UNDERWRITING AGREEMENT between TORCHLIGHT ENERGY RESOURCES, INC. and THINKEQUITY, A DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC., as Representative of the Several Underwriters TORCHLIGHT ENERGY RESOURCES, INC. UNDERWRITING AGREEMENT
EXHIBIT
1.1
between
TORCHLIGHT ENERGY RESOURCES, INC.
and
THINKEQUITY,
A DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC.,
as Representative of the Several Underwriters
TORCHLIGHT ENERGY RESOURCES, INC.
May
18, 2020
ThinkEquity,
A
Division of Fordham Financial Management, Inc.
As
Representative of the several Underwriters named on Schedule 1
attached hereto
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Ladies
and Gentlemen:
The
undersigned, Torchlight Energy Resources, Inc., a corporation
formed under the laws of the State of Nevada (collectively with its
subsidiaries and affiliates, including, without limitation, all
entities disclosed or described in the Registration Statement (as
hereinafter defined) as being subsidiaries or affiliates of
Torchlight Energy Resources, Inc., the “Company”), hereby confirms its
agreement (this “Agreement”) with ThinkEquity, a
division of Fordham Financial Management, Inc. (hereinafter
referred to as “you” (including its correlatives) or
the “Representative”), and with the
other underwriters named on Schedule 1 hereto for which the
Representative is acting as representative (the Representative and
such other underwriters being collectively called the
“Underwriters”
or, individually, an “Underwriter”) as
follows:
1. Purchase and Sale of
Shares.
1.1 Firm
Shares.
1.1.1 Nature
and Purchase of Firm Shares.
(i) On the basis of the
representations and warranties herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue
and sell to the several Underwriters, an aggregate of 3,000,000
shares (the “Firm
Shares”) of the Company’s common stock, $.001
par value (the “Common
Stock”).
(ii) The
Underwriters, severally and not jointly, agree to purchase from the
Company the number of Firm Shares set forth opposite their
respective names on Schedule 1 attached hereto and
made a part hereof at a purchase price of $0.3145 per Firm Share
(92.5% of the per Firm Share offering price). The Firm Shares are
to be offered initially to the public at the offering price set
forth on the cover page of the Prospectus (as defined in Section
2.1.1 hereof).
1.1.2 Shares
Payment and Delivery.
(i) Delivery and
payment for the Firm Shares shall be made at 10:00 a.m., Eastern
time, on the second (2nd) (or, if the Firm
Shares are priced, as contemplated by Rule 15c-6-1(c) under the
Exchange Act, after 4:30 p.m., Eastern time, the third (3rd))
Business Day following the date hereof, or at such earlier time as
shall be agreed upon by the Representative and the Company, at the
offices of Loeb & Loeb LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(“Representative
Counsel”), or at such other place (or remotely by
facsimile or other electronic transmission) as shall be agreed upon
by the Representative and the Company. The hour and date of
delivery and payment for the Firm Shares is called the
“Closing
Date.”
(ii) Payment
for the Firm Shares shall be made on the Closing Date by wire
transfer in Federal (same day) funds, payable to the order of the
Company upon delivery of the certificates (in form and substance
satisfactory to the Underwriters) representing the Firm Shares (or
through the facilities of the Depository Trust Company
(“DTC”)) for the
account of the Representative. The Firm Shares shall be registered
in such name or names and in such authorized denominations as the
Representative may request in writing at least two (2) full
Business Days prior to the Closing Date. The Company shall not be
obligated to sell or deliver the Firm Shares except upon tender of
payment by the Representative for all of the Firm Shares. The term
“Business Day”
means any day other than a Saturday, a Sunday or a legal holiday or
a day on which banking institutions are authorized or obligated by
law to close in New York, New York.
1.2 Over-allotment
Option.
1.2.1 Option
Shares. For the purposes of covering any over-allotments in
connection with the distribution and sale of the Firm Shares, the
Company hereby grants to the Representative an option to purchase
up to 450,000 additional shares of Common Stock, representing
fifteen percent (15%) of the Firm Shares sold in the offering, from
the Company (the “Over-allotment Option”). Such
450,000 additional shares of Common Stock, the net
proceeds of which will be deposited with the Company’s
account, are hereinafter referred to as the “Option Shares.” The purchase price
to be paid per Option Share shall be equal to the price per Firm
Share set forth in Section 1.1.1 hereof. The Firm Shares and the
Option Shares are hereinafter referred to together as the
“Public
Securities.” The offering and sale of the Public
Securities is hereinafter referred to as the “Offering.”
1.2.2 Exercise
of Option. The Over-allotment Option granted pursuant to
Section 1.2.1 hereof 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 date hereof. The Underwriters shall
not be under any obligation to purchase any Option Shares prior to
the exercise of the Over-allotment Option. The Over-allotment
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 (the “Option
Closing Date”), which shall not be later than two (2)
full Business 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 Representative Counsel or at such other place (including
remotely by facsimile or other electronic transmission) as shall be
agreed upon by the Company and the Representative. If such delivery
and payment for the Option Shares does not occur on the Closing
Date, the Option Closing Date will be as set forth in the notice.
Upon exercise of the Over-allotment Option with respect to all or
any portion of the Option Shares, subject to the terms and
conditions set forth herein, (i) the Company shall become obligated
to sell to the Underwriters the number of Option Shares specified
in such notice and (ii) each of the Underwriters, acting severally
and not jointly, shall purchase that portion of the total number of
Option Shares then being purchased as set forth in Schedule 1 opposite the name of
such Underwriter bears to the total number of Firm Shares, subject,
in each case, to such adjustments as the Representative, in its
sole discretion, shall determine.
1.2.3 Payment
and Delivery. Payment for the Option Shares shall be made on
the Option Closing Date by wire transfer in Federal (same day)
funds, payable to the order of the Company upon delivery to you of
certificates (in form and substance satisfactory to the
Underwriters) representing the Option Shares (or through the
facilities of DTC) for the account of the Underwriters. The Option
Shares shall be registered in such name or names and in such
authorized denominations as the Representative may request in
writing at least two (2) full Business Days prior to the Option
Closing Date. The Company shall not be obligated to sell or deliver
the Option Shares except upon tender of payment by the
Representative for applicable Option Shares. The Option Closing
Date may be simultaneous with, but not earlier than, the Closing
Date; and in the event that such time and date are simultaneous
with the Closing Date, the term “Closing Date” shall refer to the
time and date of delivery of the Firm Shares and Option
Shares.
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1.3 Representative’s
Warrants.
1.3.1 Purchase
Warrants. The Company hereby agrees to issue and sell to the
Representative (and/or its designees) on the Closing Date an option
(“Representative’s Warrant”) for the purchase of
an aggregate of 150,000 shares of Common Stock, representing 5% of
the Public Securities, for an aggregate purchase price of $100.00.
The Representative’s Warrant agreement, in the form attached
hereto as Exhibit A (the “Representative’s Warrant
Agreement”), shall be exercisable, in whole or in part,
commencing on a date which is one hundred eighty (180) days after
the date hereof and expiring on the five-year anniversary of the
date hereof at an initial exercise price per share of Common Stock
of $0.425, which is equal to 125% of the initial public offering
price of the Firm Shares. The Representative’s Warrant
Agreement and the shares of Common Stock issuable upon exercise
thereof are hereinafter referred to together as the
“Representative’s Securities.” The Representative
understands and agrees that there are significant restrictions
pursuant to FINRA Rule 5110 against transferring the
Representative’s Warrant Agreement and the underlying shares
of Common Stock during the one hundred eighty (180) days after the
date hereof and by its acceptance thereof shall agree that it will
not sell, transfer, assign, pledge or hypothecate the
Representative’s Warrant Agreement, or any portion thereof,
or be the subject of any hedging, short sale, derivative, put or
call transaction that would result in the effective economic
disposition of such securities for a period of one hundred eighty
(180) days following the date hereof to anyone other than (i) an
Underwriter or a selected dealer in connection with the Offering,
or (ii) a bona fide officer or partner of the Representative or of
any such Underwriter or selected dealer; and only if any such
transferee agrees to the foregoing lock-up
restrictions
1.3.2 Delivery.
Delivery of the Representative’s Warrant Agreement shall be
made on the Closing Date and shall be issued in the name or names
and in such authorized denominations as the Representative may
request.
2. Representations and Warranties of the
Company. The Company represents and warrants to the
Underwriters as of the Applicable Time (as defined below), as of
the Closing Date and as of the Option Closing Date, if any, as
follows:
2.1 Filing of Registration
Statement.
2.1.1 Pursuant
to the Securities Act. The Company has filed with the U.S.
Securities and Exchange Commission (the “Commission”) a “shelf”
registration statement on Form S-3 (File No. 333-220181), including
any related prospectus or prospectuses, for the registration of the
Public Securities under the Securities Act of 1933, as amended (the
“Securities
Act”), which registration statement was prepared by
the Company in all material respects in conformity with the
requirements of the Securities Act and the rules and regulations of
the Commission under the Securities Act (the “Securities Act Regulations”) and
contains and will contain all material statements that are required
to be stated therein in accordance with the Securities Act and the
Securities Act Regulations. Except as the context may otherwise
require, such registration statement on file with the Commission at
any given time, including any amendments thereto to such time,
exhibits and schedules thereto at such time, documents filed as a
part thereof or incorporated pursuant to Item 12 of Form S-3 under
the Securities Act and the documents and information otherwise
deemed to be a part thereof or included therein pursuant to Rule
430B of the Securities Act Regulations (the “Rule 430B Information”) or
otherwise pursuant to the Securities Act Regulations at such time,
is referred to herein as the “Registration Statement.” The
Registration Statement at the time it originally became effective
is referred to herein as the “Initial Registration Statement.”
If the Company files any registration statement pursuant to Rule
462(b) of the Securities Act Regulations, then after such filing,
the term “Registration Statement” shall include such
registration statement filed pursuant to Rule 462(b). The
Registration Statement was declared effective by the Commission on
September 28, 2017 (the “Effective Date”).
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The
prospectus in the form in which it was filed with the Commission in
connection with the Initial Registration Statement is herein called
the “Base
Prospectus.” Each preliminary prospectus supplement to
the Base Prospectus (including the Base Prospectus as so
supplemented) that described the Public Securities and the Offering
and omitted the Rule 430B Information and that was used prior to
the filing of the final prospectus supplement referred to in the
following paragraph is herein called a “Preliminary
Prospectus.”
Promptly after the
execution and delivery of this Agreement, the Company will prepare
and file with the Commission a final prospectus supplement to the
Base Prospectus relating to the Public Securities and the Offering
in accordance with the provisions of Rule 430B and Rule 424(b) of
the Securities Act Regulations. Such final prospectus supplement
(including the Base Prospectus as so supplemented), in the form
filed with the Commission pursuant to Rule 424(b) under the
Securities Act is herein called the “Prospectus.” Any reference herein
to the Base Prospectus, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act as of the date of such
prospectus.
“Applicable Time” means 8:45 a.m.,
Eastern time, on May 18, 2020, on the date of this
Agreement.
“Disclosure Package” means any
Issuer General Use Free Writing Prospectus issued at or prior to
the Applicable Time, the Preliminary Prospectus dated May 13, 2020
and the information included on Schedule 2-A hereto, all
considered together.
“Issuer Free Writing Prospectus”
means any “issuer free writing prospectus,” as defined
in Rule 433 of the Securities Act Regulations (“Rule 433”), including without
limitation any “free writing prospectus” (as defined in
Rule 405 of the Securities Act Regulations) relating to the Public
Securities that is (i) required to be filed with the Commission by
the Company, (ii) a “road show that is a written
communication” within the meaning of Rule 433(d)(8)(i),
whether or not required to be filed with the Commission, or (iii)
exempt from filing with the Commission pursuant to Rule
433(d)(5)(i) because it contains a description of the Public
Securities or of the Offering that does not reflect the final
terms, in each case in the form filed or required to be filed with
the Commission or, if not required to be filed, in the form
retained in the Company’s records pursuant to Rule
433(g).
“Issuer General Use Free Writing
Prospectus” means any Issuer Free Writing Prospectus
that is intended for general distribution to prospective investors
(other than a “bona
fide electronic road show,” as defined in Rule 433),
as evidenced by its being specified in Schedule 2-B
hereto.
“Issuer Limited Use Free Writing
Prospectus” means any Issuer Free Writing Prospectus
that is not an Issuer General Use Free Writing
Prospectus.
2.1.2 Pursuant
to the Exchange Act. The Company has filed with the
Commission a Form 8-A (Accession No. 001-36247) providing for the
registration pursuant to Section 12(b) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), of the shares of
Common Stock. The registration of the shares of Common Stock and
related Form 8-A have become effective under the Exchange Act on or
prior to the date hereof. The Company has taken no action designed
to, or likely to have the effect of, terminating the registration
of the shares of Common Stock under the Exchange Act, nor has the
Company received any notification that the Commission is
contemplating terminating such registration.
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2.2 Stock Exchange Listing. The
shares of Common Stock have been approved for listing on The NASDAQ
Capital Market (the “Exchange”), and the Company has
taken no action designed to, or likely to have the effect of,
delisting the shares of Common Stock from the Exchange, nor has the
Company received any notification that the Exchange is
contemplating terminating such listing except as described in the
Registration Statement, the Disclosure Package and the Prospectus.
The Company has submitted the Listing of Additional Shares
Notification Form with the Exchange with respect to the Offering of
the Public Securities.
2.3 No Stop Orders, etc. Neither
the Commission nor, to the Company’s knowledge, any state
regulatory authority has issued any order preventing or suspending
the use of the Registration Statement, any Preliminary Prospectus
or the Prospectus or has instituted or, to the Company’s
knowledge, threatened to institute, any proceedings with respect to
such an order. The Company has complied with each request (if any)
from the Commission for additional information.
2.4 Disclosures in Registration
Statement.
2.4.1 Compliance
with Securities Act and 10b-5 Representation.
(i) Each of the
Registration Statement and any post-effective amendment thereto, at
the time it became effective (including each deemed effective date
with respect to the Underwriters pursuant to Rule 430B or otherwise
under the Securities Act) complied and will comply in all material
respects with the requirements of the Securities Act and the
Securities Act Regulations. The conditions for use of Form S-3, set
forth in the General Instructions thereto, including, but not
limited to, General Instruction I.B.6 and other conditions related
to the offer and sale of the Public Securities, have been
satisfied. Each Preliminary Prospectus and the Prospectus, at the
time each was or will be filed with the Commission, complied and
will comply in all material respects with the requirements of the
Securities Act and the Securities Act Regulations. Each Preliminary
Prospectus delivered to the Underwriters for use in connection with
this Offering and the Prospectus was or will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
(ii) Neither
the Registration Statement nor any amendment thereto, at its
effective time, as of the Applicable Time, at the Closing Date or
at any Option Closing Date (if any), contained, contains or will
contain an untrue statement of a material fact or omitted, omits or
will omit to state a material fact required to be stated therein or
necessary to make the statements therein not
misleading.
(iii) The
Disclosure Package, as of the Applicable Time, at the Closing Date
or at any Option Closing Date (if any), did not, does not and will
not include an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; and any Issuer Limited Use Free Writing Prospectus
hereto does not conflict with the information contained in the
Registration Statement, any Preliminary Prospectus or the
Prospectus, and each such Issuer Limited Use Free Writing
Prospectus, as supplemented by and taken together with the
Prospectus as of the Applicable Time, did not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided, however, that this representation and
warranty shall not apply to statements made or statements omitted
in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by the
Representative expressly for use in the Registration Statement, the
Disclosure Package or the Prospectus or any amendment thereof or
supplement thereto. The parties acknowledge and agree that such
information provided by or on behalf of any Underwriter consists
solely of the following statements concerning the Underwriters
contained in the “Underwriting” section of the
Prospectus (the “Underwriters
Information”): (i) the second sentence of the
subsection entitled “Discounts, Commissions and
Reimbursements” related to concessions; (ii) the subsection
entitled “Stabilization”; and (iii) the subsection
entitled “Electronic Offer, Sale and Distribution of
Securities.”
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(iv) Neither
the Prospectus nor any amendment or supplement thereto (including
any prospectus wrapper), as of its issue date, at the time of any
filing with the Commission pursuant to Rule 424(b), at the Closing
Date or at any Option Closing Date, included, includes or will
include an untrue statement of a material fact or omitted, omits or
will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation and
warranty shall not apply to the Underwriters’
Information.
(v) The documents
incorporated by reference in the Registration Statement, the
Disclosure Package and the Prospectus, when they became effective
or were filed with the Commission, as the case may be, conformed in
all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder and none of such documents contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading; and any further documents so
filed and incorporated by reference in the Registration Statement,
the Disclosure Package and the Prospectus, when such documents
become effective or are filed with the Commission, as the case may
be, will conform in all material respects to the requirements of
the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and will not
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 the light of the circumstances
under which they were made, not misleading.
2.4.2 Disclosure
of Agreements. The agreements and documents described in the
Registration Statement, the Disclosure Package and the Prospectus
conform in all material respects to the descriptions thereof
contained or incorporated by reference therein and there are no
agreements or other documents required by the Securities Act and
the Securities Act Regulations to be described in the Registration
Statement, the Disclosure Package and the Prospectus or to be filed
with the Commission as exhibits to the Registration Statement or to
be incorporated by reference in the Registration Statement, the
Disclosure Package or the Prospectus, that have not been so
described or filed or incorporated by reference. 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 or incorporated by reference in the
Registration Statement, the Disclosure Package and the Prospectus,
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 therefor 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 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 (each, a “Governmental Entity”), including,
without limitation, those relating to environmental laws and
regulations.
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2.4.3 Prior
Securities Transactions. Since January 1, 2018, no
securities of the Company have been sold by the Company or by or on
behalf of, or for the benefit of, any person or persons
controlling, controlled by or under common control with the
Company, except as disclosed in the Registration Statement, the
Disclosure Package or the Preliminary Prospectus.
2.4.4 Regulations.
The disclosures in the Registration Statement, the Disclosure
Package and the Prospectus concerning the effects of federal,
state, local and all foreign regulation on the Offering and the
Company’s business as currently contemplated are correct in
all material respects and no other such regulations are required to
be disclosed in the Registration Statement, the Disclosure Package
and the Prospectus which are not so disclosed.
2.4.5 No
Other Distribution of Offering Materials. The Company has
not, directly or indirectly, distributed and will not distribute
any offering material in connection with the Offering other than
any Preliminary Prospectus, the Disclosure Package, the Prospectus
and other materials, if any, permitted under the Securities Act and
consistent with Section 3.2 below.
2.5 Changes After Dates in Registration
Statement.
2.5.1 No
Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement, the
Disclosure Package and the Prospectus, except as otherwise
specifically stated therein: (i) there has been no material adverse
change in the financial position or results of operations of the
Company, nor any change or development that, singularly or in the
aggregate, would involve a material adverse change or a prospective
material adverse change, in or affecting the condition (financial
or otherwise), results of operations, business, assets or prospects
of the Company (a “Material
Adverse Change”); (ii) there have been no material
transactions entered into by the Company, other than as
contemplated pursuant to this Agreement; and (iii) no officer or
director of the Company has resigned from any position with the
Company.
2.5.2 Recent
Securities Transactions, etc. Subsequent to the respective
dates as of which information is given in the Registration
Statement, the Disclosure Package and the Prospectus, and except as
may otherwise be indicated or contemplated herein or disclosed in
the Registration Statement, the Disclosure Package and the
Prospectus, the Company has not: (i) issued any securities or
incurred any liability or obligation, direct or contingent, for
borrowed money; or (ii) declared or paid any dividend or made any
other distribution on or in respect to its capital
stock.
2.6 Disclosures in Commission
Filings. Since January 1, 2018, (i) none of the
Company’s filings with the Commission contained any untrue
statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and
(ii) the Company has made all filings with the Commission required
under the Exchange Act and the rules and regulations of the
Commission promulgated thereunder (the “Exchange Act
Regulations”).
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2.7 Independent Accountants. To the
knowledge of the Company, ▇▇▇▇▇▇ & Veselka Co. (the
“Auditors”),
whose report is filed with the Commission and included or
incorporated by reference in the Registration Statement, the
Disclosure Package and the Prospectus, is an independent registered
public accounting firm as required by the Securities Act and the
Securities Act Regulations and the Public Company Accounting
Oversight Board. The Auditors have not, during the periods covered
by the financial statements included or incorporated by reference
in the Registration Statement, the Disclosure Package and the
Prospectus, provided to the Company any non-audit services, as such
term is used in Section 10A(g) of the Exchange Act.
2.8 Financial Statements, etc. The
financial statements, including the notes thereto and supporting
schedules included or incorporated by reference in the Registration
Statement, the Disclosure Package and the Prospectus, fairly
present the financial position and the results of operations of the
Company at the dates and for the periods to which they apply; and
such financial statements have been prepared in conformity with
U.S. generally accepted accounting principles (“GAAP”), consistently applied
throughout the periods involved (provided that unaudited interim
financial statements are subject to year-end audit adjustments that
are not expected to be material in the aggregate and do not contain
all footnotes required by GAAP); and the supporting schedules
included or incorporated by reference in the Registration Statement
present fairly the information required to be stated therein. No
other historical or pro forma financial statements or supporting
schedules are required to be included in the Registration
Statement, the Disclosure Package or the Prospectus by the
Securities Act or the Securities Act Regulations. The pro forma
financial statements and the related notes, if any, included or
incorporated by reference in the Registration Statement, the
Disclosure Package and the Prospectus have been properly compiled
and prepared in accordance with the applicable requirements of the
Securities Act, the Securities Act Regulations, the Exchange Act or
the Exchange Act Regulations and present fairly the information
shown therein, and the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to
therein. All disclosures contained in the Registration Statement,
the Disclosure Package or the Prospectus, or incorporated or deemed
incorporated by reference therein, regarding “non-GAAP
financial measures” (as such term is defined by the rules and
regulations of the Commission), if any, comply with Regulation G of
the Exchange Act and Item 10 of Regulation S-K of the Securities
Act, to the extent applicable. Each of the Registration Statement,
the Disclosure Package and the Prospectus discloses all material
off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the
Company with unconsolidated entities or other persons that may have
a material current or future effect on the Company’s
financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or
significant components of revenues or expenses. Except as disclosed
in the Registration Statement, the Disclosure Package and the
Prospectus, (a) neither the Company nor any of its direct and
indirect subsidiaries, including each entity disclosed or described
in the Registration Statement, the Disclosure Package and the
Prospectus as being a subsidiary of the Company (each, a
“Subsidiary”
and, collectively, the “Subsidiaries”), has incurred any
material liabilities or obligations, direct or contingent, or
entered into any material transactions other than in the ordinary
course of business, (b) the Company has not declared or paid any
dividends or made any distribution of any kind with respect to its
capital stock, (c) there has not been any change in the capital
stock of the Company or any of its Subsidiaries, or, other than in
the course of business or any grants under any stock compensation
plan, and (d) there has not been any Material Adverse Change in the
Company’s long-term or short-term debt.
2.9 Authorized Capital; Options,
etc. The Company had, at the date or dates indicated in the
Registration Statement, the Disclosure Package and the Prospectus,
the duly authorized, issued and outstanding capitalization as set
forth therein. Based on the assumptions stated in the Registration
Statement, the Disclosure Package and the Prospectus, the Company
will have on the Closing Date the adjusted stock capitalization set
forth therein. Except as set forth in, or contemplated by, the
Registration Statement, the Disclosure Package and the Prospectus,
on the Effective Date, as of the Applicable Time and on the Closing
Date and any Option Closing Date, there will be no stock options,
warrants, or other rights to purchase or otherwise acquire any
authorized, but unissued shares of Common Stock of the Company or
any security convertible or exercisable into shares of Common Stock
of the Company, or any contracts or commitments to issue or sell
shares of Common Stock or any such options, warrants, rights or
convertible securities.
- 8 -
2.10 Valid
Issuance of Securities, etc.
2.10.1 Outstanding
Securities. All issued and outstanding securities of the
Company issued prior to the transactions contemplated by this
Agreement have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights
of rescission or similar rights with respect thereto or put rights,
and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of
the preemptive rights, rights of first refusal or rights of
participation of any holders of any security of the Company or
similar contractual rights granted by the Company. The authorized
shares of Common Stock conform in all material respects to all
statements relating thereto contained in the Registration
Statement, the Disclosure Package and the Prospectus. The offers
and sales of the outstanding shares of Common Stock 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 of such Shares, exempt from such registration
requirements.
2.10.2 Securities
Sold Pursuant to this Agreement. The Public Securities have
been duly authorized for issuance and sale and, when issued and
paid for, will be validly issued, fully paid and non-assessable;
the holders thereof are not and will not be subject to personal
liability by reason of being such holders; the Public Securities
are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual
rights granted by the Company; and all corporate action required to
be taken for the authorization, issuance and sale of the Public
Securities has been duly and validly taken. The Public Securities
conform in all material respects to all statements with respect
thereto contained in the Registration Statement, the Disclosure
Package and the Prospectus.
2.11 Registration
Rights of Third Parties. Except as disclosed to the
Representative or as disclosed in the Registration Statement, the
Disclosure Package or the Preliminary Prospectus, no holders of any
securities of the Company or any rights exercisable for or
convertible or exchangeable into securities of the Company have the
right to require the Company to register any such securities of the
Company under the Securities Act or to include any such securities
in a registration statement to be filed by the
Company.
2.12 Validity
and Binding Effect of Agreements. This Agreement has been
duly and validly authorized by the Company, and, when executed and
delivered, will constitute, the valid and binding agreement of the
Company, enforceable against the Company in accordance with
its terms, except: (i)
as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights
generally; (ii) as enforceability of any indemnification or
contribution provision may be limited under the federal and state
securities laws; and (iii) 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 therefor may be brought.
2.13 No
Conflicts, etc. The execution, delivery and performance by
the Company of this Agreement and all ancillary documents, the
consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms
hereof and thereof do not and will not, with or without the giving
of notice or the lapse of time or both: (i) result in a material
breach of, or conflict with any of the terms and provisions of, or
constitute a material default under, or result in the creation,
modification, termination or imposition of any lien, charge,
mortgage, pledge, security interest, claim, equity, trust or other
encumbrance, preferential arrangement, defect or restriction of any
kind whatsoever or encumbrance upon any property or assets of the
Company pursuant to the terms of any indenture, mortgage, deed of
trust, note, lease, loan agreement or any other agreement or
instrument, franchise, license or permit to which the Company is a
party or as to which any property of the Company is a party; (ii)
result in any violation of the provisions of the Company’s
Articles of Incorporation (as the same may be amended or restated
from time to time, the “Charter”) or the by-laws of the
Company (as the same may be amended or restated from time to time,
the “Bylaws”);
or (iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any Governmental Entity as of the date
hereof.
- 9 -
2.14 No
Defaults; Violations. No material default exists in the due
performance and observance of any term, covenant or condition of
any material license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not
in violation of any term or provision of its Charter or by-laws, or
in violation of any franchise, license, permit, applicable law,
rule, regulation, judgment or decree of any Governmental
Entity.
2.15 Corporate
Power; Licenses; Consents.
2.15.1 Conduct
of Business. The Company has all requisite corporate power
and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies that it needs as of
the date hereof to conduct its business purpose as described in the
Registration Statement, the Disclosure Package and the
Prospectus.
2.15.2 Transactions
Contemplated Herein. The Company has all corporate power and
authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been
obtained. No consent, authorization or order of, and no filing
with, any court, government agency or other body is required for
the valid issuance, sale and delivery of the Public Securities and
the consummation of the transactions and agreements contemplated by
this Agreement and as contemplated by the Registration Statement,
the Disclosure Package and the Prospectus, except with respect to
applicable federal and state securities laws and the rules and
regulations of the Exchange and the Financial Industry Regulatory
Authority, Inc. (“FINRA”).
2.16 D&O
Questionnaires. To the Company’s knowledge, all
information contained in the questionnaires (the
“Questionnaires”)
completed by each of the Company’s directors and officers
immediately prior to the Offering (the “Insiders”), as supplemented by all
information concerning the Company’s directors, officers and
principal shareholders as described in the Registration Statement,
the Disclosure Package and the Prospectus, as well as in the
Lock-Up Agreement (as defined in Section 2.27 below) provided to
the Underwriters, is true and correct in all material respects and
the Company has not become aware of any information which would
cause the information disclosed in the Questionnaires to become
materially inaccurate and incorrect.
2.17 Litigation;
Governmental Proceedings. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or
governmental proceeding pending or, to the Company’s
knowledge, threatened against, or involving the Company or, to the
Company’s knowledge, any executive officer or director which
has not been disclosed in the Registration Statement, the
Disclosure Package and the Prospectus, or in connection with the
Company’s listing application for the listing of the Public
Securities on the Exchange, and which is required to be
disclosed.
2.18 Good
Standing. The Company has been duly incorporated and is
validly existing as a corporation and is in good standing under the
laws of the State of Nevada as of the date hereof, and is duly
qualified to do business and is in good standing in each other
jurisdiction in which its ownership or lease of property or the
conduct of business requires such qualification, except where the
failure to be so qualified or in good standing, singularly or in
the aggregate, would not have or reasonably be expected to result
in a Material Adverse Change.
- 10 -
2.19 Insurance.
The Company carries or is entitled to the benefits of insurance,
with reputable insurers, in such amounts and covering such risks
which the Company believes are adequate, including, but not limited
to, directors and officers insurance coverage at least equal to
$5,000,000 and all such insurance is in full force and effect. The
Company has no reason to believe that it will not be able (i) to
renew its existing insurance coverage as and when such policies
expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its
business as now conducted and at a cost that would not result in a
Material Adverse Change.
2.20 Transactions
Affecting Disclosure to FINRA.
2.20.1 Finder’s
Fees. Except as described in the Registration Statement, the
Disclosure Package and the Prospectus, there are no claims,
payments, arrangements, agreements or understandings relating to
the payment of a finder’s, consulting or origination fee by
the Company or any Insider with respect to the sale of the Public
Securities hereunder or any other arrangements, agreements or
understandings of the Company or, to the Company’s knowledge,
any of its shareholders that may affect the Underwriters’
compensation, as determined by FINRA.
2.20.2 Payments
Within 180-Day Period. Except as described in the
Registration Statement, the Disclosure Package and the Prospectus,
the Company has not made any direct or indirect payments (in cash,
securities or otherwise) to: (i) any person, as a finder’s
fee, 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 180-day period prior to the date of this Agreement, other than
the payment to the Underwriters as provided hereunder in connection
with the Offering.
2.20.3 Use
of Proceeds. 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.
2.20.4 FINRA
Affiliation. There is no (i) officer or director of the
Company, (ii) beneficial owner of 5% or more of any class of the
Company's securities or (iii) beneficial owner of the
Company’s unregistered equity securities which were acquired
during the 180-day period immediately preceding the filing of the
Registration Statement that is an affiliate or associated person of
a FINRA member participating in the Offering (as determined in
accordance with the rules and regulations of FINRA). Except as
disclosed in the Registration Statement, the Disclosure Package and
the Prospectus, the Company (i) does not have any material lending
or other relationship with any bank or lending affiliate of any
Underwriter and (ii) does not intend to use any of the proceeds
from the sale of the Public Securities to repay any outstanding
debt owed to any affiliate of any Underwriter.
2.20.5 Information.
All information provided by the Company in its FINRA questionnaire
to Representative Counsel specifically for use by Representative
Counsel in connection with its Public Offering System filings (and
related disclosure) with FINRA is true, correct and complete in all
material respects.
- 11 -
2.21 Foreign
Corrupt Practices Act. None of the Company and its
Subsidiaries or, to the Company’s knowledge, any director,
officer, agent, employee or affiliate of the Company and its
Subsidiaries or any other person acting on behalf of the Company
and its Subsidiaries, has, directly or indirectly, given or agreed
to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was,
is, or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed
transaction) that (i) might subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, might have had a
Material Adverse Change; (iii) if not continued in the future,
might adversely affect the assets, business, operations or
prospects of the Company. 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
Foreign Corrupt Practices Act of 1977, as amended, and the rules
and regulations thereunder (collectively, the “FCPA”) or employee; (iv) violated
or is in violation of any provision of the FCPA or any applicable
non-U.S. anti-bribery statute or regulation; (v) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful
payment; or (vi) received notice of any investigation, proceeding
or inquiry by any Governmental Entity regarding any of the matters
in clauses (i)-(v) above; and the Company and, to the knowledge of
the Company, the Company’s affiliates have conducted their
respective businesses in compliance with the FCPA and have
instituted and maintain policies and procedures designed to ensure,
and which are reasonably expected to continue to ensure, continued
compliance therewith.
2.22 Compliance
with OFAC. None of the Company and its Subsidiaries or, to
the Company’s knowledge, any director, officer, agent,
employee or affiliate of the Company and its Subsidiaries or any
other person acting on behalf of the Company and its Subsidiaries,
is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Department of the
Treasury (“OFAC”), and the Company will not,
directly or indirectly, use the proceeds of the Offering hereunder,
or lend, contribute or otherwise make available such proceeds to
any subsidiary, joint venture partner or other person or entity,
for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC.
2.23 Forward-Looking
Statements. No forward-looking statement (within the meaning
of Section 27A of the Securities Act and Section 21E of the
Exchange Act) contained in either the Registration Statement,
Disclosure Package or Prospectus has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good
faith.
2.24 Money
Laundering Laws. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial recordkeeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the money laundering statutes of all jurisdictions, the
rules and regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any
Governmental Entity (collectively, the “Money Laundering Laws”); and no
action, suit or proceeding by or before any Governmental Entity
involving the Company with respect to the Money Laundering Laws is
pending or, to the best knowledge of the Company,
threatened.
2.25 Regulatory.
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, Disclosure Package 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, the Disclosure Package 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, the Disclosure
Package 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,
the Time of Sale Disclosure Package 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.
- 12 -
2.26 Officers’
Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to you or to Representative
Counsel shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered
thereby.
2.27 Lock-Up
Agreements. Schedule 3 hereto contains a
complete and accurate list of the Company’s officers,
directors and beneficial owners of more than 5% of the Common Stock
as of the date hereof (collectively, the “Lock-Up Parties”). The Company has
caused each of the Lock-Up Parties to deliver to the Representative
an executed Lock-Up Agreement, in the form attached hereto as
Exhibit
A (the “Lock-Up Agreement”), prior to the
execution of this Agreement.
2.28 Subsidiaries.
All direct and indirect Subsidiaries of the Company are duly
organized and in good standing under the laws of the place of
organization or incorporation, and each Subsidiary is in good
standing in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification,
except where the failure to qualify would not have a Material
Adverse Change. The Company’s ownership and control of each
Subsidiary is as described in the Registration Statement, the
Disclosure Package and the Prospectus.
2.29 Related
Party Transactions.
2.29.1 Business
Relationships. There are no business relationships or
related party transactions involving the Company or any other
person required to be described in the Registration Statement, the
Disclosure Package and the Prospectus that have not been described
as required.
2.29.2 No
Relationships with Customers and Suppliers. No relationship,
direct or indirect, exists between or among the Company on the one
hand, and the directors, officers, 5% or greater stockholders,
customers or suppliers of the Company or any of the Company’s
affiliates on the other hand, which is required to be described in
the Disclosure Package and the Prospectus or a document
incorporated by reference therein and which is not so
described.
2.29.3 No
Unconsolidated Entities. There are no transactions,
arrangements or other relationships between and/or among the
Company, any of its affiliates (as such term is defined in Rule 405
of the Securities Act) and any unconsolidated entity, including,
but not limited to, any structure finance, special purpose or
limited purpose entity that could reasonably be expected to
materially affect the Company’s liquidity or the availability
of or requirements for its capital resources required to be
described in the Disclosure Package and the Prospectus or a
document incorporated by reference therein which have not been
described as required.
2.29.4 No
Loans or Advances to Affiliates. There are no outstanding
loans, advances (except normal advances for business expenses in
the ordinary course of business) or guarantees or indebtedness by
the Company to or for the benefit of any of the officers or
directors of the Company, any other affiliates of the Company or
any of their respective family members, except as disclosed in the
Registration Statement, the Disclosure Package and the
Prospectus.
- 13 -
2.30 Board
of Directors. The Board of Directors of the Company is
comprised of the persons disclosed in the Registration Statement,
the Disclosure Package and the Prospectus. The qualifications of
the persons serving as board members and the overall composition of
the board comply with the Exchange Act, the Exchange Act
Regulations, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules
promulgated thereunder (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act”) applicable to
the Company and the listing rules of the Exchange. At least one
member of the Audit Committee of the Board of Directors of the
Company qualifies as an “audit committee financial
expert,” as such term is defined under Regulation S-K and the
listing rules of the Exchange. In addition, at least a majority of
the persons serving on the Board of Directors qualify as
“independent,” as defined under the listing rules of
the Exchange.
2.31 ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Compliance.
2.31.1 Disclosure
Controls. The Company has developed and currently maintains
disclosure controls and procedures that will comply with Rule
13a-15 or 15d-15 under the Exchange Act Regulations, and such
controls and procedures are effective to ensure that all material
information concerning the Company will be made known on a timely
basis to the individuals responsible for the preparation of the
Company’s Exchange Act filings and other public disclosure
documents.
2.31.2 Compliance.
The Company is, or at the Applicable Time and on the Closing Date
will be, in material compliance with the provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act applicable to it, and has implemented or will
implement such programs and taken reasonable steps to ensure the
Company’s future compliance (not later than the relevant
statutory and regulatory deadlines therefor) with all of the
material provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
2.32 Accounting
Controls. The Company and its Subsidiaries maintain systems
of “internal control over financial reporting” (as
defined under Rules 13a-15 and 15d-15 under the Exchange Act
Regulations) that comply with the requirements of the Exchange Act
and have been designed by, or under the supervision of, their
respective principal executive and principal financial officers, or
persons performing similar functions, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP, including, but not limited to, 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. Except as disclosed in the Registration
Statement, the Disclosure Package and the Prospectus, the Company
is not aware of any material weaknesses in its internal controls.
The Company’s auditors and the Audit Committee of the Board
of Directors of the Company have been advised of: (i) all
significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are
known to the Company’s management and that have adversely
affected or are reasonably likely to adversely affect the
Company’ ability to record, process, summarize and report
financial information; and (ii) any fraud known to the
Company’s management, whether or not material, that involves
management or other employees who have a significant role in the
Company’s internal controls over financial reporting. Since
the date of the latest audited financial statements included in the
Disclosure Package, there has been no change in the Company’s
internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the
Company’s internal control over financial
reporting.
- 14 -
2.33 No
Investment Company Status. The Company is not and, after
giving effect to the Offering and the application of the proceeds
thereof as described in the Registration Statement, the Disclosure
Package and the Prospectus, will not be, required to register as an
“investment company,” as defined in the Investment
Company Act of 1940, as amended.
2.34 No
Labor Disputes. No labor dispute with the employees of the
Company or any of its Subsidiaries exists or, to the knowledge of
the Company, is imminent.
2.35 Intellectual
Property Rights. The Company and each of its Subsidiaries
owns or possesses or has valid rights to use all patents, patent
applications, trademarks, service marks, trade names, trademark
registrations, service ▇▇▇▇ registrations, copyrights, licenses,
inventions, trade secrets and similar rights (“Intellectual Property Rights”)
necessary for the conduct of the business of the Company and its
Subsidiaries as currently carried on and as described in the
Registration Statement, the Disclosure Package and the Prospectus.
To the knowledge of the Company, no action or use by the Company or
any of its Subsidiaries necessary for the conduct of its business
as currently carried on and as described in the Registration
Statement and the Prospectus will involve or give rise to any
infringement of, or license or similar fees (other than license or
similar fees described or contemplated in the Registration
Statement, the Disclosure Package and the Prospectus) for, any
Intellectual Property Rights of others. Neither the Company nor any
of its Subsidiaries has received any notice alleging any such
infringement of, license or similar fees for, or conflict with, any
asserted Intellectual Property Rights of others. Except as would
not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Change, (i) to the knowledge of
the Company, there is no infringement, misappropriation or
violation by third parties of any of the Intellectual Property
Rights owned by the Company; (ii) there is no pending or, to the
knowledge of the Company, threatened action, suit, proceeding or
claim by others challenging the rights of the Company in or to any
such Intellectual Property Rights, and the Company is unaware of
any facts which would form a reasonable basis for any such claim,
that would, individually or in the aggregate, together with any
other claims in this Section 2.35, reasonably be expected to result
in a Material Adverse Change; (iii) the Intellectual Property
Rights owned by the Company and, to the knowledge of the Company,
the Intellectual Property Rights licensed to the Company have not
been adjudged by a court of competent jurisdiction invalid or
unenforceable, in whole or in part, and there is no pending or, to
the Company’s knowledge, threatened action, suit, proceeding
or claim by others challenging the validity or scope of any such
Intellectual Property Rights, and the Company is unaware of any
facts which would form a reasonable basis for any such claim that
would, individually or in the aggregate, together with any other
claims in this Section 2.35, reasonably be expected to result in a
Material Adverse Change; (iv) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or
claim by others that the Company infringes, misappropriates or
otherwise violates any Intellectual Property Rights or other
proprietary rights of others, the Company has not received any
written notice of such claim and the Company is unaware of any
other facts which would form a reasonable basis for any such claim
that would, individually or in the aggregate, together with any
other claims in this Section 2.35, reasonably be expected to result
in a Material Adverse Change; and (v) to the Company’s
knowledge, no employee of the Company is in or has ever been in
violation in any material respect of any term of any employment
contract, patent disclosure agreement, invention assignment
agreement, non-competition agreement, non-solicitation agreement,
nondisclosure agreement or any restrictive covenant to or with a
former employer where the basis of such violation relates to such
employee’s employment with the Company, or actions undertaken
by the employee while employed with the Company and could
reasonably be expected to result, individually or in the aggregate,
in a Material Adverse Change. To the Company’s knowledge, all
material technical information developed by and belonging to the
Company which has not been disclosed in a filed patent application
has been kept confidential. The Company is not a party to or bound
by any options, licenses or agreements with respect to the
Intellectual Property Rights of any other person or entity that are
required to be set forth in the Registration Statement, the
Disclosure Package and the Prospectus and are not described
therein. The Registration Statement, the Disclosure Package and the
Prospectus contain in all material respects the same description of
the matters set forth in the preceding sentence. None of the
technology employed by the Company has been obtained or is being
used by the Company in violation of any contractual obligation
binding on the Company or, to the Company’s knowledge, any of
its officers, directors or employees, or otherwise in violation of
the rights of any persons.
- 15 -
All
licenses for the use of the Intellectual Property described in the
Registration Statement, the Disclosure Package and the Prospectus
are in full force and effect in all material respects and are
enforceable by the Company and, to the Company’s knowledge,
the other parties thereto, in accordance with their 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 therefor may be
brought. None of such agreements or instruments has been assigned
by the Company, and the Company has not, and to the Company’s
knowledge, no other party is in default thereunder and no event has
occurred that, with the lapse of time or the giving of notice, or
both, would constitute a default thereunder.
2.36 Reserved.
2.37 Taxes.
Each of the Company and its Subsidiaries has filed all returns (as
hereinafter defined) required to be filed with taxing authorities
prior to the date hereof or has duly obtained extensions of time
for the filing thereof. Each of the Company and its Subsidiaries
has paid all taxes (as hereinafter defined) shown as due on such
returns that were filed and has paid all taxes imposed on or
assessed against the Company or such respective Subsidiary. 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. Except as disclosed in writing
to the Underwriters, (i) no issues have been raised (and are
currently pending) by any taxing authority in connection with any
of the returns or taxes asserted as due from the Company or its
Subsidiaries, and (ii) no waivers of statutes of limitation with
respect to the returns or collection of taxes have been given by or
requested from the Company or its Subsidiaries. The term
“taxes” means
all federal, state, local, foreign and other net income, gross
income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or
other taxes, fees, assessments or charges of any kind whatever,
together with any interest and any penalties, additions to tax or
additional amounts with respect thereto. The term
“returns” means
all returns, declarations, reports, statements and other documents
required to be filed in respect to taxes.
2.38 ERISA
Compliance. The Company and any “employee benefit
plan” (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, “ERISA”)) established or maintained
by the Company or its “ERISA Affiliates” (as defined
below) are in compliance in all material respects with ERISA.
“ERISA
Affiliate” means, with respect to the Company, any
member of any group of organizations described in Sections
414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations
thereunder (the “Code”) of which the Company is a
member. No “reportable event” (as defined under ERISA)
has occurred or is reasonably expected to occur with respect to any
“employee benefit plan” established or maintained by
the Company or any of its ERISA Affiliates. No “employee
benefit plan” established or maintained by the Company or any
of its ERISA Affiliates, if such “employee benefit
plan” were terminated, would have any “amount of
unfunded benefit liabilities” (as defined under ERISA).
Neither the Company nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any material liability under (i) Title
IV of ERISA with respect to termination of, or withdrawal from, any
“employee benefit plan” or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each “employee benefit plan”
established or maintained by the Company or any of its ERISA
Affiliates that is intended to be qualified under Section 401(a) of
the Code is so qualified and, to the knowledge of the Company,
nothing has occurred, whether by action or failure to act, which
would cause the loss of such qualification.
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2.39 Compliance
with Laws. The Company: (i) is and at all times has been in
compliance with all statutes, rules, or regulations applicable to
the ownership, testing, development, manufacture, packaging,
processing, use, distribution, marketing, labeling, promotion,
sale, offer for sale, storage, import, export storage or disposal
of any product manufactured or distributed by the Company
(“Applicable
Laws”), except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Change; (ii) has not received any correspondence or written notice
from any governmental authority alleging or asserting noncompliance
with any Applicable Laws or any licenses, certificates, approvals,
clearances, authorizations, permits and supplements or amendments
thereto required by any such Applicable Laws (“Authorizations”); (iii) possesses
all material Authorizations and such Authorizations are valid and
in full force and effect and are not in material violation of any
term of any such Authorizations; (iv) has not received written
notice of any claim, action, suit, proceeding, hearing,
enforcement, investigation, arbitration or other action from any
governmental authority or third party alleging that any product
operation or activity is in violation of any Applicable Laws or
Authorizations and has no knowledge that any such governmental
authority or third party is considering any such claim, litigation,
arbitration, action, suit, investigation or proceeding; (v) has not
received written notice that any governmental authority has taken,
is taking or intends to take action to limit, suspend, modify or
revoke any Authorizations and has no knowledge that any such
governmental authority is considering such action; and (vi) has
filed, obtained, maintained or submitted all material reports,
documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any
Applicable Laws or Authorizations and that all such reports,
documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete and correct
in all material respects on the date filed (or were corrected or
supplemented by a subsequent submission.
2.40 Environmental
Laws. The Company and its Subsidiaries are in compliance
with all foreign, federal, state and local rules, laws and
regulations relating to the use, treatment, storage and disposal of
hazardous or toxic substances or waste and protection of health and
safety or the environment which are applicable to their businesses
(“Environmental
Laws”), except where the failure to comply would not,
singularly or in the aggregate, result in a Material Adverse
Change. There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission, or other
release of any kind of toxic or other wastes or other hazardous
substances by, due to, or caused by the Company or any of its
Subsidiaries (or, to the Company’s knowledge, any other
entity for whose acts or omissions the Company or any of its
Subsidiaries is or may otherwise be liable) upon any of the
property now or previously owned or leased by the Company or any of
its Subsidiaries, or upon any other property, in violation of any
law, statute, ordinance, rule, regulation, order, judgment, decree
or permit or which would, under any law, statute, ordinance, rule
(including rule of common law), regulation, order, judgment, decree
or permit, give rise to any liability; and there has been no
disposal, discharge, emission or other release of any kind onto
such property or into the environment surrounding such property of
any toxic or other wastes or other hazardous substances with
respect to which the Company has knowledge. In the ordinary course
of business, the Company and its Subsidiaries conduct periodic
reviews of the effect of Environmental Laws on their business and
assets, in the course of which they identify and evaluate
associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or
governmental permits issued thereunder, any related constraints on
operating activities and any potential liabilities to third
parties). On the basis of such reviews, the Company and its
Subsidiaries have reasonably concluded that such associated costs
and liabilities would not have, singularly or in the aggregate, a
Material Adverse Change.
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2.41 Real
Property. Except as set forth in the Registration Statement,
the Disclosure Package and the Prospectus, the Company and each of
its Subsidiaries have good and marketable title in fee simple to,
or have valid rights to lease or otherwise use, all items of real
or personal property which are material to the business of the
Company and its Subsidiaries taken as a whole, in each case free
and clear of all liens, encumbrances, security interests, claims
and defects that do not, singly or in the aggregate, materially
affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any
of its Subsidiaries; and all of the leases and subleases material
to the business of the Company and its subsidiaries, considered as
one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Registration
Statement, the Disclosure Package and the Prospectus, are in full
force and effect, and neither the Company nor any Subsidiary has
received any notice of any material 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.
2.42 Contracts
Affecting Capital. There are no transactions, arrangements
or other relationships between and/or among the Company, any of its
affiliates (as such term is defined in Rule 405 of the Securities
Act Regulations) and any unconsolidated entity, including, but not
limited to, any structured finance, special purpose or limited
purpose entity that could reasonably be expected to materially
affect the Company’s or any of its Subsidiaries’
liquidity or the availability of or requirements for their capital
resources required to be described or incorporated by reference in
the Registration Statement, the Disclosure Package and the
Prospectus which have not been described or incorporated by
reference as required.
2.43 Ineligible
Issuer. At the time of filing the Registration Statement and
any post-effective amendment thereto, at the time of effectiveness
of the Registration Statement and any amendment thereto, at the
earliest time thereafter that the Company or another offering
participant made a bona fide offer (within the meaning of Rule
164(h)(2) of the Securities Act Regulations) of the Public
Securities and at the date hereof, the Company was not and is not
an “ineligible issuer,” as defined in Rule 405, without
taking account of any determination by the Commission pursuant to
Rule 405 that it is not necessary that the Company be considered an
ineligible issuer.
2.44 Reserved.
2.45 Industry
Data. The statistical and market-related data included in
each of the Registration Statement, the Disclosure Package and the
Prospectus are based on or derived from sources that the Company
reasonably and in good faith believes are reliable and accurate or
represent the Company’s good faith estimates that are made on
the basis of data derived from such sources.
2.46 Margin
Securities. The Company owns no “margin
securities” as that term is defined in Regulation U of the
Board of Governors of the Federal Reserve System (the
“Federal Reserve
Board”), and none of the proceeds of Offering will be
used, directly or indirectly, for the purpose of purchasing or
carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might
cause any of the shares of Common Stock to be considered a
“purpose credit” within the meanings of Regulation T, U
or X of the Federal Reserve Board.
2.47 Exchange
Act Reports. The Company has filed in a timely manner all
reports required to be filed pursuant to Sections 13(a), 13(e), 14
and 15(d) of the Exchange Act during the preceding 12 months
(except to the extent that Section 15(d) requires reports to be
filed pursuant to Sections 13(d) and 13(g) of the Exchange Act,
which shall be governed by the next clause of this sentence); and
the Company has filed in a timely manner all reports required to be
filed pursuant to Sections 13(d) and 13(g) of the Exchange Act
since January 1, 2018, except where the failure to timely file
could not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Change.
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2.48 Minute
Books. The minute books of the Company have been made
available to the Underwriters and counsel for the Underwriters, and
such books (i) contain a complete summary of all meetings and
actions of the board of directors (including each board committee)
and stockholders of the Company (or analogous governing bodies and
interest holders, as applicable), and each of its Subsidiaries
since the time of its respective incorporation or organization
through the date of the latest meeting and action, and (ii)
accurately in all material respects reflect all transactions
referred to in such minutes. There are no material transactions,
agreements, dispositions or other actions of the Company that are
not properly approved and/or accurately and fairly recorded in the
minute books of the Company, as applicable.
2.49 Integration.
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 the Offering to be
integrated with prior offerings by the Company for purposes of the
Securities Act that would require the registration of any such
securities under the Securities Act.
2.50 No
Stabilization. Neither the Company nor, to its knowledge,
any of its employees, directors or stockholders (without the
consent of the Representative) has taken or shall take, directly or
indirectly, any action designed to or that has constituted or that
might reasonably be expected to cause or result in, under
Regulation M of 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
Securities.
2.51 Confidentiality
and Non-Competition. To the Company’s knowledge, no
director, officer, key employee or consultant of the Company is
subject to any confidentiality, non-disclosure, non-competition
agreement or non-solicitation agreement with any employer or prior
employer that could reasonably be expected to materially affect his
ability to be and act in his respective capacity of the Company or
be expected to result in a Material Adverse Change.
3. Covenants of the Company. The
Company covenants and agrees as follows:
3.1 Amendments to Registration
Statement. The Company shall deliver to the Representative,
prior to filing, any amendment or supplement to the Registration
Statement, Preliminary Prospectus, Disclosure Package or Prospectus
proposed to be filed after the Effective Date and not file any such
amendment or supplement to which the Representative shall
reasonably object in writing.
3.2 Federal Securities
Laws.
3.2.1 Compliance.
The Company, subject to Section 3.2.2, shall comply with the
requirements of Rule 424(b) and Rule 430B of the Securities Act
Regulations, and will notify the Representative promptly, and
confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement or any amendment or
supplement to any Preliminary Prospectus, the Disclosure Package or
the Prospectus shall have been filed and when any post-effective
amendment to the Registration Statement shall become effective;
(ii) of the receipt of any comments from the Commission; (iii) of
any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to any Preliminary
Prospectus, the Disclosure Package or the Prospectus or for
additional information; (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment or of any order
preventing or suspending the use of any Preliminary Prospectus, the
Disclosure Package or the Prospectus, or of the suspension of the
qualification of the Public Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes or of any examination pursuant
to Section 8(d) or 8(e) of the Securities Act concerning the
Registration Statement; and (v) if the Company becomes the subject
of a proceeding under Section 8A of the Securities Act in
connection with the Offering of the Public Securities. The Company
shall effect all filings required under Rule 424(b) of the
Securities Act Regulations, in the manner and within the time
period required by Rule 424(b) (without reliance on Rule
424(b)(8)), and shall take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for
filing under Rule 424(b) was received for filing by the Commission
and, in the event that it was not, it will promptly file such
prospectus. The Company shall use its best efforts to prevent the
issuance of any stop order, prevention or suspension and, if any
such order is issued, to obtain the lifting thereof at the earliest
possible moment.
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3.2.2 Continued
Compliance. The Company shall comply with the Securities
Act, the Securities Act Regulations, the Exchange Act and the
Exchange Act Regulations so as to permit the completion of the
distribution of the Public Securities as contemplated in this
Agreement and in the Registration Statement, the Disclosure Package
and the Prospectus. If at any time when a prospectus relating to
the Public Securities is (or, but for the exception afforded by
Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by
the Securities Act to be delivered in connection with sales of the
Public Securities, any event shall occur or condition shall exist
as a result of which it is necessary, in the opinion of counsel for
the Underwriters or for the Company, to (i) amend the Registration
Statement in order that the Registration Statement will not include
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) amend or supplement the
Disclosure Package or the Prospectus in order that the Disclosure
Package or the Prospectus, as the case may be, will not include any
untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time
it is delivered to a purchaser or (iii) amend the Registration
Statement or amend or supplement the Disclosure Package or the
Prospectus, as the case may be, in order to comply with the
requirements of the Securities Act or the Securities Act
Regulations, the Company will promptly (A) give the Representative
notice of such event; (B) prepare any amendment or supplement as
may be necessary to correct such statement or omission or to make
the Registration Statement, the Disclosure Package or the
Prospectus comply with such requirements and, a reasonable amount
of time prior to any proposed filing or use, furnish the
Representative with copies of any such amendment or supplement and
(C) file with the Commission any such amendment or supplement;
provided, however, that the Company shall not
file or use any such amendment or supplement to which the
Representative or counsel for the Underwriters shall reasonably
object. The Company will furnish to the Underwriters such number of
copies of such amendment or supplement as the Underwriters may
reasonably request. The Company has given the Representative notice
of any filings made pursuant to the Exchange Act or the Exchange
Act Regulations within 48 hours prior to the Applicable Time. The
Company shall give the Representative notice of its intention to
make any such filing from the Applicable Time until the later of
the Closing Date and the exercise in full or expiration of the
Over-allotment Option specified in Section 1.2 hereof and will
furnish the Representative with copies of the related document(s) a
reasonable amount of time prior to such proposed filing, as the
case may be, and will not file or use any such document to which
the Representative or counsel for the Underwriters shall reasonably
object.
3.2.3 Exchange
Act Registration. For a period of three (3) years after the
date of this Agreement, the Company shall use its best efforts to
maintain the registration of the shares of Common Stock under the
Exchange Act. The Company shall not deregister the shares of Common
Stock under the Exchange Act without the prior written consent of
the Representative.
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3.2.4 Free
Writing Prospectuses. The Company agrees that, unless it
obtains the prior written consent of the Representative, it shall
not make any offer relating to the Public Securities that would
constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a “free writing prospectus,” or a
portion thereof, required to be filed by the Company with the
Commission or retained by the Company under Rule 433; provided, however, that the Representative shall
be deemed to have consented to each Issuer General Use Free Writing
Prospectus hereto and any “road show that is a written
communication” within the meaning of Rule 433(d)(8)(i) that
has been reviewed by the Representative. The Company represents
that it has treated or agrees that it will treat each such free
writing prospectus consented to, or deemed consented to, by the
Underwriters as an “issuer free writing prospectus,” as
defined in Rule 433, and that it has complied and will comply with
the applicable requirements of Rule 433 with respect thereto,
including timely filing with the Commission where required,
legending and record keeping. If at any time following issuance of
an Issuer Free Writing Prospectus there occurred or occurs an event
or development as a result of which such Issuer Free Writing
Prospectus conflicted or would conflict with the information
contained in the Registration Statement or included or would
include an untrue statement of a material fact or omitted or would
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at
that subsequent time, not misleading, the Company will promptly
notify the Underwriters and will promptly amend or supplement, at
its own expense, such Issuer Free Writing Prospectus to eliminate
or correct such conflict, untrue statement or
omission.
3.2.5 Reserved.
3.3 Delivery to the Underwriters of
Registration Statements. The Company has delivered or made
available or shall deliver or make available to the Representative
and counsel for the Representative, without charge, signed copies
of the Registration Statement as originally filed and each
amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated or
deemed to be incorporated by reference therein) and signed copies
of all consents and certificates of experts, and will also deliver
to the Underwriters, without charge, a conformed copy of the
Registration Statement as originally filed and each amendment
thereto (without exhibits) for each of the Underwriters. The copies
of the Registration Statement and each amendment thereto furnished
to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to
▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
3.4 Delivery to the Underwriters of
Prospectuses. The Company has delivered or made available or
will deliver or make available to each Underwriter, without charge,
as many copies of each Preliminary Prospectus as such Underwriter
reasonably requested, and the Company hereby consents to the use of
such copies for purposes permitted by the Securities Act. The
Company will furnish to each Underwriter, without charge, during
the period when a prospectus relating to the Public Securities is
(or, but for the exception afforded by Rule 172, would be) required
to be delivered under the Securities Act, such number of copies of
the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be identical
to the electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, except to the extent permitted by
Regulation S-T.
3.5 Events Requiring Notice to the
Representative. The Company shall use its best efforts to
cause the Registration Statement to remain effective with a current
prospectus for at least nine (9) months after the Applicable Time,
and shall notify the Representative immediately and confirm the
notice in writing: (i) of the issuance by the Commission of any
stop order or of the initiation, or the threatening, of any
proceeding for that purpose; (ii) of the issuance by any state
securities commission of any proceedings for the suspension of the
qualification of the Public Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose; (iii) of the mailing and delivery to
the Commission for filing of any amendment or supplement to the
Registration Statement or Prospectus; (iv) of the receipt of any
comments or request for any additional information from the
Commission; and (v) of the happening of any event during the period
described in this Section 3.5 that, in the judgment of the Company,
makes any statement of a material fact made in the Registration
Statement, the Disclosure Package or the Prospectus untrue or that
requires the making of any changes in (a) the Registration
Statement in order to make the statements therein not misleading,
or (b) in the Disclosure Package 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 shall make every reasonable
effort to obtain promptly the lifting of such order.
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3.6 Review of Financial Statements.
For a period of five (5) years after the date of this Agreement,
the Company, at its expense, shall cause its regularly engaged
independent registered public accounting firm to review (but not
audit) the Company’s financial statements for each of the
three fiscal quarters immediately preceding the announcement of any
quarterly financial information.
3.7 Listing. The Company shall use
its best efforts to maintain the listing of the shares of Common
Stock (including the Public Securities) on the Exchange for at
least three years from the date of this Agreement.
3.8 Financial Public Relations
Firm. The Company shall retain a financial public relations
firm reasonably acceptable to the Representative and the Company,
which firm shall be experienced in assisting issuers in public
offerings of securities and in their relations with their security
holders, and shall retain such firm or another firm reasonably
acceptable to the Representative for a period of not less than two
(2) years after the date hereof.
3.9 Reports to the
Representative.
3.9.1 Periodic
Reports, etc. For a period of three (3) years after the date
of this Agreement, the Company shall furnish or make available 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 Representative: (i) a copy of each
periodic report the Company shall be required to file with the
Commission under the Exchange Act and the Exchange Act Regulations;
(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) five copies of each registration statement filed
by the Company under the Securities Act; (v) a copy of each report
or other communication furnished to stockholders and (vi) 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, however, the Representative shall sign,
if requested by the Company, a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to the
Representative and Representative Counsel in connection with the
Representative’s receipt of such information. Documents filed
with the Commission pursuant to its ▇▇▇▇▇ system shall be deemed to
have been delivered to the Representative pursuant to this Section
3.9.1.
3.9.2 Transfer
Agent; Transfer Sheets. For a period of three (3) years
after the date of this Agreement, the Company shall retain a
transfer agent and registrar acceptable to the Representative (the
“Transfer
Agent”) and shall furnish to the Representative at the
Company’s sole cost and expense such transfer sheets of the
Company’s securities as the Representative may reasonably
request, including the daily and monthly consolidated transfer
sheets of the Transfer Agent and DTC. American Stock Transfer and
Trust Company. is acceptable to the Representative to act as
Transfer Agent for the shares of Common Stock.
3.9.3 Trading
Reports. During such time as the Public
Securities are listed
on the Exchange, the
Company shall provide to the Representative, at the Company’s
expense, such reports published by Exchange relating to price
trading of the Public Securities, as the Representative shall
reasonably request.
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3.10 Payment
of Expenses. The Company hereby agrees to pay on each of the
Closing Date and the Option Closing Date, if any, to the extent not
paid at the Closing Date, all expenses incident to the performance
of the obligations of the Company under this Agreement, including,
but not limited to: (i) all filing fees and communication expenses
relating to the registration of Public Securities to be issued and
sold in the Offering with the Commission; (ii) all filing fees
associated with the review of the Offering by FINRA; (iii) all fees
and expenses relating to the listing of such Common Stock on the
Exchange, including any fees charged by The Depository Trust
Company (DTC) for new securities; (iv) all fees, expenses and
disbursements relating to background checks of the Company’s
officers and directors in an amount not to exceed $15,000 in the
aggregate; (v) all fees, expenses and disbursements relating to the
registration, qualification or exemption of the Public Securities
under the securities laws of such foreign jurisdictions as the
Representative may reasonably designate; (vi) the costs of all
mailing and printing of the underwriting documents (including,
without limitation, this Agreement, any blue sky surveys and, if
appropriate, any agreement among underwriters, selected
dealers’ agreement, underwriters’ questionnaire and
power of attorney), Registration Statements, Prospectuses and all
amendments, supplements and exhibits thereto and as many
preliminary and final Prospectuses as the Representative may
reasonably deem necessary; (vii) the costs and expenses of the
public relations firm referred to in Section 3.8 hereof; (viii) the
costs of preparing, printing and delivering certificates
representing the Public Securities; (ix) fees and expenses of the
Transfer Agent for the shares of Common Stock; (x) stock transfer
and/or stamp taxes, if any, payable upon the transfer of securities
from the Company to the Underwriters; (xi) to the extent approved
by the Company in writing, the costs associated with post-Closing
advertising of the Offering in the national editions of The Wall
Street Journal and The New York Times; (xii) the costs associated
with bound volumes of the public offering materials as well as
commemorative mementos and lucite tombstones, each of which the
Company or its designee will provide within a reasonable time after
the Closing in such quantities as the Representative may reasonably
request; (xiii) the fees and expenses of the Company’s
accountants; (xiv) the fees and expenses of the Company’s
legal counsel and other agents and representatives; (xv) the
reasonable and documented fees and expenses of Underwriter’s
legal counsel; (xvi) the $29,500 cost associated with the
Underwriters’ use of Ipreo’s book building, prospectus
tracking and compliance software for the Offering; (xvii) $10,000
for data services and communications expenses, and (xviii) up to
$20,000 of the Underwriters’ actual accountable “road
show” expenses for the offering. The reimbursement of the
Underwriter’s expenses shall not exceed $100,000 in the
aggregate, which foregoing limit does not apply to the
non-acccountable expense amount referred to Section 3.11 below. The
Representative may deduct from the net proceeds of the Offering
payable to the Company on the Closing Date, or the Option Closing
Date, if any, the expenses set forth herein to be paid by the
Company to the Underwriters, provided, however, that in the event
that the Offering is terminated, the Company agrees to reimburse
the Underwriters pursuant to Section 8.3 hereof.
3.11 Non-accountable
Expenses. The Company further agrees that, in addition to
the expenses payable pursuant to Section 3.10, on the Closing Date
it shall pay to the Representative, by deduction from the net
proceeds of the Offering contemplated herein, a non-accountable
expense allowance equal to one percent (1.0%) of the gross proceeds
received by the Company from the sale of the Public Securities),
less the Advance (as such term is defined in Section 8.3 hereof),
provided, however, that in the event that the Offering is
terminated, the Company agrees to reimburse the Underwriters
pursuant to Section 8.3 hereof.
3.12 Application
of Net Proceeds. The Company shall apply the net proceeds
from the Offering received by it in a manner consistent with the
application thereof described under the caption “Use of
Proceeds” in the Registration Statement, the Disclosure
Package and the Prospectus.
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3.13 Delivery
of Earnings Statements to Security Holders. The Company
shall make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth
(15th)
full calendar month following the date of this Agreement, an
earnings statement (which need not be certified by independent
registered public accounting firm unless required by the Securities
Act or the Securities Act Regulations, 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 (12) consecutive months
beginning after the date of this Agreement.
3.14 Stabilization.
Neither the Company nor, to its knowledge, any of its employees,
directors or shareholders (without the consent of the
Representative) has taken or shall take, directly or indirectly,
any action designed to or that has constituted or that might
reasonably be expected to cause or result in, under Regulation M of
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 Securities.
3.15 Internal
Controls. The Company shall 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.
3.16 Accountants.
As of the date of this Agreement, the Company shall continue to
retain a nationally recognized independent registered public
accounting firm for a period of at least three (3) years after the
date of this Agreement. The Representative acknowledges that the
Auditors are acceptable to the Representative.
3.17 FINRA.
The Company shall advise the Representative (who shall make an
appropriate filing with FINRA) if it is or becomes aware that (i)
any officer or director of the Company, (ii) any beneficial owner
of 5% or more of any class of the Company's securities or (iii) any
beneficial owner of the Company's unregistered equity securities
which were acquired during the 180 days immediately preceding the
filing of the Registration Statement is or becomes an affiliate or
associated person of a FINRA member participating in the Offering
(as determined in accordance with the rules and regulations of
FINRA).
3.18 No
Fiduciary Duties. The Company acknowledges and agrees that
the Underwriters’ responsibility to the Company is solely
contractual in nature and that none of the Underwriters or their
affiliates or any selling agent 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.
3.19 OMITTED.
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3.20 Company
Lock-Up Agreements. The Company, on behalf of itself and any
successor entity, agrees that, without the prior written consent of
the Representative, it will not for a period of 15 trading days
after the date of this Agreement (the “Lock-Up Period”), (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 to purchase, lend, or otherwise transfer
or dispose of, directly or indirectly, any shares of capital stock
of the Company or any securities convertible into or exercisable or
exchangeable for shares of capital stock of the Company in a public
offering registered or otherwise qualified with the Commission (a
“Registered Offering”); (ii) 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
to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for
shares of capital stock of the Company in a transaction that is not
a Registered Offering for
a consideration per share or involving a price per share for which
one share of Common Stock is at any time issuable upon the exercise
of any such option or upon conversion, exercise or exchange of any
such right or warrant or otherwise pursuant to the terms thereof is
less than the Firm Share offering price in the Offering; (iii) file
or cause to be filed any registration statement with the Commission
relating to the offering of any shares of capital stock of the
Company or any securities convertible into or exercisable or
exchangeable for shares of capital stock of the Company; or (iv)
complete any offering of debt securities of the Company, other than
entering into a line of credit with a traditional bank or (v) enter
into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
capital stock of the Company, whether any such transaction
described in clause (i), (ii), (iii), (iv) or (v) above is to be
settled by delivery of shares of capital stock of the Company or
such other securities, in cash or otherwise.
The
restrictions contained in this Section 3.20 shall not apply to (i)
the shares of Common Stock to be sold hereunder, (ii) the issuance
by the Company of shares of Common Stock upon the exercise of a
stock option or warrant or the conversion of a security outstanding
on the date hereof, which is disclosed in the Registration
Statement, Disclosure Package and Prospectus, provided that such
options, warrants, and securities have not been amended since the
date of this Agreement to increase the number of such securities or
to decrease the exercise price, exchange price or conversion price
of such securities or to extend the term of such securities, (iii)
the issuance by the Company of stock options, shares of capital
stock of the Company or other awards under any equity compensation
plan of the Company, provided that in each of (ii) and (iii) above,
the underlying shares shall be restricted from sale during the
entire Lock-Up Period.
3.21 Release
of D&O Lock-up Period. If the Representative, in its
sole discretion, agrees to release or waive the restrictions set
forth in the Lock-Up Agreements described in Section 2.27 hereof
for an officer or director of the Company and provide the Company
with notice of the impending release or waiver at least three (3)
Business Days before the effective date of the release or waiver,
the Company agrees to announce the impending release or waiver by a
press release substantially in the form of Exhibit B hereto through a
major news service at least two (2) Business Days before the
effective date of the release or waiver.
3.22 Blue
Sky Qualifications. The Company shall use its best efforts,
in cooperation with the Underwriters, if necessary, to qualify the
Public Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions (domestic or
foreign) as the Representative may designate and to maintain such
qualifications in effect so long as required to complete the
distribution of the Public Securities; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise so subject.
3.23 Reporting
Requirements. The Company, during the period when a
prospectus relating to the Public Securities is (or, but for the
exception afforded by Rule 172, would be) required to be delivered
under the Securities Act, will file all documents required to be
filed with the Commission pursuant to the Exchange Act within the
time periods required by the Exchange Act and Exchange Act
Regulations. Additionally, the Company shall report the use of
proceeds from the issuance of the Public Securities as may be
required under Rule 463 under the Securities Act
Regulations.
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3.24 Press
Releases. Prior to the Closing Date and any Option Closing
Date, the Company shall not issue any press release or other
communication directly or indirectly or hold any press conference
with respect to the Company, its condition, financial or otherwise,
or earnings, business affairs or business prospects (except for
routine oral marketing communications in the ordinary course of
business and consistent with the past practices of the Company and
of which the Representative is notified), without the prior written
consent of the Representative, which consent shall not be
unreasonably withheld, unless in the judgment of the Company and
its counsel, and after notification to the Representative, such
press release or communication is required by law.
3.25 ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
Except as disclosed in the Registration Statement, the Disclosure
Package and the Prospectus, the Company shall at all times comply
with all applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act in effect
from time to time.
4. Conditions of Underwriters’
Obligations. The obligations of the Underwriters to purchase
and pay for the Public Securities, as provided herein, shall be
subject to (i) the continuing accuracy of the representations and
warranties of the Company as of the date hereof and as of each of
the Closing Date and the Option Closing Date, if any; (ii) the
accuracy of the statements of officers of the Company made pursuant
to the provisions hereof; (iii) the performance by the Company of
its obligations hereunder; and (iv) the following
conditions:
4.1 Regulatory
Matters.
4.1.1 Commission
Actions; Required Filings. At each of the Closing Date and
any Option Closing Date, no stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment
thereto shall have been issued under the Securities Act, no order
preventing or suspending the use of any Preliminary Prospectus or
the Prospectus shall have been issued and no proceedings for any of
those purposes shall have been instituted or are pending or, to the
Company’s knowledge, contemplated by the Commission. The
Company has complied with each request (if any) from the Commission
for additional information. A prospectus containing the Rule 430B
Information shall have been filed with the Commission in the manner
and within the time frame required by Rule 424(b) under the
Securities Act Regulations (without reliance on Rule 424(b)(8)) or
a post-effective amendment providing such information shall have
been filed with, and declared effective by, the Commission in
accordance with the requirements of Rule 430B under the Securities
Act Regulations.
4.1.2 FINRA
Clearance. On or before the date of this Agreement, the
Representative shall have received clearance from FINRA as to the
amount of compensation allowable or payable to the Underwriters as
described in the Registration Statement.
4.1.3 Exchange Stock
Market Clearance. On the Closing Date, the Company’s
shares of Common Stock, including the Firm Shares and the shares of
Common Stock underlying the Option Shares) shall have been approved
for listing on the Exchange, subject only to official notice of
issuance. On the first Option Closing Date (if any), the
Company’s shares of Common Stock (including the shares of
Common Stock underlying the Option Shares) shall have been approved
for listing on the Exchange, subject only to official notice of
issuance.
4.2 Company Counsel
Matters.
4.2.1 Closing
Date Opinion of Counsel. On the Closing Date, the
Representative shall have received the favorable opinion of Law
Offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company, and a
written statement providing certain “10b-5” negative
assurances, dated the Closing Date and addressed to the
Representative, substantially in the form of Exhibit C attached
hereto.
4.2.2 Option
Closing Date Opinion of Counsel. On the Option Closing Date,
if any, the Representative shall have received the favorable
opinion of the counsel listed in Section 4.2.1 dated the Option
Closing Date, addressed to the Representative and in form and
substance reasonably satisfactory to the Representative, confirming
as of the Option Closing Date, the statements made by such counsel
in their opinion delivered on the Closing Date.
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4.2.3 Reliance.
In rendering such opinions, such counsel may rely: (i) as to
matters involving the application of laws other than the laws of
the United States and jurisdictions in which they are admitted, to
the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and
substance reasonably satisfactory to the Representative) of other
counsel reasonably acceptable to the Representative, familiar with
the applicable laws; and (ii) as to matters of fact, to the extent
they deem proper, on certificates or other written statements of
officers of the Company and officers of departments of various
jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company; provided that copies of any such
statements or certificates shall be delivered to Representative
Counsel if requested. The opinions of ▇▇▇▇▇▇▇ & ▇▇▇▇▇, and any
opinion relied upon by ▇▇▇▇▇▇▇ & ▇▇▇▇▇, shall include a
statement to the effect that it may be relied upon by
Representative Counsel in its opinion delivered to the
Underwriters.
4.3 Comfort Letters.
4.3.1 Cold
Comfort Letter. At the time this Agreement is executed you
shall have received a cold comfort letter from the Auditors
containing statements and information of the type customarily
included in accountants’ comfort letters with respect to the
financial statements and certain financial information contained or
incorporated or deemed incorporated by reference in the
Registration Statement, the Disclosure Package and the Prospectus,
addressed to the Representative and in form and substance
satisfactory in all respects to you and to the
Auditors, dated as of
the date of this Agreement.
4.3.2 Bring-down
Comfort Letter. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received from
the Auditors a letter, dated as of the Closing Date or the Option
Closing Date, as applicable, to the effect that the Auditors
reaffirm the statements made in their letter furnished pursuant to
Section 4.3.1, except that the specified date referred to shall be
a date not more than three (3) business days prior to the Closing
Date or the Option Closing Date, as applicable.
4.4 Officers’
Certificates.
4.4.1 Officers’
Certificate. The Company shall have furnished to the
Representative a certificate, dated the Closing Date and any Option
Closing Date (if such date is other than the Closing Date), of its
Chief Executive Officer and its Chief Financial Officer stating
that (i) such officers have carefully examined the Registration
Statement, the Disclosure Package, any Issuer Free Writing
Prospectus and the Prospectus and, in their opinion, the
Registration Statement and each amendment thereto, as of the
Applicable Time and as of the Closing Date (or any Option Closing
Date if such date is other than the Closing Date) did not include
any untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Disclosure Package,
as of the Applicable Time and as of the Closing Date (or any Option
Closing Date if such date is other than the Closing Date), any
Issuer Free Writing Prospectus as of its date and as of the Closing
Date (or any Option Closing Date if such date is other than the
Closing Date), and the Prospectus and each amendment or supplement
thereto, as of the respective date thereof and as of the Closing
Date, did not include any untrue statement of a material fact and
did not omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances in which
they were made, not misleading, (ii) since the effective date of
the Registration Statement, no event has occurred which should have
been set forth in a supplement or amendment to the Registration
Statement, the Disclosure Package or the Prospectus, (iii) to the
best of their knowledge after reasonable investigation, as of the
Closing Date (or any Option Closing Date if such date is other than
the Closing Date), the representations and warranties of the
Company in this Agreement are true and correct and the Company has
complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the
Closing Date (or any Option Closing Date if such date is other than
the Closing Date), and (iv) there has not been, subsequent to the
date of the most recent audited financial statements included or
incorporated by reference in the Disclosure Package, any material
adverse change in the financial position or results of operations
of the Company, or any change or development that, singularly or in
the aggregate, would involve a material adverse change or a
prospective material adverse change, in or affecting the condition
(financial or otherwise), results of operations, business, assets
or prospects of the Company, except as set forth in the
Prospectus.
- 27 -
4.4.2 Secretary’s
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary of the Company,
dated the Closing Date or the Option Date, as the case may be,
respectively, certifying: (i) that each of the Charter and Bylaws is true and complete, has not been
modified and is in full force and effect; (ii) that the resolutions
of the Company’s Board of Directors relating to the Offering
are in full force and effect and have not been modified; (iii) as
to the accuracy and completeness of all correspondence between the
Company or its counsel and the Commission; and (iv) as to the
incumbency of the officers of the Company. The documents referred
to in such certificate shall be attached to such
certificate.
4.4.3 Chief
Financial Officer’s Certificate. At each of the
Closing Date and the Option Closing Date, if any, the
Representative shall have received a certificate of the Chief
Financial Officer of the Company, dated the Closing Date or the
Option Date, as the case may be, respectively, with respect to the
accuracy of certain information contained in the Registration
Statement, the Disclosure Package and the Prospectus, in a form
reasonably acceptable to the Representative.
4.5 No Material Changes. Prior to
and on each of the Closing Date and each Option Closing Date, if
any: (i) there shall have been no material adverse change or
development involving a prospective material adverse change in the
condition or prospects or the business activities, financial or
otherwise, of the Company from the latest dates as of which such
condition is set forth in the Registration Statement and no change
in the capital stock or debt of the Company, the Disclosure Package
and the Prospectus; (ii) no action, suit or proceeding, at law or
in equity, shall have been pending or threatened against the
Company or any Insider 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
or income of the Company, except as set forth in the Registration
Statement, the Disclosure Package and the Prospectus; (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; (iv) no action shall have been taken and no law,
statute, rule, regulation or order shall have been enacted, adopted
or issued by any Governmental Entity which would prevent the
issuance or sale of the Public Securities or materially and
adversely affect or potentially materially and adversely affect the
business or operations of the Company; (v) no injunction,
restraining order or order of any other nature by any federal or
state court of competent jurisdiction shall have been issued which
would prevent the issuance or sale of the Public Securities or
materially and adversely affect or potentially materially and
adversely affect the business or operations of the Company and (vi)
the Registration Statement, the Disclosure Package and the
Prospectus and any amendments or supplements thereto shall contain
all material statements which are required to be stated therein in
accordance with the Securities Act and the Securities Act
Regulations and shall conform in all material respects to the
requirements of the Securities Act and the Securities Act
Regulations, and neither the Registration Statement, the Disclosure
Package, the Prospectus nor any amendment or supplement thereto
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 the light of the circumstances
under which they were made, not misleading.
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4.6 Corporate Proceedings. All
corporate proceedings and other legal matters incident to the
authorization, form and validity of each of this Agreement, the
Public Securities, the Registration Statement, the Disclosure
Package and the Prospectus and all other legal matters relating to
this Agreement and the transactions contemplated hereby and thereby
shall be reasonably satisfactory in all material respects to
counsel for the Underwriters, and the Company shall have furnished
to such counsel all documents and information that they may
reasonably request to enable them to pass upon such
matters.
4.7 Delivery of
Agreements.
4.7.1 Lock-Up
Agreements. On or before the date of this Agreement, the
Company shall have delivered to the Representative executed copies
of the Lock-Up Agreements from each of the persons listed in
Schedule 3
hereto.
4.8 Additional Documents. At the
Closing Date and at each Option Closing Date (if any)
Representative Counsel shall have been furnished with such
documents and opinions as they may require for the purpose of
enabling Representative Counsel to deliver an opinion to the
Underwriters, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Public
Securities as herein contemplated shall be satisfactory in form and
substance to the Representative and Representative
Counsel.
5. Indemnification.
5.1 Indemnification
of the Underwriters.
5.1.1 General.
Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Underwriter, its affiliates and
each of its and their respective directors, officers, members,
employees, representatives, partners, shareholders, affiliates,
counsel and agents and each person, if any, who controls any such
Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (collectively the
“Underwriter Indemnified
Parties,” and each an “Underwriter Indemnified Party”),
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 any of
the Underwriter Indemnified Parties and the Company or between any
of the Underwriter Indemnified Parties 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 (a
“Claim”), arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained
in (i) the Registration Statement, the Disclosure Package, the
Preliminary Prospectus, the Prospectus or any Issuer Free Writing
Prospectus (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, including any “road
show” or investor presentations made to investors by the
Company (whether in person or electronically); (iii) any
application or other document or written communication (in this
Section 5, 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 Securities under
the securities laws thereof or filed with the Commission, any state
securities commission or agency, the Exchange or any other national
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 the 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, the
Underwriters’ Information, or (iv) otherwise arising in
connection with or allegedly in connection with the Offering. The
Company also agrees that it will reimburse each Underwriter
Indemnified Party for all fees and expenses (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 any of the Underwriter Indemnified
Parties and the Company or between any of the Underwriter
Indemnified Parties and any third party, or otherwise)
(collectively, the “Expenses”), and further agrees
wherever and whenever possible to advance payment of Expenses as
they are incurred by an Underwriter Indemnified Party in
investigating, preparing, pursuing or defending any
Claim.
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5.1.2 Procedure.
If any action is brought against an Underwriter Indemnified Party
in respect of which indemnity may be sought against the Company
pursuant to Section 5.1.1, such Underwriter Indemnified Party 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
approval of such Underwriter Indemnified Party) and payment of
actual expenses if an Underwriter Indemnified Party requests that
the Company do so. Such Underwriter Indemnified Party 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, 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 shall be borne by the
Companythe Company, and shall be advanced by the Company. The
Company shall not be liable for any settlement of any action
effected without its consent (which shall not be unreasonably
withheld). In addition, the Company shall not, without the prior
written consent of the Underwriters, settle, compromise or consent
to the entry of any judgment in or otherwise seek to terminate any
pending or threatened action in respect of which advancement,
reimbursement, indemnification or contribution may be sought
hereunder (whether or not such Underwriter Indemnified Party is a
party thereto) unless such settlement, compromise, consent or
termination (i) includes an unconditional release of each
Underwriter Indemnified Party, acceptable to such Underwriter
Indemnified Party, from all liabilities, expenses and claims
arising out of such action for which indemnification or
contribution may be sought and (ii) does not include a statement as
to or an admission of fault, culpability or a failure to act, by or
on behalf of any Underwriter Indemnified Party.
5.2 Indemnification of the Company.
Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, its directors, its officers who
signed the Registration Statement and persons 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 the several Underwriters, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue
statements or omissions made in the Registration Statement, any
Preliminary Prospectus, the Disclosure Package or Prospectus or any
amendment or supplement thereto or in any application, in reliance
upon, and in strict conformity with, the Underwriters’
Information. In case any action shall be brought against the
Company or any other person so indemnified based on any Preliminary
Prospectus, the Registration Statement, the Disclosure Package or
Prospectus or any amendment or supplement thereto or any
application, and in respect of which indemnity may be sought
against any 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 the
several Underwriters by the provisions of Section 5.1.2. The
Company agrees promptly to notify the Representative of the
commencement of any litigation or proceedings against the Company
or any of its officers, directors or any person, if any, who
controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, in connection
with the issuance and sale of the Public Securities or in
connection with the Registration Statement, the Disclosure Package,
the Prospectus or any Issuer Free Writing Prospectus.
- 30 -
5.3 Contribution.
5.3.1 Contribution
Rights. If the indemnification provided for in this Section
5 shall for any reason be unavailable to or insufficient to hold
harmless an indemnified party under Section 5.1 or 5.2 in respect
of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall,
in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of
such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect
the relative benefits received by the Company, on the one hand, and
the Underwriters, on the other, from the Offering of the Public
Securities, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to
in clause (i) above but also the relative fault of the Company, on
the one hand, and the Underwriters, on the other, with respect to
the statements or omissions that resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the Underwriters, on
the other, with respect to such Offering shall be deemed to be in
the same proportion as the total net proceeds from the Offering of
the Public Securities purchased under this Agreement (before
deducting expenses) received by the Company, as set forth in the
table on the cover page of the Prospectus, on the one hand, and the
total underwriting discounts and commissions received by the
Underwriters with respect to the shares of the Common Stock
purchased under this Agreement, as set forth in the table on the
cover page of the Prospectus, on the other hand. The relative fault
shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by the
Company or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contributions pursuant to this Section 5.3.1 were to be determined
by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 5.3.1
shall be deemed to include, for purposes of this Section 5.3.1, any
legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 5.3.1 in
no event shall an Underwriter be required to contribute any amount
in excess of the amount by which the total underwriting discounts
and commissions received by such Underwriter with respect to the
Offering of the Public Securities exceeds the amount of any damages
that such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5.3.2 Contribution
Procedure. Within fifteen (15) 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 15 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 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 5.3.2 are intended to supersede, to the extent permitted by
law, any right to contribution under the Securities Act, the
Exchange Act or otherwise available. Each Underwriter’s
obligations to contribute pursuant to this Section 5.3 are several
and not joint.
- 31 -
6. Default by an
Underwriter.
6.1 Default Not Exceeding 10% of Firm
Shares or Option Shares. If any Underwriter or Underwriters
shall default in its or their obligations to purchase the Firm
Shares or the Option Shares, if the Over-allotment Option is
exercised hereunder, and if the number of the Firm Shares or Option
Shares with respect to which such default relates does not exceed
in the aggregate 10% of the number of Firm Shares or Option Shares
that all Underwriters have agreed to purchase hereunder, then such
Firm Shares or Option Shares to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to their
respective commitments hereunder.
6.2 Default Exceeding 10% of Firm Shares
or Option Shares. In the event that the default addressed in
Section 6.1 relates to more than 10% of the Firm Shares or Option
Shares, you may in your discretion arrange for yourself or for
another party or parties to purchase such Firm Shares or Option
Shares to which such default relates on the terms contained herein.
If, within one (1) Business Day after such default relating to more
than 10% of the Firm Shares or Option Shares, you do not arrange
for the purchase of such Firm Shares or Option Shares, then the
Company shall be entitled to a further period of one (1) Business
Day within which to procure another party or parties satisfactory
to you to purchase said Firm Shares or Option Shares on such terms.
In the event that neither you nor the Company arrange for the
purchase of the Firm Shares or Option Shares to which a default
relates as provided in this Section 6, this Agreement will
automatically be terminated by you or the Company without liability
on the part of the Company (except as provided in Sections 3.9 and
5 hereof) or the several Underwriters (except as provided in
Section 5 hereof); provided, however, that if such default occurs
with respect to the Option Shares, this Agreement will not
terminate as to the Firm Shares; and provided, further, that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the
other Underwriters and to the Company for damages occasioned by its
default hereunder.
6.3 Postponement of Closing Date.
In the event that the Firm Shares or Option Shares to which the
default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as
aforesaid, you or the Company shall have the right to postpone the
Closing Date or Option Closing Date for a reasonable period, but
not in any event exceeding five (5) Business Days, in order to
effect whatever changes may thereby be made necessary in the
Registration Statement, the Disclosure Package or the Prospectus or
in any other documents and arrangements, and the Company agrees to
file promptly any amendment to the Registration Statement, the
Disclosure Package or the Prospectus that in the opinion of counsel
for the Underwriter may thereby be made necessary. The term
“Underwriter” as
used in this Agreement shall include any party substituted under
this Section 6 with like effect as if it had originally been a
party to this Agreement with respect to such shares of Common
Stock.
7. Additional
Covenants.
7.1 Board Composition and Board
Designations. The Company shall ensure that: (i) the
qualifications of the persons serving as members of the Board of
Directors and the overall composition of the Board comply with the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, with the Exchange Act and with the listing
rules of the Exchange or any other national securities exchange, as
the case may be, in the event the Company seeks to have any of its
securities listed on another exchange or quoted on an automated
quotation system, and (ii) if applicable, at least one member of
the Audit Committee of the Board of Directors qualifies as an
“audit committee financial expert,” as such term is
defined under Regulation S-K and the listing rules of the
Exchange.
- 32 -
7.2 Prohibition on Press Releases and
Public Announcements. The Company shall not issue press
releases or engage in any other publicity, without the
Representative’s prior written consent, for a period ending
at 5:00 p.m., Eastern time, on the first (1st) Business Day
following the forty-fifth (45th) day after the
Closing Date, other than normal and customary releases issued in
the ordinary course of the Company’s business.
8. Effective Date of this Agreement and
Termination Thereof.
8.1 Effective Date. This Agreement
shall become effective when both the Company and the Representative
have executed the same and delivered counterparts of such
signatures to the other party.
8.2 Termination. 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 your opinion will
in the immediate future materially disrupt, general securities
markets in the United States; or (ii) if trading on the New York
Stock Exchange or the Nasdaq Stock Market LLC 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 your opinion,
make it inadvisable to proceed with the delivery of the Firm Shares
or Option 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 Securities or to enforce contracts
made by the Underwriters for the sale of the Public
Securities.
8.3 Expenses. Notwithstanding
anything to the contrary in this Agreement, except in the case of a
default by the Underwriters, pursuant to Section 6.2 above, in the
event that this Agreement shall not be carried out for any reason
whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the Company shall be
obligated to pay to the Underwriters their actual and accountable
out-of-pocket expenses related to the transactions contemplated
herein then due and payable (including the fees and disbursements
of Representative’s Counsel) up to $50,000 (inclusive of the
$10,000 advance for out-of-pocket accountable expenses previously
paid by the Company to the Representative (the “Advance”)), and upon demand the
Company shall pay the full amount thereof to the Representative on
behalf of the Underwriters; provided, however, that such expense
cap in no way limits or impairs the indemnification and
contribution provisions of this Agreement. Notwithstanding the
foregoing, any advance received by the Representative will be
reimbursed to the Company to the extent not actually incurred in
compliance with FINRA Rule 5110(f)(2)(C).
8.4 Survival of 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 Section 5 shall remain in full force and effect and
shall not be in any way affected by, such election or termination
or failure to carry out the terms of this Agreement or any part
hereof.
- 33 -
8.5 Representations, Warranties,
Agreements to Survive. All representations, warranties and
agreements contained in this Agreement or in certificates of
officers of the Company submitted pursuant hereto, shall remain
operative and in full force and effect regardless of (i) any
investigation made by or on behalf of any Underwriter or its
Affiliates or selling agents, any person controlling any
Underwriter, its officers or directors or any person controlling
the Company or (ii) delivery of and payment for the Public
Securities.
9. Miscellaneous.
9.1 Notices. All communications
hereunder, except as herein otherwise specifically provided, shall
be in writing and shall be mailed (registered or certified mail,
return receipt requested), personally delivered or sent by e-mail
or facsimile transmission and confirmed and shall be deemed given
when so delivered, e-mailed or faxed and confirmed or if mailed,
two (2) days after such mailing.
If to
the Representative:
ThinkEquity, a
division of Fordham Financial Management, Inc.
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇
▇▇▇▇, Head of Investment Banking
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇@▇▇▇▇▇-▇▇▇▇▇▇.▇▇▇
with a
copy (which shall not constitute notice) to:
Loeb
& Loeb LLP
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax
No.:(▇▇▇) ▇▇▇-▇▇▇▇
If to
the Company:
▇▇▇▇ ▇.
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
▇▇▇▇
Fax No:
(▇▇▇) ▇▇▇-▇▇▇▇
with a
copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇
& ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇
▇▇. 77007
Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Esq.
Fax No:
(▇▇▇) ▇▇▇-▇▇▇▇
- 34 -
9.2 Research Analyst Independence.
The Company acknowledges that each Underwriter’s research
analysts and research departments are required to be independent
from its investment banking division and are subject to certain
regulations and internal policies, and that such
Underwriter’s research analysts may hold views and make
statements or investment recommendations and/or publish research
reports with respect to the Company and/or the Offering that differ
from the views of their investment banking division. The Company
acknowledges that each Underwriter is a full service securities
firm and as such from time to time, subject to applicable
securities laws, rules and regulations, may effect transactions for
its own account or the account of its customers and hold long or
short positions in debt or equity securities of the Company;
provided, however, that nothing in this Section
9.2 shall relieve the Underwriter of any responsibility or
liability it may otherwise bear in connection with activities in
violation of applicable securities laws, rules or
regulations.
9.3 Headings. The headings
contained herein are for the sole purpose of convenience of
reference, and shall not in any way limit or affect the meaning or
interpretation of any of the terms or provisions of this
Agreement.
9.4 Amendment. This Agreement may
only be amended by a written instrument executed by each of the
parties hereto.
9.5 Entire Agreement. This
Agreement (together with the other agreements and documents being
delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof and thereof, and supersedes all prior
agreements and understandings of the parties, oral and written,
with respect to the subject matter hereof. Notwithstanding anything
to the contrary set forth herein, it is understood and agreed by
the parties hereto that all other terms and conditions of that
certain engagement letter between the Company and ThinkEquity, a
division of Fordham Financial Management, Inc., dated May 8, 2020
shall remain in full force and effect.
9.6 Binding Effect. This Agreement
shall inure solely to the benefit of and shall be binding upon the
Representative, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 5 hereof,
and their respective successors, legal representatives, heirs and
assigns, and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or in respect of or
by virtue of this Agreement or any provisions herein contained. The
term “successors and assigns” shall not include a
purchaser, in its capacity as such, of securities from any of the
Underwriters.
9.7 Governing Law; Consent to
Jurisdiction; Trial by Jury. This Agreement shall be
governed by and construed and enforced in accordance with the laws
of the State of New York, without giving effect to conflict of laws
principles thereof. The Company hereby agrees that any action,
proceeding or claim against it arising out of, or relating in any
way to this Agreement shall be brought and enforced in the New York
Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York, and irrevocably
submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an
inconvenient forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 9.1
hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the Company in any action, proceeding or
claim. The Company agrees that the prevailing party(ies) in any
such action shall be entitled to recover from the other party(ies)
all of its reasonable attorneys’ fees and expenses relating
to such action or proceeding and/or incurred in connection with the
preparation therefor. The Company (on its behalf and, to the extent
permitted by applicable law, on behalf of its stockholders and
affiliates) and each of the Underwriters hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby.
- 35 -
9.8 Execution in Counterparts. This
Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which
shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of
the parties hereto and delivered to each of the other parties
hereto. Delivery of a signed counterpart of this Agreement by
facsimile or email/pdf transmission shall constitute valid and
sufficient delivery thereof.
9.9 Waiver, etc. The failure of any
of the parties hereto to at any time enforce any of the provisions
of this Agreement shall not be deemed or construed to be a waiver
of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of
this Agreement. No waiver of any breach, non-compliance or
non-fulfillment of any of the provisions of this Agreement shall be
effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver
is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any
other or subsequent breach, non-compliance or
non-fulfillment.
[Signature Page
Follows]
- 36 -
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 between us.
|
|
Very truly
yours,
TORCHLIGHT ENERGY
RESOURCES, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
▇▇▇▇
▇▇▇▇
|
|
|
|
|
Name:
▇▇▇▇
▇▇▇▇
|
|
|
|
|
Title:
President
|
|
Confirmed as of the
date first written
above
mentioned, on behalf of itself and as
Representative of
the several Underwriters
named
on Schedule 1
hereto:
THINKEQUITY
A
Division of Fordham Financial Management, Inc.
|
|
|
|
|
By:
|
▇▇▇▇
▇▇▇▇
|
|
|
|
Name: ▇▇▇▇ ▇▇▇▇
|
|
|
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Title:
Head of
Investment Banking
|
|
SCHEDULE 1
|
|
|
|
|
Underwriter
|
Total Number of Firm Shares to be Purchased
|
Number of Additional Shares to be Purchased if the Over-Allotment
Option is Fully Exercised by the Representative
|
|
ThinkEquity,
a division of Fordham Financial Management, Inc.
|
3,000,000
|
450,000
|
|
|
|
|
|
TOTAL
|
3,000,000
|
450,000
|
Sch.
1-1
SCHEDULE 2-A
Pricing
Information
Number
of Firm Shares: 3,000,000
Number
of Option Shares: 450,000
Public
Offering Price per Share: $0.34
Underwriting
Discount per Share: $0.0255
Underwriting
non-accountable expense allowance per
Share: $0.0034
Proceeds
to Company per Share (before expenses): $0.3111
SCHEDULE 2-B
Issuer General Use Free Writing Prospectuses
Free
Writing Prospectus filed on May 13, 2020.
Sch.
2-1
SCHEDULE 3
List of Lock-Up Parties
▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇.
Alexandre
▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
Sch
3-1
EXHIBIT
A
Form of Representative’s Warrant Agreement
THE
REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE
HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS
PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED
HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL,
TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A
PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE DATE OF THE
UNDERWRITING AGREEMENT (DEFINED BELOW) TO ANYONE OTHER THAN (I)
THINKEQUITY, A DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC., OR
AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE
OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF THINKEQUITY, A
DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC., OR OF ANY SUCH
UNDERWRITER OR SELECTED DEALER.
THIS
PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO NOVEMBER 20, 2020.
VOID AFTER 5:00 P.M., EASTERN TIME, MAY 18, 2025.
TORCHLIGHT ENERGY RESOURCES, INC.
Warrant
Shares: _______
Initial
Exercise Date: November 20, 2020
THIS
WARRANT TO PURCHASE COMMON STOCK (the “Warrant”) certifies that,
for value received, _____________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after November
20, 2020 (the “Initial Exercise Date”)
and, in accordance with FINRA Rule 5110(f)(2)(G)(i), prior to at
5:00 p.m. (New York time) on the date that is five (5) years
following the date of the Underwriting Agreement (as defined
herein) (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Torchlight
Energy Resources, Inc., a Nevada corporation (the
“Company”), up to ______
shares of Common Stock, $.001 par value, of the Company (the
“Warrant
Shares”), as subject to adjustment hereunder. The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section
2(b).
Section 1. Definitions. In addition to the
terms defined elsewhere in this Agreement, the following terms have
the meanings indicated in this Section 1:
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“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.
Sch.
3-2
“Commission” means the
United States Securities and Exchange Commission.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“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.
“Rule 144” means Rule 144
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.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Trading Day” means a day
on which the New York Stock Exchange 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 MKT,
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).
“VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if OTCQB or OTCQX is not a Trading Market, the volume
weighted average price of a share of Common Stock for such date (or
the nearest preceding date) on the OTCQB or OTCQX as applicable,
(c) if Common Stock is not then listed or quoted for trading on the
OTCQB or OTCQX and if prices for Common Stock are then reported in
the “Pink Sheets” published by OTC Markets Group, Inc.
(or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of Common
Stock so reported, or (d) in all other cases, the fair market
value of the Common Stock as determined by an independent appraiser
selected in good faith by the Holder and reasonably acceptable to
the Company, the fees and expenses of which shall be paid by the
Company.
Section 2. Exercise.
Sch.
3-3
a)
Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by
delivery to the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the
Company) of a duly executed facsimile copy (or e-mail attachment)
of the Notice of Exercise Form annexed hereto. Within two (2)
Trading Days following the date of exercise as aforesaid, the
Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or
cashier’s check drawn on a United States bank unless the
cashless exercise procedure specified in Section 2(c) below is
specified in the applicable Notice of Exercise. No ink-original
Notice of Exercise shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Exercise form be required. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within five
(5) Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
Form within two (2) Business Days of receipt of such notice.
The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
b)
Exercise Price. The
exercise price per share of the Common Stock under this Warrant
shall be $0.425, subject to
adjustment hereunder (the “Exercise
Price”).
c)
Cashless Exercise.
If at any time on or after the Initial Exercise Date, there is no
effective registration statement registering, or the prospectus
contained therein is not available for the issuance of the Warrant
Shares to the Holder, then this Warrant may also be exercised, in
whole or in part, at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive
the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:
(A) =
the VWAP on the Trading Day immediately preceding the date on which
Holder elects to exercise this Warrant by means of a
“cashless exercise,” as set forth in the applicable
Notice of Exercise;
(B) =
the Exercise Price of this Warrant, as adjusted hereunder;
and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
If Warrant Shares are issued in such a
“cashless exercise,” the parties acknowledge and agree
that in accordance with Section 3(a)(9) of the Securities Act, the
Warrant Shares shall take on the registered characteristics of the
Warrants being exercised, and the holding period of the Warrants
being exercised may be tacked on to the holding period of the
Warrant Shares. The Company agrees not to take any
position contrary to this Section 2(c).
Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
d)
Mechanics of
Exercise.
Sch.
3-4
i.
Delivery of Warrant Shares
Upon Exercise. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by its transfer agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder, or (B)
the Warrant Shares are eligible for resale by the Holder without
volume or manner-of-sale limitations pursuant to Rule 144 and, in
either case, the Warrant Shares have been sold by the Holder prior
to the Warrant Share Delivery Date (as defined below), and
otherwise by physical delivery of a certificate, registered in the
Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is two
(2) Trading Days after the delivery to the Company of the
Notice of Exercise (such date, the “Warrant Share Delivery
Date”). If the Warrant Shares can be delivered via
DWAC, the transfer agent shall have received from the Company, at
the expense of the Company, any legal opinions or other
documentation required by it to deliver such Warrant Shares without
legend (subject to receipt by the Company of reasonable back up
documentation from the Holder, including with respect to affiliate
status) and, if applicable and requested by the Company prior to
the Warrant Share Delivery Date, the transfer agent shall have
received from the Holder a confirmation of sale of the Warrant
Shares (provided the requirement of the Holder to provide a
confirmation as to the sale of Warrant Shares shall not be
applicable to the issuance of unlegended Warrant Shares upon a
cashless exercise of this Warrant if the Warrant Shares are then
eligible for resale pursuant to Rule 144(b)(1)). The Warrant Shares
shall be deemed to have been issued, and Holder or any other person
so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date
the Warrant has been exercised, with payment to the Company of the
Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to
Section 2(d)(vi) prior to the issuance of such shares, having
been paid. If the Company fails for any reason to deliver to the
Holder the Warrant Shares subject to a Notice of Exercise by the
second Trading Day following the Warrant Share Delivery Date, the
Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares subject to such
exercise (based on the VWAP of the Common Stock on the date of the
applicable Notice of Exercise), $10 per Trading Day (increasing to
$20 per Trading Day on the fifth Trading Day after such liquidated
damages begin to accrue) for each Trading Day after the second
Trading Day following such Warrant Share Delivery Date until such
Warrant Shares are delivered or Holder rescinds such
exercise.
ii.
Delivery of New Warrants
Upon Exercise. If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of
the Warrant Shares, deliver to the Holder a new Warrant evidencing
the rights of the Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
Sch.
3-5
iii.
Rescission Rights.
If the Company fails to cause its transfer agent to deliver to the
Holder the Warrant Shares pursuant to Section 2(d)(i) by the
Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise; provided, however, that the Holder shall
be required to return any Warrant Shares or Common Stock subject to
any such rescinded exercise notice concurrently with the return to
Holder of the aggregate Exercise Price paid to the Company for such
Warrant Shares and the restoration of Holder’s right to
acquire such Warrant Shares pursuant to this Warrant (including,
issuance of a replacement warrant certificate evidencing such
restored right).
iv.
Compensation for Buy-In on
Failure to Timely Deliver Warrant Shares Upon Exercise. In
addition to any other rights available to the Holder, if the
Company fails to cause its transfer agent to transmit to the Holder
the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or
otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (2)
the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
v.
No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such exercise, the Company shall, at its election,
either pay a cash adjustment in respect of such final fraction in
an amount equal to such fraction multiplied by the Exercise Price
or round up to the next whole share.
Sch.
3-6
vi.
Charges, Taxes and
Expenses. Issuance of Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such Warrant
Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder;
provided,
however, that in
the event that Warrant Shares are to be issued in a name other than
the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto. The Company shall pay all transfer
agent fees required for same-day processing of any Notice of
Exercise and all fees to the Depository Trust Company (or another
established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant
Shares.
vii.
Closing of Books.
The Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.
viii.
Signature. This
Section 2 and the exercise form attached hereto set forth the
totality of the procedures required of the Holder in order to
exercise this Purchase Warrant. Without limiting the
preceding sentences, no ink-original exercise form shall be
required, nor shall any medallion guarantee (or other type of
guarantee or notarization) of any exercise form be required in
order to exercise this Purchase Warrant. No additional legal
opinion, other information or instructions shall be required of the
Holder to exercise this Purchase Warrant. The Company shall
honor exercises of this Purchase Warrant and shall deliver Shares
underlying this Purchase Warrant in accordance with the terms,
conditions and time periods set forth herein.
Sch.
3-7
e)
Holder’s Exercise
Limitations. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, the Holder
(together with the Holder’s Affiliates, and any other Persons
acting as a group together with the Holder or any of the
Holder’s Affiliates), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates and (ii) exercise or conversion of the unexercised
or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any
of its Affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(e), beneficial ownership
shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance
with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith. To the extent that the limitation contained in this
Section 2(e) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant
is exercisable shall be in the sole discretion of the Holder, and
the submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership
Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of
this Section 2(e), in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as reflected in (A) the Company’s most
recent periodic or annual report filed with the Commission, as the
case may be, (B) a more recent public announcement by the Company
or (C) a more recent written notice by the Company or the
Company’s transfer agent setting forth the number of shares
of Common Stock outstanding. Upon the written or oral request
of a Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates since the
date as of which such number of outstanding shares of Common Stock
was reported. The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this
Warrant. The Holder, upon notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this
Section 2(e), provided that the Beneficial Ownership Limitation in
no event exceeds 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(e) shall continue to
apply. Any increase in the Beneficial Ownership Limitation will not
be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section 3. Certain
Adjustments.
a)
Stock Dividends and
Splits. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the
Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event, and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification. For
the purposes of clarification, the Exercise Price of this Warrant
will not be adjusted in the event that the Company or any
Subsidiary thereof, as applicable, sells or grants any option to
purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any
option to purchase or other disposition) any Common Stock or Common
Stock Equivalents, at an effective price per share less than the
Exercise Price then in effect.
Sch.
3-8
b)
[RESERVED]
c)
Subsequent Rights
Offerings. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or
sells any Common Stock Equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to
participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a
result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the
Holder exceeding the Beneficial Ownership Limitation).
d)
Pro Rata
Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend
(other than cash dividends) or other distribution of its assets (or
rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without
limitation, any distribution of shares or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a "Distribution"), at any time
after the issuance of this Warrant, then, in each such case, the
Holder shall be entitled to participate in such Distribution to the
same extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation). To the extent that this Warrant
has not been partially or completely exercised at the time of such
Distribution, such portion of the Distribution shall be held in
abeyance for the benefit of the Holder until the Holder has
exercised this Warrant.
Sch.
3-9
e)
Fundamental
Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of
the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii)
any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property, or (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable by holders of Common Stock as a result of such
Fundamental Transaction for each share of Common Stock for which
this Warrant is exercisable immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 2(e) on
the exercise of this Warrant). For purposes of any such exercise,
the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate
Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. The Company shall cause any
successor entity in a Fundamental Transaction in which the Company
is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this
Warrant in accordance with the provisions of this Section 3(e)
pursuant to written agreements in form and substance reasonably
satisfactory to the Holder and approved by the Holder (without
unreasonable delay) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.
Sch.
3-10
f)
Calculations. All
calculations under this Section 3 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
g)
Notice to
Holder.
i.
Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to
any provision of this Section 3, the Company shall promptly mail to
the Holder a notice setting forth the Exercise Price after such
adjustment and any resulting adjustment to the number of Warrant
Shares and setting forth a brief statement of the facts requiring
such adjustment.
ii.
Notice to Allow Exercise
by Holder. If (A) the Company shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock, (C) the Company shall
authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (D) the approval of any stockholders
of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize
the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company, then, in each case, the Company
shall cause to be mailed a notice to the Holder at its last address
as it shall appear upon the Warrant Register of the Company, at
least 20 calendar days prior to the applicable record or effective
date hereinafter specified, stating (x) the date on which a record
is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as
of which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to provide such notice or any
defect therein shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that
any notice provided hereunder constitutes, or contains, material,
non-public information regarding the Company or any of the
Subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K. The
Holder shall remain entitled to exercise this Warrant during the
period commencing on the date of such notice to the effective date
of the event triggering such notice except as may otherwise be
expressly set forth herein.
Sch.
3-11
Section 4. Transfer of
Warrant.
a)
Transferability.
Pursuant to FINRA Rule 5110(g)(1), neither this Warrant nor any
Warrant Shares issued upon exercise of this Warrant shall be sold,
transferred, assigned, pledged, or hypothecated, or be the subject
of any hedging, short sale, derivative, put, or call transaction
that would result in the effective economic disposition of the
securities by any person for a period of 180 days immediately
following the date of effectiveness or commencement of sales of the
offering pursuant to which this Warrant is being issued, except the
transfer of any security:
i.
by operation of law or by reason of reorganization of the
Company;
ii.
to any FINRA member
firm participating in the offering and the officers or partners
thereof, if all securities so transferred remain subject to the
lock-up restriction in this Section 4(a) for the remainder of the
time period;
iii.
if the aggregate amount of securities of the Company held by the
Holder or related person do not exceed 1% of the securities being
offered;
iv.
that is beneficially owned on a pro-rata basis by all equity owners
of an investment fund, provided that no participating member
manages or otherwise directs investments by the fund, and
participating members in the aggregate do not own more than 10% of
the equity in the fund; or
v.
the exercise or conversion of any security, if all securities
received remain subject to the lock-up restriction in this Section
4(a) for the remainder of the time period.
Subject
to the foregoing restriction, any applicable securities laws and
the conditions set forth in Section 4(d), this Warrant and all
rights hereunder (including, without limitation, any registration
rights) are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company or its
designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by
the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company unless the Holder has assigned this Warrant in full,
in which case, the Holder shall surrender this Warrant to the
Company within three (3) Trading Days of the date the Holder
delivers an assignment form to the Company assigning this Warrant
full. The Warrant, if properly assigned in accordance herewith, may
be exercised by a new holder for the purchase of Warrant Shares
without having a new Warrant issued.
Sch.
3-12
b)
New Warrants. This
Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. All Warrants issued on
transfers or exchanges shall be dated the initial issuance date of
this Warrant and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant
thereto.
c)
Warrant Register.
The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d)
Representation by the
Holder. The Holder, by the acceptance hereof, represents and
warrants that it is acquiring this Warrant and, upon any exercise
hereof, will acquire the Warrant Shares issuable upon such
exercise, for its own account and not with a view to or for
distributing or reselling such Warrant Shares or any part thereof
in violation of the Securities Act or any applicable state
securities law, except pursuant to sales registered or exempted
under the Securities Act.
Section 5. Registration Rights.
5.1
“Piggy-Back”
Registration.
5.1.1 Grant
of Right. The Holder shall have the right, for a period of no more
than four and a half (4.5) years from the Initial Exercise Date in
accordance with FINRA Rule 5110(f)(2)(G)(v), to include the
Registrable Securities as part of any other registration of
securities filed by the Company (other than in connection with a
transaction contemplated by Rule 145(a) promulgated under the
Securities Act or pursuant to Form S-8 or any equivalent form);
provided, however, that if, solely in connection with any primary
underwritten public offering for the account of the Company, the
managing underwriter(s) thereof shall, in its reasonable
discretion, impose a limitation on the number of shares of Common
Stock which may be included in the Registration Statement because,
in such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in
such Registration Statement only such limited portion of the
Registrable Securities with respect to which the Holder requested
inclusion hereunder as the underwriter shall reasonably permit. Any
exclusion of Registrable Securities shall be made pro rata among
the Holders seeking to include Registrable Securities in proportion
to the number of Registrable Securities sought to be included by
such Holders; provided, however, that the Company shall not exclude
any Registrable Securities unless the Company has first excluded
all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or
are not entitled to pro rata inclusion with the Registrable
Securities.
Sch.
3-13
5.1.2
Terms.
The Company shall bear all fees and expenses attendant to
registering the Registrable Securities pursuant to Section 5.1.1
hereof, but the Holders shall pay any and all underwriting
commissions and the expenses of any legal counsel selected by the
Holders to represent them in connection with the sale of the
Registrable Securities. In the event of such a proposed
registration, the Company shall furnish the then Holders of
outstanding Registrable Securities with not less than thirty (30)
days written notice prior to the proposed date of filing of such
registration statement. Such notice to the Holders shall continue
to be given for each registration statement filed by the Company
during the two (2) year period following the Initial Exercise Date
until such time as all of the Registrable Securities have been sold
by the Holder. The holders of the Registrable Securities shall
exercise the “piggy-back” rights provided for herein by
giving written notice within ten (10) days of the receipt of the
Company’s notice of its intention to file a registration
statement. Except as otherwise provided in this Warrant, there
shall be no limit on the number of times the Holder may request
registration under this Section 5.1.2; provided, however, that such
registration rights shall terminate on the second anniversary of
the Initial Exercise Date.
5.2
General
Terms
5.2.1 Indemnification.
The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such Holders within
the meaning of Section 15 of the Securities Act or Section 20 (a)
of the Exchange Act against all loss, claim, damage, expense or
liability (including all reasonable attorneys’ fees and other
expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may
become subject under the Securities Act, the Exchange Act or
otherwise, arising from such registration statement but only to the
same extent and with the same effect as the provisions pursuant to
which the Company has agreed to indemnify the Underwriters
contained in Section 5.1 of the Underwriting Agreement (as defined
below). The Holder(s) of the Registrable Securities to be sold
pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company,
against all loss, claim, damage, expense or liability (including
all reasonable attorneys’ fees and other expenses reasonably
incurred in investigating, preparing or defending against any claim
whatsoever) to which they may become subject under the Securities
Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or
assigns, in writing, for specific inclusion in such registration
statement to the same extent and with the same effect as the
provisions contained in Section 5.2 of the Underwriting Agreement
pursuant to which the Underwriters have agreed to indemnify the
Company.
5.2.2
Exercise
of Warrants. Nothing contained in this Warrant shall be construed
as requiring the Holder(s) to exercise their Warrants prior to or
after the initial filing of any registration statement or the
effectiveness thereof.
Sch.
3-14
5.2.3
Documents
Delivered to Holders. The Company shall furnish to each Holder
participating in any primary underwritten public offering and to
each underwriter of any such offering, if any, a signed
counterpart, addressed to such Holder or underwriter, of: (i) an
opinion of counsel to the Company, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii)
a “cold comfort” letter dated the effective date of
such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the
closing under the underwriting agreement) signed by the independent
registered public accounting firm which has issued a report on the
Company’s financial statements included in such registration
statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants’
letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of
issuer’s counsel and in accountants’ letters delivered
to underwriters in underwritten public offerings of securities. The
Company shall also deliver promptly to each Holder participating in
the offering requesting the correspondence and memoranda described
below and to the managing underwriter, if any, copies of all
correspondence between the Commission and the Company, its counsel
or auditors and all memoranda relating to discussions with the
Commission or its staff with respect to the registration statement
and permit each Holder and underwriter to do such investigation,
upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or
rules of FINRA. Such investigation shall include access to books,
records and properties and opportunities to discuss the business of
the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times as any such Holder
shall reasonably request.
5.2.4
Underwriting
Agreement. The Company shall enter into an underwriting agreement
with the managing underwriter(s), if any, selected by the Company.
Such agreement shall be reasonably satisfactory in form and
substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties
and covenants by the Company and such other terms as are
customarily contained in agreements of that type used by the
managing underwriter. The Holders shall be parties to any
underwriting agreement relating to an underwritten sale of their
Registrable Securities and may, at their option, require that any
or all the representations, warranties and covenants of the Company
to or for the benefit of such underwriters shall also be made to
and for the benefit of such Holders. Such Holders shall not be
required to make any representations or warranties to or agreements
with the Company or the underwriters except as they may relate to
such Holders, their Warrant Shares and their intended methods of
distribution..
5.2.5
Documents
to be Delivered by Holder(s). Each of the Holder(s) participating
in any of the foregoing offerings shall furnish to the Company a
completed and executed questionnaire provided by the Company
requesting information customarily sought of selling security
holders.
Section 6. Miscellaneous.
a)
No Rights as Stockholder
Until Exercise. This Warrant does not entitle the Holder to
any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section
2(d)(i).
b)
Loss, Theft, Destruction
or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c)
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 Trading Day, then, such action may be taken
or such right may be exercised on the next succeeding Trading
Day.
d)
Authorized
Shares.
Sch.
3-15
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e)
Jurisdiction. All
questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the underwriting agreement, dated May 18,
2020, by and between the Company and ThinkEquity, a division of
Fordham Financial Management, Inc., as representatives of the
underwriters set forth therein (the “Underwriting
Agreement”).
f)
Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.
Sch.
3-16
g)
Nonwaiver and
Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s
rights, powers or remedies. Without limiting any other provision of
this Warrant or the Underwriting Agreement, if the Company
willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the
Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to,
reasonable attorneys’ fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
h)
Notices. Any
notice, request or other document required or permitted to be given
or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Underwriting
Agreement.
i)
Limitation of
Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the
Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
j)
Remedies. The
Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law
would be adequate.
k)
Successors and
Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns
of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit
of any Holder from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.
l)
Amendment. This
Warrant may be modified or amended or the provisions hereof waived
with the written consent of the Company and the
Holder.
m)
Severability.
Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.
n)
Headings. The
headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
Sch.
3-17
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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TORCHLIGHT
ENERGY RESOURCES, INC.
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By: |
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Name:
Title:
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Sch.
3-18
NOTICE OF EXERCISE
TO: TORCHLIGHT
ENERGY RESOURCES, INC.
_________________________
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if
any.
(2)
Payment shall take the form of (check applicable box):
[ ] in
lawful money of the United States; or
[ ] if
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3)
Please register and issue said Warrant Shares in the name of the
undersigned or in such other name as is specified
below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number or by physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. If the Warrant is being exercised via cash
exercise, the undersigned is an “accredited investor”
as defined in Regulation D promulgated under the Securities Act of
1933, as amended
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
_______________________________________________________________________________________
Signature of Authorized Signatory of Investing Entity:
________________________________________________________________
Name of
Authorized Signatory:
__________________________________________________________________________________
Title
of Authorized Signatory:
___________________________________________________________________________________
Date:
_______________________________________________________________________________________________________
Sch.
3-19
ASSIGNMENT FORM
(To
assign the foregoing warrant, execute
this
form and supply required information.
Do not
use this form to exercise the warrant.)
FOR
VALUE RECEIVED, [____] all of or [_______] shares of the foregoing
Warrant and all rights evidenced thereby are hereby assigned
to
_______________________________________________
whose address is
___________________________________________________________________________.
___________________________________________________________________________
Dated:
______________, _______
Holder’s
Signature: _____________________________
Holder’s
Address: ______________________________
______________________________
NOTE:
The signature to this Assignment Form must correspond with the name
as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever. Officers of corporations and
those acting in a fiduciary or other representative capacity should
file proper evidence of authority to assign the foregoing
Warrant.
Sch.
3-20
EXHIBIT B
Form of Lock-Up Agreement
[●],
2020
ThinkEquity
A
Division of Fordham Financial Management, Inc.
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
The
undersigned understands that ThinkEquity, a division of Fordham
Financial Management, Inc., (the “Representative”) proposes to enter
into an Underwriting Agreement (the “Underwriting Agreement”) with
Torchlight Energy Resources, Inc., a Nevada corporation (the
“Company”),
providing for the public offering (the “Public Offering”) of shares of
common stock, $.001 par value, of the Company (the
“Shares”).
To
induce the Representative to continue its efforts in connection
with the Public Offering, the undersigned hereby agrees that,
without the prior written consent of the Representative, the
undersigned will not, during the period commencing on the date
hereof and ending 90 days after the date of the Underwriting
Agreement (the “Lock-Up
Period”), (1) offer, pledge, sell, contract to sell,
grant, lend, or otherwise transfer or dispose of, directly or
indirectly, any Shares or any securities convertible into or
exercisable or exchangeable for 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
(collectively, the “Lock-Up
Securities”); (2) 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 Lock-Up Securities,
whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Lock-Up Securities, in cash or
otherwise; (3) make any demand for or exercise any right with
respect to the registration of any Lock-Up Securities; or (4)
publicly disclose the intention to make any offer, sale, pledge or
disposition, or to enter into any transaction, swap, hedge or other
arrangement relating to any Lock-Up Securities. Notwithstanding the
foregoing, and subject to the conditions below, the undersigned may
transfer Lock-Up Securities without the prior written consent of
the Representative in connection with (a) transactions relating to
Lock-Up Securities acquired in open market transactions after the
completion of the Public Offering; provided that no filing under
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), shall be required or shall be voluntarily made
in connection with subsequent sales of Lock-Up Securities acquired
in such open market transactions; (b) transfers of Lock-Up
Securities as a bona fide
gift, by will or intestacy or to a family member or trust for the
benefit of a family member (for purposes of this lock-up agreement,
“family member” means any relationship by blood,
marriage or adoption, not more remote than first cousin); (c)
transfers of Lock-Up Securities to a charity or educational
institution; or (d) if the undersigned, directly or indirectly,
controls a corporation, partnership, limited liability company or
other business entity, any transfers of Lock-Up Securities to any
shareholder, partner or member of, or owner of similar equity
interests in, the undersigned, as the case may be; provided that in the case of
any transfer pursuant to the foregoing clauses (b), (c) or
(d), (i) any such transfer shall not involve a disposition for
value, (ii) each transferee shall sign and deliver to the
Representative a lock-up agreement substantially in the form of
this lock-up agreement and (iii) no filing under Section 16(a)
of the Exchange Act shall be required or shall be voluntarily made.
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 Lock-Up
Securities except in compliance with this lock-up
agreement.
Sch.
3-21
If the
undersigned is an officer or director of the Company, (i) the
undersigned agrees that the foregoing restrictions shall be equally
applicable to any issuer-directed or “friends and
family” Shares that the undersigned may purchase in the
Public Offering; and (ii) the Company has agreed in the
Underwriting Agreement to announce any impending waiver by press
release through a major news service at least two (2) business days
before the effective date of the waiver. Any waiver granted by the
Representative hereunder to any such officer or director shall only
be effective two (2) business days after the publication date of
such press release. The provisions of this paragraph will not apply
if (a) the waiver is effected solely to permit a transfer of
Lock-Up Securities not for consideration and (b) the transferee has
agreed in writing to be bound by the same terms described in this
lock-up agreement to the extent and for the duration that such
terms remain in effect at the time of such transfer.
No
provision in this agreement shall be deemed to restrict or prohibit
the exercise, exchange or conversion by the undersigned of any
securities exercisable or exchangeable for or convertible into
Shares, as applicable; provided that the undersigned
does not transfer the Shares acquired on such exercise, exchange or
conversion during the Lock-Up Period, unless otherwise permitted
pursuant to the terms of this lock-up agreement. In addition, no
provision herein shall be deemed to restrict or prohibit the entry
into or modification of a so-called “10b5-1” plan at
any time (other than the entry into or modification of such a plan
in such a manner as to cause the sale of any Lock-Up Securities
within the Lock-Up Period).
The
undersigned understands that the Company and the Representative are
relying upon this lock-up agreement in proceeding toward
consummation of the Public Offering. The undersigned further
understands that this lock-up agreement is irrevocable and shall be
binding upon the undersigned’s heirs, legal representatives,
successors and assigns.
The
undersigned understands that, if the Underwriting Agreement is not
executed by June 10, 2020, or 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
Shares to be sold thereunder, then this lock-up agreement shall be
void and of no further force or effect.
Whether
or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only
be made pursuant to an Underwriting Agreement, the terms of which
are subject to negotiation between the Company and the
Representative.
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Very
truly yours,
________________________
(Name -
Please Print)
_______________
(Signature)
______________________________
(Name
of Signatory, in the case of entities - Please Print)
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Ex.
B-1
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______________________________
(Title of
Signatory, in the case of entities - Please
Print)
Address:
__________________________________
__________________________________
__________________________________
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Ex.
B-2
EXHIBIT C
Form of Press Release
TORCHLIGHT ENERGY RESOURCES, INC.
[Date]
Torchlight
Energy Resources, Inc. (the “Company”) announced today
that ThinkEquity, a division of Fordham Financial Management, Inc.,
acting as representative for the underwriters in the
Company’s recent public offering of _______ shares of
the Company’s common stock, is [waiving] [releasing] a
lock-up restriction with respect to _________ shares of the
Company’s common stock held by [certain officers or
directors] [an officer or director] of the Company. The
[waiver] [release] will take effect on _________, 20___, and
the shares may be sold on or after such
date.
This press release is not an offer or sale of the securities in the
United States or in any other jurisdiction where such offer or sale
is prohibited, and such securities may not be offered or sold in
the United States absent registration or an exemption from
registration under the Securities Act of 1933, as
amended.
Ex.
C-1
EXHIBIT D
Form of
Opinion of Counsel
[Intentionally
Omitted.]
Ex.
D-1