dealer
or a Controlling Person in respect of which indemnity may be sought
against the Company pursuant to Section 6.1, such Underwriter, such
Selected Dealer or Controlling Person, as the case may be, shall
promptly notify the Company in writing of the institution of such
action and the Company shall assume the defense of such action,
including the employment and fees of counsel (subject to the
reasonable approval of such Underwriter or such Selected Dealer, as
the case may be) and payment of actual expenses. Such Underwriter,
such Selected Dealer or Controlling Person shall have the right to
employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such
Underwriter, such Selected Dealer or Controlling Person unless (i)
the employment of such counsel at the expense of the Company shall
have been authorized in writing by the Company in connection with
the defense of such action, or (ii) the Company shall not have
employed counsel to have charge of the defense of such action, or
(iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company
(in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses
of not more than one additional firm of attorneys selected by such
Underwriter (in addition to local counsel), Selected Dealer and/or
Controlling Person shall be borne by the Company. Notwithstanding
anything to the contrary contained herein, if any Underwriter,
Selected Dealer or Controlling Person shall assume the defense of
such action as provided above, the Company shall have the right to
approve the terms of any settlement of such action which approval
shall not be unreasonably withheld.
6.3 Indemnification
of the Company. Each Underwriter severally and not jointly
agrees to indemnify and hold harmless the Company, its directors,
officers and employees and agents who control the Company within
the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any and all loss, liability, claim, damage
and expense described in the foregoing indemnity from the Company
to such Underwriter, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions
made in the Registration Statement, the Preliminary Prospectus
Supplement or the Prospectus Supplement or any amendment or
supplement thereto or in any application, in reliance upon, and in
strict conformity with, written information furnished to the
Company with respect to such Underwriter by or on behalf of such
Underwriter expressly for use in the Preliminary Prospectus
Supplement or the Prospectus Supplement or any amendment or
supplement thereto or in any such application. In case any action
shall be brought against the Company or any other Person so
indemnified based on the Registration Statement, the Prospectus,
the Preliminary Prospectus Supplement or the Prospectus Supplement
or any amendment or supplement thereto or any application, and in
respect of which indemnity may be sought against such Underwriter,
such Underwriter shall have the rights and duties given to the
Company, and the Company and each other Person so indemnified shall
have the rights and duties given to such Underwriter by the
provisions of this Article VI. Notwithstanding the provisions of
this Section 6.3, no Underwriter shall be required to indemnify the
Company for any amount in excess of the underwriting discounts and
commissions applicable to the Public Shares purchased by such
Underwriter. The Underwriters' obligations in this Section 6.3 to
indemnify the Company are several in proportion to their respective
underwriting obligations and not joint.
6.4 Contribution.
(a) Contribution
Rights. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) any
Person entitled to indemnification under this Article VI makes a
claim for indemnification pursuant hereto but it is judicially
determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that this
Article VI provides for indemnification in such case, or (ii)
contribution under the Securities Act, the Exchange Act or
otherwise may be required on the part of any such Person in
circumstances for which indemnification is provided under this
Article VI, then, and in each such case, the Company and each
Underwriter, severally and not jointly, shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by said indemnity agreement incurred by the
Company and such Underwriter, as incurred, in such proportions that
such Underwriter is responsible for that portion represented by the
percentage that the underwriting discount appearing on the cover
page of the Prospectus Supplement bears to the initial offering
price appearing thereon and the Company is responsible for the
balance; provided, that, no Person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. For
purposes of this Section, each director, officer and employee of
such Underwriter or the Company, as applicable, and each Person, if
any, who controls such Underwriter or the Company, as applicable,
within the meaning of Section 15 of the Securities Act shall have
the same rights to contribution as such Underwriter or the Company,
as applicable. Notwithstanding the provisions of this Section 6.4,
no Underwriter shall be required to contribute any amount in excess
of the underwriting discounts and commissions applicable to the
Public Shares purchased by such Underwriter. The
Underwriters’ obligations in this Section 6.4 to contribute
are several in proportion to their respective underwriting
obligations and not joint.
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(b) Contribution
Procedure. Within fifteen days after receipt by any party to
this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if
a claim for contribution in respect thereof is to be made against
another party (“contributing party”),
notify the contributing party of the commencement thereof, but the
failure to so notify the contributing party will not relieve it
from any liability which it may have to any other party other than
for contribution hereunder. In case any such action, suit or
proceeding is brought against any party, and such party notifies a
contributing party or its representative of the commencement
thereof within the aforesaid fifteen days, the contributing party
will be entitled to participate therein with the notifying party
and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking
contribution on account of any settlement of any claim, action or
proceeding affected by such party seeking contribution without the
written consent of such contributing party. The contribution
provisions contained in this Section 6.4 are intended to supersede,
to the extent permitted by law, any right to contribution under the
Securities Act, the Exchange Act or otherwise
available.
ARTICLE VII.
MISCELLANEOUS
7.1 Termination.
(a) Termination
Right. The Representative shall have the right to terminate
this Agreement at any time prior to any Closing Date, (i) if
any domestic or international event or act or occurrence has
materially disrupted, or in its opinion will in the immediate
future materially disrupt, general securities markets in the United
States; or (ii) if trading on any Trading Market shall have
been suspended or materially limited, or minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required by FINRA or by order of the
Commission or any other government authority having jurisdiction,
or (iii) if the United States shall have become involved in a
new war or an increase in major hostilities, or (iv) if a
banking moratorium has been declared by a New York State or federal
authority, or (v) if a moratorium on foreign exchange trading
has been declared which materially adversely impacts the United
States securities markets, or (vi) if the Company shall have
sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act
which, whether or not such loss shall have been insured, will, in
the Representative’s opinion, make it inadvisable to proceed
with the delivery of the Public Shares, or (vii) if the
Company is in material breach of any of its representations,
warranties or covenants hereunder, or (viii) if the
Representative shall have become aware after the date hereof of
such a material adverse change in the conditions or prospects of
the Company, or such adverse material change in general market
conditions as in the Representative’s judgment would make it
impracticable to proceed with the offering, sale and/or delivery of
the Public Shares or to enforce contracts made by the Underwriters
for the sale of the Public Shares.
(b) Expenses.
In the event this Agreement shall be terminated pursuant to Section
7.1(a)(vii), within the time specified therein or any extensions
thereof pursuant to the terms herein, the Company shall be
obligated to reimburse the Representative for its actual and
accountable out of pocket expenses incurred and directly related to
the transactions contemplated herein, including the fees and
disbursements of NMRS, up to $50,000 in the aggregate (provided, however, that such expense cap
in no way limits or impairs the indemnification and contribution
provisions of this Agreement), upon presentation by the
Representative of appropriate documentation evidencing the actual
payment of such expenses.
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(c) Indemnification.
Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the
provisions of Article VI shall not be in any way effected by such
election or termination or failure to carry out the terms of this
Agreement or any part hereof.
7.2 Entire
Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus
Supplement, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
7.3 Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or e-mail attachment at the
e-mail address set forth on the signature pages attached hereto at
or prior to 5:30 p.m. (New York City time) on a Trading Day, (b)
the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number
or e-mail attachment at the e-mail address as set forth on the
signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day,
(c) the second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the
signature pages attached hereto.
7.4 Amendments;
Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Company and the
Representative. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of
any such right.
7.5 Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
7.6 Successors
and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns.
7.7 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto
or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any action, suit or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the
Company under Article VI, the prevailing party in such action, suit
or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.
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7.8 Survival.
The representations and warranties contained herein shall survive
the Closing and the Option Closing, if any, and the delivery of the
Public Shares.
7.9 Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
7.10 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
7.11 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the
Underwriters and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
7.12 Saturdays,
Sundays, Holidays,
etc. If
the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.
7.13 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.
7.14 WAIVER
OF JURY TRIAL. IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY
PARTY AGAINST ANY OTHER PARTY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVE FOREVER ANY RIGHT TO TRIAL BY
JURY.
(Signature Pages Follow)
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If the
foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall
constitute a binding agreement among the Company and the several
Underwriters in accordance with its terms.
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Very
truly yours,
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TORCHLIGHT
ENERGY RESOURCES, INC.
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By: /s/
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Name:
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Title:
President and CEO
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Address
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Torchlight Energy Resources, Inc.
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Attention:
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Copy
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Accepted
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AEGIS CAPITAL CORP.
By: /s/
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Title:
Co-Head Investment Banking
By /s/
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Title:
Co-Head Investment Banking
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Address
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Aegis
Capital Corp.
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Attention:
Syndicate
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SCHEDULE I
SCHEDULE OF UNDERWRITERS
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Underwriters
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Closing Shares
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Closing Purchase Price
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Aegis
Capital Corp.
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3,285,715
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$0.644
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Total
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3,285,715
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$0.644
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EXHIBIT A
Form of
Lock-Up Agreement
January
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Capital Corp.
as
Representative of the several Underwriters
listed
on Schedule I of
the Underwriting Agreement
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Re:
Proposed Public
Offering by Torchlight Energy Resources, Inc.
Ladies
and Gentlemen:
The
undersigned, an executive officer and/or director of Torchlight
Energy Resources, Inc., a Nevada corporation (the
“Company”), understands
that Aegis Capital Corp. (“Aegis Capital”), as
representative of the Underwriters, proposes to enter into an
Underwriting Agreement (the “Underwriting Agreement”)
with the Company providing for the public offering (the
“Offering”) of the
Company’s common shares, $0.001 par value per share (the
“Common
Shares”). In recognition of the benefit that such an
offering will confer upon the undersigned as an executive officer
and/or director of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be
named in the Underwriting Agreement that, from the date hereof
until ninety (90) days from the date of the Underwriting
Agreement, the undersigned will not, without the prior written
consent of Aegis Capital, directly or indirectly, (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, or otherwise dispose of
or transfer any Common Shares or any securities convertible into or
exchangeable or exercisable for Common Shares, whether now owned or
hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition, or
publicly announce an intention to do any of the foregoing, or make
any demand or request for the Company to file any registration
statement under the Securities Act of 1933, as amended, with
respect to any of the foregoing or (ii) enter into any swap,
hedge or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence
of ownership of the Common Shares, whether any such swap, hedge or
transaction is to be settled by delivery of Common Shares or other
securities, in cash or otherwise.
Notwithstanding the
foregoing, the undersigned may transfer the undersigned’s
Common Shares or securities convertible into or exercisable for
Common Shares (i) as a bona fide gift or gifts, provided that
the donee or donees agree to be bound in writing by the
restrictions set forth herein, (ii) to any trust or family
limited partnership for the direct or indirect benefit of the
undersigned or the immediate family of the undersigned, provided
that the trustee of the trust or general partner of the family
limited partnership, as the case may be, agrees to be bound by the
restrictions set forth herein, and provided further that any such
transfer shall not involve a disposition for value,
(iii) pursuant to the exercise by the undersigned of stock
options that have been granted by the Company prior to, and are
outstanding as of, the date of the Underwriting Agreement, where
the Common Shares received upon any such exercise is held by the
undersigned, individually or as fiduciary, in accordance with the
terms of this Lock-Up Agreement, or (iv) with the prior
written consent of Aegis Capital; provided, however, that, with respect
to the exceptions in clauses (i)—(iii), no filing pursuant to
Section 16 of the Securities Exchange Act of 1934, as amended,
is required or made voluntarily during the restricted period
referred to in the previous paragraphs other than a Form 5 Annual
Statement of Changes in Beneficial Ownership of Securities. For
purposes of this Lock-Up Agreement, “immediate family”
shall mean any relationship by blood, marriage or adoption, not
more remote than first cousin.
The
undersigned represents and warrants that the undersigned
beneficially owns the Common Shares covered by this Lock-Up
Agreement, and that the undersigned has full power and authority to
enter into this Lock-Up Agreement. The undersigned agrees that the
provisions of this Lock-Up Agreement shall be binding also upon the
successors, assigns, heirs and personal representatives of the
undersigned. The undersigned also agrees and consents to the entry
of stop transfer instructions with the Company’s transfer
agent and registrar against the transfer of the undersigned’s
Common Shares, except in compliance with this Lock-Up Agreement. In
furtherance of the foregoing, the Company and its transfer agent
are hereby authorized to decline to make any transfer of securities
if such transfer would constitute a violation or breach of this
Lock-Up Agreement.
Notwithstanding the
provisions of this Lock-Up Agreement set forth above, if the
Underwriting Agreement (other than the provisions thereof which
survive termination) shall terminate or be terminated prior to
payment for and delivery of the Common Shares to be sold
thereunder, the undersigned shall be released from all obligations
under this Lock-Up Agreement.
This
Lock-Up Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
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Very truly
yours,
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