LEVEL BRANDS, INC. SELLING AGENCY AGREEMENT
Exhibit 1.1
______________,
2017
▇▇▇▇▇▇
▇▇▇▇▇▇ & Co., LLC
As Lead
Selling Agent for the Selling Agents named herein
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear
Ladies and Gentlemen:
Level
Brands, Inc., a North Carolina corporation (the “Company”), proposes, subject to
the terms and conditions contained in this Selling Agency Agreement
(this “Agreement”), to issue and sell on
a “best efforts” basis only up to an aggregate of [ ]
shares of its common stock, par value $0.001 per share (the
“Common Stock”),
to investors, in an initial public offering
(the “Offering”) pursuant to Regulation
A under the Securities Act of 1933, as amended (the
“Securities
Act”), through ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC and
Tripoint Global Equities, LLC (collectively, the
“Selling
Agents”), in connection with such sales. In the event
that all of the [ ] shares of Common Stock are sold in the Offering
(the “Initial
Shares”), for the sole purpose of covering additional
subscriptions, at the option of the Lead Selling Agent (as defined
below), through the Selling Agents, the Company shall have the
right to issue and sell up to an additional [ ] shares of Common
Stock. The shares of Common Stock to be sold in this Offering are
collectively referred to herein as the “Shares.” The Shares are more fully
described in the Offering Statement (as hereinafter defined). The
Company hereby confirms its agreement to sell the Shares to
investors (collectively, the “Investors”) in the Offering
through the Selling Agents, acting on a best efforts basis only. In
connection with such sales, ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC is acting
as sole book-runner and lead selling agent (the “Lead Selling Agent”) and Tripoint
Global Equities, LLC is acting as the co-manager and a selling
agent in connection with the offering and sale of the Shares
contemplated herein.
The
Company hereby confirms its agreement with the Selling Agents
concerning the purchase and sale of the Shares, as
follows:
1. Agreement
to Act on a Best Efforts Basis. (a) On the basis of
the representations, warranties, covenants and other agreements of
the Company herein contained and subject to all the terms and
conditions of this Agreement, the Selling Agents agree to act on a
“best efforts” basis only, in connection with the
issuance and sale by the Company of the Shares to the Investors.
The Selling Agents shall be the exclusive Selling Agents in
connection with the offering and sale by the Company of the Shares
pursuant to the Company’s Offering Statement, with the terms
of the Offering to be subject to market conditions and negotiations
between the Company and the Selling Agents. Under no circumstances will the Selling
Agents be obligated to underwrite or purchase any of the Shares for
its own account or otherwise provide any financing. The Company
will pay to the Lead Selling Agent a fee (the “Fee”) as set forth below in
Section
2(e).
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(b) The
Lead Selling Agent shall have the right to enter into selected
dealer agreements with other broker-dealers participating in the
Offering (each dealer being referred to herein as a
“Dealer” and
said dealers being collectively referred to herein as the
“Dealers”). The
Fee shall be re-allowable, in whole or in part, to the Dealers. The
Company will not be liable or responsible to any Dealer for direct
payment of compensation to any Dealer, it being the sole and
exclusive responsibility of the Lead Selling Agent for payment of
compensation to Dealers.
2. Offering
and Sale of Shares; Delivery and Payment.
(a) The
Company hereby authorizes the Selling Agents to act as its
exclusive agents in connection with the Offering and to offer and
sell the Shares on behalf of the Company at a price of $[ ] per
Share. Prior to the earlier of (i) the date on which this
Selling Agency Agreement is terminated and (ii) the final Closing
Date, the Company shall not, without the prior written consent of
the Lead Selling Agent, solicit or accept offers to purchase any
equity securities of the Company (other than pursuant to the
exercise of options or warrants to purchase Common Stock that are
outstanding at the date hereof) otherwise than through the Selling
Agents in accordance herewith.
(b) The
Selling Agents hereby agree, as agents of the Company, to use their
reasonable best efforts to solicit offers to purchase all or part
of the Shares from the Company upon the terms and conditions set
forth in the Offering Statement, the Final Offering Circular and
Pricing Disclosure Materials. The Selling Agents shall make
reasonable best efforts to assist the Company in obtaining
performance by each Investor whose offer to purchase Shares has
been solicited by the Selling Agents and accepted by the Company,
but the Selling Agents shall not have any liability to the Company
in the event that any such purchase is not consummated for any
reason. Under no circumstances will the Selling Agents be obligated
to underwrite or to purchase any Shares for their own accounts or
otherwise provide any financing and, in soliciting purchases of
Shares, the Selling Agents shall act solely as the Company’s
agents and not as principals. Notwithstanding the foregoing, it is
understood and agreed that the Selling Agents (or their affiliates)
may, solely at their discretion and without any obligation to do
so, purchase Shares as principals.
(c) Subject
to the provisions of this Section (2), offers for
the purchase of Shares may be solicited by the Selling Agents as
agents for the Company at such times and in such amounts as the
Selling Agents deem advisable. Each Selling Agent shall have the
right, in its discretion reasonably exercised, and without notice
to the Company, to reject any offer to purchase the Shares received
by it, in whole or in part, and any such rejection shall not be
deemed a breach of its agreement contained herein.
(d) The
Company hereby grants to the Selling Agents, acting severally and
not jointly, the option to place up to [ ] additional Shares
in the event that all of the Initial
Shares are sold in the Offering for the sole purpose of
covering additional subscriptions in the sale of the Shares. This
option may be exercised at any time and from time to time, in whole
or in part on one or more occasions, up to 45 calendar days
following the Closing Date, by written notice from the Lead Selling
Agent to the Company (such date referred to herein as
“Additional Closing
Date”). Such notice shall set forth the aggregate
number of Shares as to which the option is being exercised. The
Selling Agents shall not be under any obligation to place any such
additional Shares.
(e) As
compensation for the services rendered to the Company by the
Selling Agents in respect of the Offering, the Company will pay to
the Lead Selling Agent, in U.S. currency, an aggregate amount equal
to 7.0% of the gross proceeds received by the Company from the sale
of the Shares.
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(f) No
Shares which the Company has agreed to sell pursuant to this
Agreement shall be deemed to have been purchased and paid for, or
sold by the Company, until the appropriate corresponding amount of
Shares shall have been delivered to Investors or Selling Agents for
delivery to Investors against payment by therefore. If the Company
shall default in its obligations to deliver the Shares to the
Investors or Selling Agents on behalf of the Investors as per such
instructions, the Company shall indemnify and hold the Selling
Agents harmless against any loss, claim, damage or liability
directly or indirectly arising from or as a result of such default
by the Company.
(g) On
or after the date of this Agreement, (i) the Company, the Lead
Selling Agent and Wilmington Trust, N.A. (the “Escrow Agent”) will enter into an
escrow agreement substantially in the form included as an exhibit
to the Offering Statement and (ii) the Company, TriPoint Global
Equities, LLC and the Escrow Agent will enter into a separate
escrow agreement substantially in the form included as an exhibit
to the Offering Statement (together, the “Escrow Agreements”), pursuant to
which escrow accounts will be established (the “Escrow Accounts”) at the
Company’s expense, for the benefit of Investors, other than
those Investors who choose to invest through the Banq® online
platform. The Selling Agents agree to utilize the Banq® online
platform to enable Investors that maintain an account with
Banq® to subscribe for Shares in the Offering.
(h) Prior
to the Closing Date (as defined below) and any Additional Closing
Date, (i) each Investor (other than Investors who participate
through selected dealers after the notification of approval to list
the Common Stock on the NYSE American, LLC (the “Exchange”), subject to meeting all
of the requirements of the Exchange listing standards and official
notice of issuance) will execute and deliver a Subscription
Agreement (each, an “Investor
Subscription Agreement”) to the Company or the Selling
Agents for delivery to the Company and the Company will make
available to the Selling Agents and the Escrow Agent copies of each
such Investor Subscription Agreement that they receive; (ii) each
Investor that executes a Subscription Agreement (other than
Investors that request funds be withdrawn from their brokerage
account held by the Selling Agents) will transfer to the Escrow
Account funds in an amount equal to the price per Share as shown on
the cover page of the Final Offering Circular (as hereinafter
defined) multiplied by the number of Shares subscribed by such
Investor; (iii) subscription funds received by a Selling Agent from
any Investor will be promptly transmitted to the Escrow Accounts in
compliance with Rule 15c2-4 of the Securities Exchange Act of 1934,
as amended (the “Exchange
Act”) in accordance with the terms of the Investor
Subscription Agreement, and (iv) the Escrow Agent will notify the
Company and the Selling Agents in writing as to the balance of the
collected funds in the Escrow Accounts.
(i) Investors
that maintain an account with Banq®, a division of Tripoint
Global Equities, LLC, may participate in the Offering without
depositing funds with the Escrow Agent, provided such Investors
maintain sufficient funds in their account with Banq®.
Investors who wish to participate in the Offering through their
account with Banq® will be asked to confirm their respective
investment approximately 24-48 hours prior to Closing, at which
time each Investor will be required to have funds in its account
sufficient to fund the purchase of any Shares for which it
subscribes in the Offering. At Closing, any amounts subscribed for
will be removed from such Investor’s account and sent
immediately to the account of the Company less any Fees due to the
Selling Agents. Such funds will not be held in a separate escrow
account or otherwise segregated until such time as the Offering is
closed.
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(j) Subject
to the terms and conditions hereof, payment for the purchase price
for, and delivery of the Shares, shall be made at one or, at the
discretion of the Lead Selling Agent and the Company, more closings
(each, a “Closing” and the date on which a
Closing occurs, a “Closing
Date”). At the Closing, payment for the purchase price
sold for the Shares sold on the Closing Date shall be made to the
Company against delivery of the Shares purchased on such Closing
Date to the Investors, which delivery may be made through the
facilities of the Depository Trust Company (“DTC”) or via book entry with the
Company’s securities registrar and transfer
agent, VStock
Transfer, LLC (the “Transfer Agent”). Delivery of
certificates in such names and denominations as the Lead Selling
Agent shall request in writing at least one (1) full Business Day
prior to the Closing date shall be made against payment of the
purchase price therefor from the Selling Agents and the Escrow
Agent to the order of the Company. If the Escrow Agent shall have
received written notice from the Company and the Selling Agents on
or before 4:00 p.m., New York City time, on [ ], 2017, or at such
other time(s) on such other date(s), not more than forty five (45)
days thereafter, as may be agreed upon by the Company and the Lead
Selling Agent (each such date, a “Closing Date”), provided that the
Company has received notification of approval to list the Common
Stock on the Exchange, subject to meeting all of the requirements
of the Exchange listing standards and official notice of
issuance, the Escrow
Agent will release the Escrow Account for collection by the Company
and the Selling Agents as provided in the Escrow Agreements and the
Company shall deliver the Shares purchased on such Closing Date to
the Investors in accordance with the delivery instructions set
forth in the Subscription Agreement or as otherwise provided by the
Selling Agents, which delivery may be made through the facilities
of the DTC or via book entry with the Transfer Agent. Each Closing
shall take place at the office of the Lead Selling Agent or such
other location as the Lead Selling Agent and the Company shall
mutually agree. All actions taken at the Closing shall be deemed to
have occurred simultaneously on the date of the Closing and all
actions taken at any Additional Closing shall be deemed to have
occurred simultaneously on the date of any such Additional
Closing.
(k) If
the Company and the Selling Agents determine that the Offering will
not proceed, then the Escrow Agent will promptly return the funds
to the Investors without interest.
(l) On
each Closing Date, the Company will issue to the Lead Selling Agent
(and/or its designee) warrants to purchase that number of shares of
Common Stock equal to five percent (5%) of the shares issued and
sold by the Company on such Closing Date (adjusted upward to the
nearest whole share) (the “Selling Agent’s Warrants”)
for an aggregate purchase price of $100.00. The Selling
Agent’s Warrant Agreement shall be in the form
of Exhibit
A attached hereto. The Selling Agent’s Warrants
shall have an exercise price per share equal to one hundred twenty
five percent (125%) of the price per Share as shown on the cover
page of the Final Offering Circular (as defined below). The Selling
Agent’s Warrant and the shares of Common Stock issuable upon
exercise thereof are hereinafter referred to together as the
“Selling Agents’
Securities.” The Selling Agent’s Warrants will
be exercisable for a term of five years beginning on the
Qualification Date (as defined below). The Selling Agents
understand and agree that there are significant restrictions
pursuant to Financial Industry Regulatory Authority
(“FINRA”) Rule
5110 against transferring the Selling Agent’s Warrants and
the underlying shares of Common Stock during the one hundred eighty
(180) days after the Qualification Date and by its acceptance
thereof shall agree that it will not sell, transfer, assign, pledge
or hypothecate the Selling Agent’s Warrants, 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 Qualification Date to anyone other than
(i) a Selling Agents or Dealer in connection with the offering
contemplated hereby or (ii) a bona fide officer or partner of the
Selling Agents or of any Selling Agents or Dealer; and only if any
such transferee agrees to the foregoing lock-up
restrictions.
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Delivery of the
Selling Agent’s Warrant shall be made on the Closing Date and
shall be issued in the name or names and in such authorized
denominations as the Lead Selling Agent may request.
3. Representations
and Warranties of the Company. The Company represents
and warrants and covenants to the Selling Agents that:
(a) The
Company has filed with the U.S. Securities and Exchange Commission
(the “Commission”) an offering statement
on Form 1-A (File No. 024-10742) (collectively, with the various
parts of such offering statement, each as amended as of the
Qualification Date for such part, including any Offering Circular
and all exhibits to such offering statement, the
“Offering
Statement”) relating to the Shares pursuant to
Regulation A as promulgated under the Securities Act, and the other
applicable rules, orders and regulations (collectively referred to
as the “Securities Act
Rules and
Regulations”) of the Commission promulgated under the
Securities Act. At the time of such filing, the Company met the
requirements for an offering statement of a Tier 2 offering under
Regulation A of the Securities Act. The Company will file with the
Commission under the Securities Act, a Final Offering Circular
included in the Offering Statement relating to the offering of the
Shares and the plan of distribution thereof and has advised the
Selling Agents of all further information (financial and other)
with respect to the Company required to be set forth therein. As
used in this Agreement:
“Applicable Time” means [ ]:00
[am][pm] (Eastern time) on the date of this Agreement;
“Final Offering Circular” means the
final offering circular relating to the public offering of the
Shares as filed with the Commission pursuant to Regulation A of the
Securities Act Rules and Regulations;
“Preliminary Offering Circular”
means any preliminary offering circular relating to the Shares
included in the Offering Statement pursuant to Regulation A of the
Rules and Regulations;
“Pricing Disclosure Materials”
means the most recent Preliminary Offering Circular and the
materials identified in Schedule
2-A hereto;
“Qualification Date” means the date
as of which the Offering Statement was or will be qualified with
the Commission pursuant to Regulation A, the Securities Act and the
Securities Act Rules and Regulations; and
“Testing-the-Waters Communication”
means any video or written communication with potential investors
undertaken in reliance on Rule 255 of the Securities Act Rules and
Regulations.
(b)
Pursuant to the Exchange
Act. The Company has filed with the Commission a Form 8-A
(File Number 000-[ ]) providing for the registration pursuant to
Section 12(b) under the Securities Exchange Act of 1934, as amended
(the “Exchange
Act”), of the Common Stock. The registration of the
Common Stock under the Exchange Act has been declared effective by
the Commission 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.
(c)
Stock Exchange
Listing. The shares of Common Stock have been approved for
listing on the Exchange under the symbol “LEVB”,
subject to meeting all of the requirements of the Exchange listing
standards and official notice of issuance, 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.
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(d)
No Stop Orders.
Neither the Commission nor, to the Company’s knowledge, any
state regulatory authority has issued any order preventing or
suspending the qualification or use of the Offering Statement or
any amendment thereto, any Preliminary Offering Circular or the
Final Offering Circular 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.
(e)
Qualification. The
Offering Statement, at the Qualification Date, as of the date
hereof, and as of the Closing Date and any Additional Closing Date,
conformed and will conform in all material respects to the
requirements of Regulation A, the Securities Act and the Securities
Act Rules and Regulations.
(f)
Disclosures in Offering
Statement.
(i) Each of the
Offering Statement and any post-effective amendment thereto, at the
time it became qualified, complied in all material respects with
the requirements of the Securities Act and the Securities Act Rules
and Regulations. The Offering Statement (any further documents to
be filed with the Commission) contains all exhibits and schedules
required by the Securities Act. Each Preliminary Offering Circular
and the Final Offering Circular, at the time each was, or will be,
filed with the Commission, complied in all material respects with
the requirements of the Securities Act and the Securities Act Rules
and Regulations. Each Preliminary Offering Circular delivered to
the Selling Agents for use in connection with this Offering and
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 Offering Statement nor any amendment thereto, at the
Qualification Date, as of the Applicable Time, at the Closing Date
or at any Additional 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
Preliminary Offering Circular did not, as of its date, contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes
no representation or warranty with respect to the statements
contained in the Preliminary Offering Circular as provided by the
Selling Agents in Section
8(b).
(iv) The
Final Offering Circular will not, as of its date and on each
Closing Date, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not
misleading; provided, however, that the Company makes
no representation or warranty with respect to the statements
contained in the Final Offering Circular as provided by the Selling
Agents in Section
8(b).
(v) the Pricing
Disclosure Materials and each Testing-the-Waters Communication,
when considered together, did not, as of the Applicable Time,
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, provided, however, that the Company makes
no representation or warranty with respect to the statements
contained in the Preliminary Offering Circular as provided by the
Selling Agents in Section
8(b).
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(vi) All
post-qualification amendments to the Offering Statement reflecting
events or facts arising after the date thereof which represent
individually or in the aggregate, a fundamental change in the
information set forth therein will have been so filed with the
Commission.
(g) Exchange
Act. The Company is not subject to the ongoing reporting
requirements of Section 13 or 15(d) of the Exchange Act and has not
been subject to an order by the Commission denying, suspending, or
revoking the registration of any class of securities pursuant to
Section 12(j) of the Exchange Act that was entered within five
years preceding the date the Offering Statement was originally
filed with the Commission. The Company is not, and has not been at
any time during the two-year period preceding the date the Offering
Statement was originally filed with the Commission, required to
file with the Commission the ongoing reports required by the
Securities Act Rules and Regulations under Regulation
A.
(h) Disclosure
of Agreements. The agreements and documents described in the
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular conform in all material respects to the
descriptions thereof contained therein and there are no agreements
or other documents required by the Securities Act and the
Securities Act Rules and Regulations to be described in the
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular or to be filed with the Commission as exhibits to
the Offering Statement, that have not been so described or filed.
Each agreement or other instrument (however characterized or
described) to which the Company is a party or by which it is or may
be bound or affected and (i) that is referred to in the
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular, 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 Company’s
knowledge, any other party is in default thereunder and, to the
Company’s knowledge, no event has occurred that, with the
lapse of time or the giving of notice, or both, would constitute a
default thereunder.. To the best of the Company’s knowledge,
performance by the Company of the material provisions of such
agreements or instruments will not result in a violation of any
existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign,
having jurisdiction over the Company or any of its assets or
businesses (each, a “Governmental Entity”), including,
without limitation, those relating to environmental laws and
regulations.
(i) Prior Securities Transactions.
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 Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular.
(j) Regulations. The disclosures in
the Offering Statement, the Pricing Disclosure Materials and the
Final Offering Circular 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 Offering Statement, the Pricing Disclosure
Materials and the Final Offering Circular which are not so
disclosed.
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(k) Disqualification Events.
Neither the Company, nor any predecessor of the Company; nor any
other issuer affiliated with the Company; nor any director or
executive officer of the Company or other officer of the Company
participating in the Offering, nor any beneficial owner of 20% or
more of the Company's outstanding voting equity securities, nor any
promoter connected with the Company, is subject to the
disqualification provisions of Rule 262 of the Securities Act Rules
and Regulations.
(l) Foreign Private Issuer. The
Company is not a “foreign private issuer,” as such term
is defined in Rule 405 under the Securities Act.
(m) No Material Adverse Change.
Since the respective dates as of which information is given in the
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular, 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.
(n) Transactions and Agreement.
Since the date as of which information is given in the most recent
Preliminary Offering Circular, neither the Company nor any
Subsidiary has entered or will before the Closing or any Additional
Closing enter into any transaction or agreement, not in the
ordinary course of business, that is material to the Company and
its Subsidiaries taken as a whole or incurred or will incur any
liability or obligation, direct or contingent, not in the ordinary
course of business, that is material to the Company and its
Subsidiaries taken as a whole, and neither the Company nor any
Subsidiary has any plans to do any of the foregoing.
(o) Recent Securities Transactions,
etc. Subsequent to the respective dates as of which
information is given in the Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular, and except as
may otherwise be indicated or contemplated herein or disclosed in
the Offering Statement, the Pricing Disclosure Materials and the
Final Offering Circular, 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.
(p) Independent Accountants. To the
knowledge of the Company, Cherry Bekaert LLP (the
“Auditor”),
whose report is filed with the Commission as part of the Offering
Statement, the Pricing Disclosure Materials and the Final Offering
Circular, is an independent registered public accounting firm as
required by the Securities Act and the Securities Act Rules and
Regulations and the Public Company Accounting Oversight Board. The
Auditor has not, during the periods covered by the financial
statements included in the Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular, provided to
the Company any non-audit services, as such term is used in Section
10A(g) of the Exchange Act.
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(q) Financial Statements, etc. The
financial statements, including the notes thereto and supporting
schedules included in the Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular, 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 in the Offering Statement present fairly the information
required to be stated therein. Except as included therein, no
historical or pro forma financial statements are required to be
included in the Offering Statement, the Pricing Disclosure
Materials or the Final Offering Circular under the Securities Act
or the Securities Act Rules and Regulations. The pro forma and pro
forma as adjusted financial information and the related notes, if
any, included in the Offering Statement, the Pricing Disclosure
Materials and the Final Offering Circular have been properly
compiled and prepared in accordance with the applicable
requirements of the Securities Act and the Securities Act Rules and
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 Offering Statement, the Pricing Disclosure
Materials or the Final Offering Circular 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 Offering Statement, the
Pricing Disclosure Materials and the Final Offering Circular
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
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular, (a) neither the Company nor any of its direct
and indirect subsidiaries, including each entity disclosed or
described in the Offering Statement, the Pricing Disclosure
Materials and the Final Offering Circular 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, 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.
(r) Authorized Capital; Options,
etc. The Company had, at the date or dates indicated in the
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular, the duly authorized, issued and outstanding
capitalization as set forth therein. Based on the assumptions
stated in the Offering Statement, the Pricing Disclosure Materials
and the Final Offering Circular, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein.
Except as set forth in, or contemplated by, the Offering Statement,
the Pricing Disclosure Materials and the Final Offering Circular,
on the Effective Date, as of the Applicable Time and on the Closing
Date and any Additional 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.
9
(s) 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
with respect thereto, 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 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 Offering Statement, the Pricing Disclosure Materials and the
Final Offering Circular. 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.
(t) Securities Sold Pursuant to this
Agreement. The Shares and Selling Agents’ Securities
have been duly authorized for issuance and sale and, when issued
and paid for, will be validly issued, fully paid and
non-assessable, free and clear of all liens; the holders thereof
are not and will not be subject to personal liability by reason of
being such holders; the Shares and Selling Agents’ 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 Shares and
Selling Agents’ Securities has been duly and validly taken.
The Shares and Selling Agents’ Securities conform in all
material respects to all statements with respect thereto contained
in the Offering Statement, the Pricing Disclosure Materials and the
Final Offering Circular. All corporate action required to be taken
for the authorization, issuance and sale of the Selling
Agent’s Warrant Agreement has been duly and validly taken;
the shares of Common Stock issuable upon exercise of the Selling
Agent’s Warrant have been duly authorized and reserved for
issuance by all necessary corporate action on the part of the
Company and when paid for and issued in accordance with the Selling
Agent’s Warrant and the Selling Agent’s Warrant
Agreement, such shares of Common Stock will be validly issued,
fully paid and non-assessable, free and clear of all liens; the
holders thereof are not and will not be subject to personal
liability by reason of being such holders; and such shares of
Common Stock 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.
(u) Registration Rights of Third
Parties. Except as set forth in the Offering Statement, the
Pricing Disclosure Materials and the Final Offering Circular, 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 an Offering Statement to be filed by the
Company.
(v) Validity and Binding Effect of
Agreements. This Agreement, the Escrow Agreements and the
Selling Agent’s Warrant Agreement have been duly and validly
authorized by the Company, and, when executed and delivered, will
constitute, the valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective
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.
10
(w) No Conflicts, etc. The
execution, delivery and performance by the Company of this
Agreement, the Escrow Agreements, the Selling Agent’s Warrant
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 or encumbrance upon any property
or assets of the Company pursuant to the terms of any agreement or
instrument to which 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 Company’s
bylaws (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.
(x) 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 Bylaws, or in violation of any franchise,
license, permit, applicable law, rule, regulation, judgment or
decree of any Governmental Entity, except for any violation which
would not reasonably be expected to result in a Material Adverse
Change.
(y) Conduct of Business. Except as
described in the Offering Statement, the Pricing Disclosure
Materials and the Final Offering Circular, 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 Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular, except for
the absence of which would not reasonably be expected to result in
a Material Adverse Change.
(z) Transactions Contemplated
Herein. The Company has all corporate power and authority to
enter into this Agreement, the Selling Agent’s Warrant
Agreement and the Escrow Agreements and to carry out the provisions
and conditions hereof and thereof, 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 Shares
and the Selling Agents’ Securities and the consummation of
the transactions and agreements contemplated by this Agreement, the
Selling Agent’s Warrant Agreement and the Escrow Agreements
and as contemplated by the Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular, except with
respect to applicable federal and state securities laws and the
rules and regulations of the Financial Industry Regulatory
Authority, Inc. (“FINRA”).
(aa) D&O
Questionnaires. To the Company’s knowledge, without
investigation, 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 Offering Statement, the
Pricing Disclosure Materials and the Final Offering Circular, as
well as in the Lock-Up Agreement (as defined below), provided to
Lead Selling Agent, 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.
11
(bb) 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 Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular or in
connection with the Company’s listing application for the
listing of the Shares on the Exchange.
(cc) Good
Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of
the State of North Carolina 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 qualify, singularly or in the aggregate, would not have
or reasonably be expected to result in a Material Adverse
Change.
(dd) 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 the Company has included each Selling Agent as an
additional insured party to the directors and officers insurance
coverage 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.
(ee) Finder’s
Fees. Except as described in the Offering Statement, the
Pricing Disclosure Materials and the Final Offering Circular, 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 Shares 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 Selling
Agents’ compensation, as determined by FINRA.
(ff) Payments
Within Twelve (12) Months. Except as described in the
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular, 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 twelve (12) months prior to the
Effective Date, other than the payment to the Selling Agents as
provided hereunder in connection with the Offering.
(gg) 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.
(hh) 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 Offering
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).
(ii) Information.
All information provided by the Company in its FINRA questionnaire
to Selling Agents’ Counsel specifically for use by Selling
Agents’ Counsel in connection with its Public Offering System
filings (and related disclosure) with FINRA is true, correct and
complete in all material respects.
12
(jj) 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 or (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.
(kk) 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.
(ll) 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.
(mm) Officers’
Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to you or to Selling
Agents’ Counsel shall be deemed a representation and warranty
by the Company to the Selling Agents as to the matters covered
thereby.
(nn) Lock-Up
Agreements. Schedule 3 hereto contains a
complete and accurate list of the Company’s officers,
directors and each owner of the Company’s outstanding shares
of Common Stock (or securities convertible or exercisable into
shares of Common Stock) (collectively, the “Lock-Up Parties”). The Company has
caused each of the Lock-Up Parties to deliver to Lead Selling Agent
an executed Lock-Up Agreement, in the form attached hereto as
Exhibit B (the
“Lock-Up
Agreement”), prior to the execution of this
Agreement.
(oo) 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 on the assets, business or operations of the Company
taken as a whole. The Company’s ownership and control of each
Subsidiary is as described in the Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular.
13
(pp) Related
Party Transactions. There are no business relationships or
related party transactions involving the Company or any other
person required to be described in the Offering Statement, the
Pricing Disclosure Materials and the Final Offering Circular that
have not been described as required.
(qq) Board
of Directors. The Board of Directors of the Company is
comprised of the persons set forth under the heading of the Pricing
Final Offering Circular and the Final Offering Circular captioned
“Management.” 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.
(rr) 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.
(ss) 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.
(tt) 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 Offering
Statement, the Pricing Disclosure Materials and the Final Offering
Circular, 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.
14
(uu) 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 Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular, will not be,
required to register as an “investment company,” as
defined in the Investment Company Act of 1940, as amended. The
Company is not a development stage company or a “business
development company” as defined in Section 2(a)(48) of the
Investment Company Act. The Company is not a blank check company
and is not an issuer of fractional undivided interests in oil or
gas rights or similar interests in other mineral rights. The
Company is not an issuer of asset-backed securities as defined in
Item 1101(c) of Regulation AB.
(vv) 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.
(ww) Market
Manipulation. The Company and its directors, officers or
controlling persons have not taken, directly or indirectly, any
action intended, or which might reasonably be expected, to cause or
result, under the Securities Act or otherwise, in, or which has
constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Company’s Common Stock.
(xx) 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
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular. 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 Offering Statement and the Final Offering Circular will involve
or give rise to any infringement of, or license or similar fees
for, any Intellectual Property Rights of others. Neither the
Company nor any of its Subsidiaries has received any notice
alleging any such infringement, fee or conflict with 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
3(xx), 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 clause (xx),
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 clause (xx),
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
patented 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 Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular and are not
described therein. The Offering Statement, the Pricing Disclosure
Materials and the Final Offering Circular 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
(yy) 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 Offering 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 Selling Agents, (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.
(zz) ERISA
Compliance. Except in each case that would not reasonably be
expected to result in a Material Adverse Change, 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.
(aa) 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 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 warning letter, untitled letter
or other correspondence or notice from any other 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 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
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; (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 on the date filed (or were corrected or
supplemented by a subsequent submission); and (vii) has not, either
voluntarily or involuntarily, initiated, conducted, or issued or
caused to be initiated, conducted or issued, any recall, market
withdrawal or replacement, safety alert, post-sale warning,
“dear doctor” letter, or other notice or action
relating to the alleged lack of safety or efficacy of any product
or any alleged product defect or violation and, to the
Company’s knowledge, no third party has initiated, conducted
or intends to initiate any such notice or action.
16
(bb) Ineligible
Issuer. At the time of filing the Offering Statement
and any post-effective amendment thereto, at the time of
qualification of the Offering 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 Rules and Regulations) of the
Shares 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.
(cc) Integration.
The Company has not sold or issued any securities that would be
integrated with the offering of the Shares contemplated by this
Agreement pursuant to the Securities Act, the Securities Act Rules
and Regulations or the interpretations thereof by the Commission or
that would fail to come within the safe harbor for integration
under Regulation A.
(dd) Real
Property. Except as set forth in the Offering Statement, the
Pricing Disclosure Materials and the Final Offering Circular, the
Company and 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 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 Offering Statement, the Pricing Disclosure Materials and the
Final Offering Circular, 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.
(ee) 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 Rules and 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 its Subsidiaries’
liquidity or the availability of or requirements for their capital
resources required to be described or incorporated by reference in
the Offering Statement, the Pricing Disclosure Materials and the
Final Offering Circular which have not been described or
incorporated by reference as required.
(ff) Loans
to Directors or Officers. 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 or its Subsidiaries to or for the benefit of any of the
officers or directors of the Company, its Subsidiaries or any of
their respective family members, except as disclosed in the
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular.
(gg) Smaller
Reporting Company. As of the time of filing of the
Offering Statement, the Company was a “smaller reporting
company,” as defined in Rule 12b-2 of the Exchange Act
Regulations.
(hh) Industry
Data. The statistical and market-related data included
in each of the Offering Statement, the Pricing Disclosure Materials
and the Final Offering Circular 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.
17
(ii) Reverse
Stock Split. The Company has taken all necessary corporate
action to effectuate a reverse stock split of its shares of Common
Stock on the basis of one (1) such share for each five (5) issued
and outstanding shares thereof (the “Reverse Stock Split”), which such
Reverse Stock Split was effective on December 5, 2016.
(jj) Emerging
Growth Company. From the time of the initial confidential
submission of the Offering Statement to the Commission (or, if
earlier, the first date on which the Company engaged directly in or
through any Person authorized to act on its behalf in any
Testing-the Waters Communication) through the date hereof, the
Company has been and is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act (an
“Emerging Growth
Company”). “Testing-the-Waters
Communication” means any oral or written communication with
potential investors undertaken in reliance on Section 5(d) of the
Securities Act.
(kk) Testing-the-Waters
Communications. The Company has not (i) alone engaged in any
Testing-the-Waters Communications, other than Testing-the-Waters
Communications with the written consent of the Selling Agents and
with entities that are qualified institutional buyers within the
meaning of Rule 144A under the Securities Act or institutions that
are accredited investors within the meaning of Rule 501 under the
Securities Act and (ii) authorized anyone other than the Selling
Agents to engage in Testing-the-Waters Communications. The Company
confirms that the Selling Agents have been authorized to act on its
behalf in undertaking Testing-the-Waters Communications. The
Company has not distributed any Written Testing-the-Waters
Communications other than those listed on Schedule 2-B hereto.
“Written Testing-the-Waters Communication” means any
Testing-the-Waters Communication that is a written communication
within the meaning of Rule 405 under the Securities
Act.
(ll) Electronic
Road Show. The Company has made available a Bona Fide
Electronic Road Show in compliance with Rule 433(d)(8)(ii) of
the Securities Act Rules and Regulations such that no filing of any
“road show” (as defined in Rule 433(h) of the
Securities Act Rules and Regulations) is required in connection
with the Offering.
(mm) 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.
(nn) XBRL.
The interactive data in eXtensible Business Reporting Language
included in the Offering Statement fairly presents the information
called for in all material respects and has been prepared in
accordance with the Commission’s rules and guidelines
applicable thereto.
(oo) No
Registration Rights. No person or entity has the right
to require registration of shares of Common Stock or other
securities of the Company or any of its subsidiaries because of the
filing or effectiveness of the Offering Statement or otherwise,
except for persons and entities who have expressly waived such
right in writing or who have been given timely and proper written
notice and have failed to exercise such right within the time or
times required under the terms and conditions of such right. Except
as described in the Offering Statement, Pricing Disclosure
Materials and Final Offering Circular, there are no persons with
registration rights or similar rights to have any securities
registered by the Company or any of its subsidiaries under the
Securities Act.
18
(pp) Governing
Law; Consent to Jurisdiction. The Company has the power to
submit, and pursuant to Section 13 of this Agreement,
has legally, validly, effectively and irrevocably submitted, to the
personal jurisdiction of each United States federal court and New
York state court located in the Borough of Manhattan, in the City
of New York, New York, U.S.A. (each, a “New York Court”), and the Company
has the power to designate, appoint and authorize, and pursuant to
Section 13 of this
Agreement, has legally, validly, effectively and irrevocably
designated, appointed and authorized an agent for service of
process in any action arising out of or relating to this Agreement
or the Shares in any New York Court, and service of process
effected on such authorized agent will be effective to confer valid
personal jurisdiction over the Company as provided in Section 13 hereof.
(qq) Insolvency.
The Company and its subsidiaries, individually and on a
consolidated basis, are not as of the date hereof, and after giving
effect to the transactions contemplated hereby to occur on the
Closing Date, will not be Insolvent (as defined below). For
purposes of this Section 3(qqq),
“Insolvent” means, with respect to any person,
(i) the present fair saleable value of such person’s
assets is less than the amount required to pay such person’s
total Indebtedness, (ii) such person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured,
(iii) such person intends to incur or believes that it will
incur debts that would be beyond its ability to pay as such debts
mature or (iv) such person has unreasonably small capital with
which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be
conducted.
4. Covenants
of the Company. The Company covenants and agrees as
follows:
(a) Amendments to Offering
Statement. The Company shall deliver to the Selling Agents,
prior to filing, any amendment or supplement to the Offering
Statement or Final Offering Circular proposed to be filed after the
Qualification Date and not file any such amendment or supplement to
which either Selling Agent shall reasonably object in
writing.
(b) Qualification. The Offering
Statement has become qualified, and the Company will file the Final
Offering Circular, subject to the prior approval of the Selling
Agents, pursuant to Rule 253 and Regulation A, within the
prescribed time period and will provide a copy of such filing to
the Selling Agents promptly following such filing.
(c) Amendments to the Offering
Statement. The Company will not, during such period as the
Final Offering Circular would be required by law to be delivered in
connection with sales of the Shares by an underwriter or dealer in
connection with the offering contemplated by this Agreement
(whether physically or through compliance with Rules 251 and 254
under the Securities Act or any similar rule(s)), file any
amendment or supplement to the Offering Statement or the Final
Offering Circular unless a copy thereof shall first have been
submitted to the Selling Agents within a reasonable period of time
prior to the filing thereof and the Selling Agents shall not have
reasonably objected thereto in good faith.
(d) Offering
Statement. The Company will notify the Selling Agents
promptly, and will, if requested, confirm such notification in
writing: (i) when any amendment to the Offering Statement is filed;
(ii) of any request by the Commission for any amendments to the
Offering Statement or any amendment or supplements to the Final
Offering Circular or for additional information; (iii) of the
issuance by the Commission of any stop order preventing or
suspending the qualification of the Offering Statement or the Final
Offering Circular, or the initiation of any proceedings for that
purpose or the threat thereof; (iv) of becoming aware of the
occurrence of any event that in the judgment of the Company makes
any statement made in the Offering Statement, the Preliminary
Offering Circular, the Pricing Disclosure Materials or the Final
Offering Circular untrue in any material respect or that requires
the making of any changes in the Offering Statement, the
Preliminary Offering Circular, the Pricing Disclosure Materials or
the Final Offering Circular in order to make the statements
therein, in light of the circumstances in which they are made, not
misleading; and (v) of receipt by the Company of any notification
with respect to any suspension of the qualification or exemption
from registration of the Shares for offer and sale in any
jurisdiction. If at any time the Commission shall issue any order
suspending the qualification of the Offering Statement in
connection with the offering contemplated hereby or in connection
with sales of Common Stock pursuant to market making activities by
the Selling Agents, the Company will make every reasonable effort
to obtain the withdrawal of any such order at the earliest possible
moment. If the Company has omitted any information from the
Offering Statement, it will use its best efforts to comply with the
provisions of and make all requisite filings with the Commission
pursuant to Regulation A, the Securities Act and the Securities Act
Rules and Regulations and to notify the Selling Agents promptly of
all such filings.
19
(e) Continued Compliance. If, at
any time when the Final Offering Circular relating to the Shares is
required to be delivered under the Securities Act, the Company
becomes aware of the occurrence of any event as a result of which
the Final Offering Circular, as then amended or supplemented,
would, in the reasonable judgment of counsel to the Company or
counsel to the Selling Agents, include any 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, or the Offering
Statement, as then amended or supplemented, would, in the
reasonable judgment of counsel to the Company or counsel to the
Selling Agents, include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein not misleading, or if for any other reason it is necessary,
in the reasonable judgment of counsel to the Company or counsel to
the Selling Agents, at any time to amend or supplement the Final
Offering Circular or the Offering Statement to comply with the
Securities Act or the Securities Act Rules and Regulations, the
Company will promptly notify the Selling Agents and will promptly
prepare and file with the Commission, at the Company’s
expense, an amendment to the Offering Statement and/or an amendment
or supplement to the Final Offering Circular that corrects such
statement and/or omission or effects such compliance and will
deliver to the Selling Agents, without charge, such number of
copies thereof as the Selling Agents may reasonably request. The
Company consents to the use of the Final Offering Circular or any
amendment or supplement thereto by the Selling Agents, and the
Selling Agents agrees to provide to each Investor, prior to the
Closing and, as applicable, any Additional Closing, a copy of the
Final Offering Circular and any amendments or supplements
thereto.
(f) Delivery of Offering Documents to the
Selling Agents. The Company will furnish to the Selling
Agents and their counsel, without charge (i) one conformed copy of
the Offering Statement as originally filed with the Commission and
each amendment thereto, including financial statements and
schedules, and all exhibits thereto, and (ii) so long as an
offering circular relating to the Shares is required to be
delivered under the Securities Act or the Securities Act Rules and
Regulations, as many copies of each Preliminary Offering Circular
or the Final Offering Circular or any amendment or supplement
thereto as the Selling Agents may reasonably request.
(g) Written Testing-the-Waters
Communication. If at any time following the distribution of
any Written Testing-the-Waters Communication there occurred or
occurs an event or development as a result of which such Written
Testing-the-Waters Communication 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 has or will promptly
notify the Selling Agents in writing and has or will promptly amend
or supplement, at its own expense, such Written Testing-the-Waters
Communication to eliminate or correct such untrue statement or
omission.
(h) Undertakings. The Company will
comply with any undertakings contained in the Offering
Statement.
(i) 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.
(j) Listing.
The Company shall use its best efforts to maintain the listing of
the shares of Common Stock (including the Shares) on the Exchange
for at least three years from the date of this
Agreement.
20
(k) Financial Public Relations
Firm. As of the Qualification Date, the Company shall have
retained a financial public relations firm reasonably acceptable to
the Selling Agent and the Company, which shall initially be Mdc
Public Relations, which firm shall be experienced in assisting
issuers in initial public offerings of securities and in their
relations with their security holders, and shall retain such firm
or another firm reasonably acceptable to the Lead Selling Agent for
a period of not less than two (2) years after the Effective
Date.
(l) 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 Selling Agents 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 Selling Agents: (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 or
offering statement filed by the Company under the Securities Act;
and (v) such additional documents and information with respect to
the Company and the affairs of any future subsidiaries of the
Company as the Selling Agents may from time to time reasonably
request; provided the Selling Agents shall sign, if requested by
the Company, a Regulation FD compliant confidentiality agreement
which is reasonably acceptable to the Selling Agents and Selling
Agents Counsel in connection with the Selling Agents’ receipt
of such information. Documents filed with the Commission pursuant
to its ▇▇▇▇▇ system shall be deemed to have been delivered to the
Lead Selling Agent pursuant to this clause (l).
(m) 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 Selling Agents and shall furnish to the
Selling Agents at the Company’s sole cost and expense such
transfer sheets of the Company’s securities as the Selling
Agents may reasonably request, including the daily and monthly
consolidated transfer sheets of the Transfer Agent and DTC.
TranShare Corporation is
acceptable to the Selling Agents to act as Transfer Agent for the
shares of Common Stock.
(n) Trading Reports. For a period
of one (1) year after the date hereof, during such time as the
Shares are listed on the Exchange, the Company shall provide to the
Selling Agents, at the Company’s expense, such reports
published by the Exchange relating to price trading of the Shares,
as the Selling Agents shall reasonably request.
(o) General Expenses Related to the
Offering. The Company hereby agrees to pay on each of the
Closing Date and the Additional 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: (a) all filing fees and
communication expenses relating to the registration of the shares
of Common Stock to be sold in the Offering with the Commission; (b)
all Public Filing System filing fees associated with the review of
the Offering by FINRA; (c) all fees and expenses relating to the
listing of such Shares on the Exchange and such other stock
exchanges as the Company and the Selling Agents together determine;
(d) 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; (e) all fees, expenses and
disbursements relating to the registration or qualification of the
Shares under the “blue sky” securities laws of such
states and other jurisdictions as the Selling Agents may reasonably
designate (including, without limitation, all filing and
registration fees, it being agreed that if the Offering is
commenced on the Exchange, the Company shall make a payment of
$5,000 to such counsel at Closing, or if the Offering is commenced
on the Over-the-Counter Bulletin Board, the Company shall make a
payment of $15,000 to such counsel upon the commencement of
“blue sky” work by such counsel and an additional
$5,000 at Closing); (f) all fees, expenses and disbursements
relating to the registration, qualification or exemption of the
Shares under the securities laws of such foreign jurisdictions as
the Selling Agents may reasonably designate; (g) the costs of all
mailing and printing of the underwriting documents (including,
without limitation, the Selling Agency Agreement, any Blue Sky
Surveys and, if appropriate, any Agreement Among Underwriters,
Selected Dealers’ Agreement, Underwriters’
Questionnaire and Power of Attorney), offering statements, offering
circulars and all amendments, supplements and exhibits thereto and
as many preliminary and final Offering Circulars as the Selling
Agents may reasonably deem necessary; (h) the costs and expenses of
a public relations firm; (i) the costs of preparing, printing and
delivering certificates representing the Shares; (j) fees and
expenses of the transfer agent for the shares of Common Stock; (k)
stock transfer and/or stamp taxes, if any, payable upon the
transfer of securities from the Company to the Investors; (l) to
the extent approved by the Company in writing, the costs associated
with post-Closing advertising the Offering in the national editions
of the Wall Street Journal and New York Times; (m) the costs
associated with one set of bound volumes of the public offering
materials as well as commemorative mementos and lucite tombstones,
each of which the Company or its designee shall provide within a
reasonable time after the Closing Date in such quantities as the
Selling Agents may reasonably request in an amount not to exceed
$2,500 in the aggregate; (n) the fees and expenses of the
Company’s accountants; (o) the fees and expenses of the
Company’s legal counsel and other agents and representatives;
(p) fees and expenses of the Selling Agents’ legal counsel
not to exceed $75,000; (q) the $29,500 cost associated with the
Selling Agents’ use of Ipreo’s book-building,
prospectus tracking and compliance software for the Offering; (r)
up to $20,000 of the Selling Agents’ actual accountable
“road show” expenses for the Offering; and the fees and
expenses of the Escrow Agent. The Selling Agents may deduct from
the net proceeds of the Offering payable to the Company on the
Closing Date, or the Additional Closing Date, if any, the expenses
set forth herein to be paid by the Company to the Selling
Agents.
21
(p) Non-accountable Expenses. The
Company further agrees that, in addition to the expenses payable
pursuant to Section
4(o), on the Closing Date it shall pay to the Selling
Agents, by deduction from the net proceeds of the Offering
contemplated herein, a non-accountable expense allowance equal to
one percent (1%) of the gross proceeds received by the Company from
the sale of the Shares, less the Advance (as such term is defined
in Section 9(c)
hereof), provided, however, that in the event that the Offering is
terminated, the Company agrees to reimburse the Selling Agents
pursuant to Section
9 hereof.
(q) 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 Offering
Statement, the Pricing Disclosure Package and the
Prospectus.
(r) 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, subject to the Company’s periodic
filings with the Commission.
(s) Stabilization. Neither the
Company nor, to its knowledge, any of its employees, directors or
shareholders (without the consent of the Selling Agents) 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
Shares.
(t) Internal Controls. Except as to
the extent disclosed in the Offering Statement, 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.
(u) Accountants. As of the date of
this Agreement, the Company shall retain an independent registered
public accounting firm reasonably acceptable to the Selling Agents,
and 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 Selling
Agents acknowledges that the Auditor is acceptable to the Selling
Agents.
(v) FINRA. For a period of six (6)
months from the date of this Agreement, the Company shall advise
the Selling Agents (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
Offering 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).
22
(w) No Fiduciary Duties. The
Company acknowledges and agrees that the Selling Agents’
responsibility to the Company is solely contractual in nature and
that none of the Selling Agents 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.
(x) Restriction on Sales of Capital
Stock. The Company, on behalf of itself and any successor
entity, agrees that, without the prior written consent of Lead
Selling Agent, it will not, for a period of 180 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; (ii) file
or caused 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; (iii)
complete any offering of debt securities of the Company, other than
entering into a line of credit with a traditional bank or (iv)
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) or (iv) 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 4(x) 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, of which the Selling Agents have
been advised in writing, or (iii) the issuance by the Company of
stock options or shares of capital stock of the Company 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.
(y) Restriction on Continuous
Offerings. The Company, on behalf of itself and any
successor entity, agrees that, without the prior written consent of
the Selling Agents, it will not, for a period of 12 months after
the date of this Agreement, directly or indirectly in any
“at-the-market” or continuous equity transaction, offer
to sell, sell, contract to sell, grant any option to sell or
otherwise dispose of shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for
shares of capital stock of the Company.
(z) Release of D&O Lock-up
Period. If Lead Selling Agent, in its sole discretion,
agrees to release or waive the restrictions set forth in the
Lock-Up Agreements described in Section 3(nn) 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 C hereto through a
major news service at least two (2) Business Days before the
effective date of the release or waiver.
(aa) Blue
Sky Qualifications. The Company shall use its best efforts,
in cooperation with the Selling Agents, if necessary, to qualify
the Shares for offering and sale under the applicable securities
laws of such states and other jurisdictions (domestic or foreign)
as Lead Selling Agent may designate and to maintain such
qualifications in effect so long as required to complete the
distribution of the Shares; 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.
23
(bb) Emerging
Growth Company Status. The Company shall promptly notify the
Selling Agents if the Company ceases to be an Emerging Growth
Company at any time prior to the later of (i) completion of the
distribution of the Shares within the meaning of the Securities Act
and (ii) fifteen (15) days following the completion of the Lock-Up
Period.
(a) 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. For a period of three (3) years after the date of
this Agreement, the Company shall not deregister the shares of
Common Stock under the Exchange Act without the prior written
consent of either of the Selling Agents.
(b) 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 its Shares 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.
(c) Prohibition
on Press Releases and Public Announcements. The Company
shall not issue press releases or engage in any other publicity,
without the Lead Selling Agent’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.
(d) Right
of First Refusal. Provided that the Firm Shares are sold in
accordance with the terms of this Agreement, the Lead Selling Agent
shall have an irrevocable right of first refusal (the “Right
of First Refusal”), for a period of twelve (12) months after
the date the Offering is completed, to act as sole and exclusive
investment banker, sole and exclusive book-runner, sole and
exclusive financial advisor, sole and exclusive underwriter and/or
sole and exclusive placement agent or selling agent, at the Lead
Selling Agents’ sole and exclusive discretion, for each and
every future public and private equity and debt offering, including
all equity linked financings (each, a “Subject
Transaction”), during such twelve (12) month period, of the
Company, or any successor to or subsidiary of the Company, on terms
and conditions customary to the Selling Agents for such Subject
Transactions. For the avoidance of any doubt, the Company shall not
retain, engage or solicit any additional investment banker,
book-runner, financial advisor, underwriter and/or placement agent
in a Subject Transaction without the express written consent of the
Lead Selling Agent.
The
Company shall notify the Lead Selling Agentof its intention to
pursue a Subject Transaction, including the material terms thereof,
by providing written notice thereof by registered mail or overnight
courier service addressed to the Selling Agents. If the Lead
Selling Agent fails to exercise its Right of First Refusal with
respect to any Subject Transaction within ten (10) Business Days
after the mailing of such written notice, then the Lead Selling
Agent shall have no further claim or right with respect to the
Subject Transaction. The Lead Selling Agent may elect, in its sole
and absolute discretion, not to exercise its Right of First Refusal
with respect to any Subject Transaction; provided that any such
election by the Lead Selling Agent shall not adversely affect the
Lead Selling Agent’s Right of First Refusal with respect to
any other Subject Transaction during the twelve (12) month period
agreed to above.
5. Representations
and Warranties of the Selling Agents; Covenants of the Selling
Agents. Each of the Selling Agents severally and not
jointly represents, warrants and covenants to the Company
that:
24
(a)
Written Testing-the-Waters
Communication. Each Selling Agent agrees that it shall not
include any “issuer
information” (as defined in Rule 433 under the
Securities Act) in any Written Testing-the-Waters Communication
used or referred to by such Selling Agent without the prior consent
of the Company (any such issuer information with respect to whose
use the Company has given its consent, “Permitted Issuer Information”),
provided that “issuer
information” (as defined in Rule 433 under the
Securities Act) within the meaning of this Section 5 shall not be
deemed to include information prepared by the Selling Agent on the
basis of, or derived from, “issuer
information.”
(b)
Disqualification.
Neither the Selling Agents nor any Dealer, nor any managing member
of the Selling Agents, nor any director or executive officer of the
Selling Agents or other officer of the Selling Agents is subject to
the disqualification provisions of Rule 262 of the Securities Act
Rules and Regulations. No registered representative of the Selling
Agents or any Dealer, or any other person being compensated by or
through the Selling Agents or any Dealer for the solicitation of
Investors, is subject to the disqualification provisions of Rule
262 of the Securities Act Rules and Regulations.
(c)
FINRA. Each Selling
Agent is a member of FINRA and each of them and their respective
employees and representatives have all required licenses and
registrations to act under this Agreement, and each shall remain a
member or duly licensed, as the case may be, during the
Offering.
(d)
Participating Dealer
Agreements. Except for Participating Dealer Agreements, no
agreement will be made by the Selling Agents with any person
permitting the resale, repurchase or distribution of any Shares
purchased by such person.
(e)
Offering Materials.
Except as otherwise consented to by the Company, no Selling Agent
has used and will not use or distribute any written offering
materials other than the Preliminary Offering Circular, Pricing
Disclosure Materials and the Final Offering Circular. Each Selling
Agent has not and will not use any “broker-dealer use
only” materials with members of the public, or has not and
will not make any unauthorized verbal representations or verbal
representations which contradict or are inconsistent with the
statements made in the Offering Statement in connection with offers
or sales of the Shares.
6. Intentionally
omitted.
7.
Conditions of the
Obligations of the Selling Agents. The obligations of
the Selling Agents hereunder are subject to the following
conditions:
(a)
Qualification of the
Offering Statement. (i) No stop order suspending the
qualification of the Offering Statement shall have been issued, and
no proceedings for that purpose shall be pending or threatened by
any securities or other governmental authority (including, without
limitation, the Commission), (ii) no order suspending the
effectiveness of the Offering Statement or the qualification or
exemption of the Shares under the securities or Blue Sky laws of
any jurisdiction shall be in effect and no proceeding for such
purpose shall be pending before, or threatened or contemplated by,
any securities or other governmental authority (including, without
limitation, the Commission), (iii) any request for additional
information on the part of the staff of any securities or other
governmental authority (including, without limitation, the
Commission) shall have been complied with to the satisfaction of
the staff of the Commission or such authorities and (iv) after the
date hereof no amendment or supplement to the Offering Statement or
the Final Offering Circular shall have been filed unless a copy
thereof was first submitted to the Selling Agents and the Selling
Agents did not object thereto in good faith, and the Selling Agents
shall have received certificates of the Company, dated as of each
Closing Date and signed by the President and Chief Executive
Officer of the Company, and the Chief Financial Officer of the
Company, to the effect of clauses (a), (b) and (c).
25
(b)
Material Adverse
Change. Since the respective dates as of which information
is given in the Offering Statement, the Pricing Disclosure
Materials and the Final Offering Circular, (i) there shall not have
been a Material Adverse Change, whether or not arising from
transactions in the ordinary course of business, in each case other
than as set forth in or contemplated by the Offering Statement, the
Pricing Disclosure Materials and the Final Offering Circular; (ii)
the Company shall not have sustained any material loss or
interference with its business or properties from fire, explosion,
flood or other casualty, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular, if in the reasonable judgment of the Selling
Agents any such development makes it impracticable or inadvisable
to consummate the sale and delivery of the Shares to Investors and
the delivery of the Selling Agents’ Securities as
contemplated hereby; (iii) no action, suit or
proceeding, at law or in equity, shall have been pending or
threatened against the Company before or by any court or federal or
state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely
affect the business, operations, prospects or financial condition
or income of the Company, except as set forth in the Offering
Statement, the Pricing Disclosure Materials and the Final Offering
Circular; (iv) no stop order shall have been issued under the
Securities Act and no proceedings therefor shall have been
initiated or threatened by the Commission; and (v) the
Offering Statement, the Pricing Disclosure Materials and the Final
Offering Circular 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 Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular 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
light of the circumstances under which they were made, not
misleading.
(c)
Litigation or
Proceedings. Since the respective dates as of which
information is given in the Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular, there shall
have been no litigation or other proceeding instituted against the
Company or any of its officers or directors in their capacities as
such, before or by any federal, state or local or foreign court,
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, which litigation or
proceeding, in the reasonable judgment of Lead Selling Agent, would
reasonably be expected to have a Material Adverse
Change.
(d)
Representations and
Warranties. Each of the representations and warranties of
the Company contained herein shall be true and correct as of each
Closing Date in all respects for those representations and
warranties qualified by materiality and in all material respects
for those representations and warranties that are not qualified by
materiality, as if made on such date, and all covenants and
agreements herein contained to be performed on the part of the
Company and all conditions herein contained to be fulfilled or
complied with by the Company at or prior to such Closing Date shall
have been duly performed, fulfilled or complied with in all
material respects.
(e)
FINRA Clearance. On
or before the date of this Agreement, the Selling Agents shall have
received clearance from FINRA as to the amount of compensation
allowable or payable to the Selling Agents as described in the
Final Offering Circular.
(f)
Exchange Stock Market
Clearance. On the Closing Date, the Company’s shares
of Common Stock, including the Shares placed in this Offering, the
Company shall have received notification of approval to list the
Shares on the Exchange, subject to meeting all of the requirements
of the Exchange’s listing standards and official notice of
issuance and be listed for trading on the Exchange promptly after
Closing. On each Additional Closing Date (if any), the
Company’s shares of Common Stock, including the Additional
Shares, shall have been approved for listing on the Exchange,
subject only to official notice of issuance.
26
(g)
Closing Date Opinion of
Counsel. The Selling Agents shall have received an opinion
and 10b-5 negative assurance letter, dated as of each Closing Date,
of ▇▇▇▇▇▇▇▇ Law Group, LLP, as counsel to the Company,
substantially in the form of Exhibit
D hereto.
(h)
Closing Date Opinion of
Special Intellectual Property Counsel. The Selling Agents
shall have received an opinion and 10b-5 negative assurance letter,
dated as of each Closing Date, of ▇▇▇▇▇▇▇▇, Loop & ▇▇▇▇▇▇▇▇,
LLP, special intellectual property counsel for the Company,
reasonably acceptable to the Selling Agents.
(i)
Additional Closing Date
Opinions of Counsel. On the Additional Closing Date, if any,
the Selling Agents shall have received the favorable opinions of
each counsel listed in clauses (g) and (h), dated the Additional
Closing Date, addressed to the Selling Agents and in form and
substance reasonably satisfactory to the Selling Agents, confirming
as of the Additional Closing Date, the statements made by such
counsels in their respective opinions delivered on the Closing
Date.
(j)
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 Selling Agents) of other
counsel reasonably acceptable to the Selling Agents, 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
Selling Agents’ Counsel if requested. The opinion of ▇▇▇▇▇▇▇▇
Law Group, LLP and any opinion relied upon by ▇▇▇▇▇▇▇▇ Law Group,
LLP shall include a statement to the effect that it may be relied
upon by Selling Agents’ Counsel in its opinion delivered to
the Selling Agents.
(k)
Cold Comfort
Letter. At the time this Agreement is executed, the Auditors
shall have furnished to the Selling Agents a letter, dated the date
hereof (the “Comfort
Letter”), addressed to the Selling Agents and in form
and substance reasonably satisfactory to the Selling Agents
containing statements and information of the type ordinarily
included in accountants’ “comfort letters” to
Selling Agents with respect to the financial statements and certain
financial information contained in the Offering Statement, the
Pricing Disclosure Materials and the Final Offering
Circular.
(l)
Bring-down Comfort
Letter. At each of the Closing Date and the Additional
Closing Date, if any, the Selling Agents shall have received from
the Auditor a letter, dated as of the Closing Date or the
Additional Closing Date, as applicable, to the effect that the
Auditor reaffirms the statements made in the letter furnished
pursuant to clause (i) 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 Additional Closing Date, as
applicable.
(m)
Officers’
Certificates. At the Closing and at any Additional Closing
Date, there shall be furnished to the Selling Agents a certificate,
dated the date of its delivery, signed by each of the Chief
Executive Officer and the Chief Financial Officer of the Company,
in form and substance satisfactory to the Selling Agents to the
effect that each signer has carefully examined the Offering
Statement, the Final Offering Circular and the Pricing Disclosure
Materials, and that to each of such person’s
knowledge:
27
(i)
As of the date of each such certificate, (A) the Offering Statement
does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, (B) neither
the Final Offering Circular nor the Pricing Disclosure Materials
contains any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading and (C) no event has occurred
as a result of which it is necessary to amend or supplement the
Final Offering Circular in order to make the statements therein not
untrue or misleading in any material respect;
(ii)
Each of the representations and warranties of the Company contained
in this Agreement were, when originally made, and are, at the time
such certificate is delivered, true and correct in all respects for
those representations and warranties qualified by materiality and
in all material respects for those representations and warranties
that are not qualified by materiality;
(iii)
Each of the covenants required herein to be performed by the
Company on or prior to the date of such certificate has been duly,
timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the delivery of such
certificate has been duly, timely and fully complied
with;
(iv) No
stop order suspending the qualification of the Offering Statement
or of any part thereof has been issued and no proceedings for that
purpose have been instituted or are contemplated by the
Commission;
(v)
Subsequent to the date of the most recent financial statements in
the Offering Statement and in the Final Offering Circular, there
has been no Material Adverse Change; and
(vi)
The Shares have been approved for listing on the
Exchange.
(n)
Additional
Certificates. The Company shall have furnished or caused to
be furnished to the Selling Agents such certificates, in addition
to those specifically mentioned herein, as the Selling Agents may
have reasonably requested as to the accuracy and completeness on
any Closing Date of any statement in the Offering Statement, the
Preliminary Offering Circular, the Pricing Disclosure Materials or
the Final Offering Circular, as to the accuracy on such Closing
Date of the representations and warranties of the Company as to the
performance by the Company of its obligations hereunder, or as to
the fulfillment of the conditions concurrent and precedent to the
obligations hereunder of the Selling Agents.
(o)
Lock-up Letters.
The Selling Agents shall have received the lock-up letters referred
to in Section 4(m) hereof substantially in the form
of Exhibit
B from each director, officer and substantially allof
the stockholders of the Company, including the holders of 1% or
more of our outstanding common stock, each of which are named
in Schedule
2 hereto.
(p)
Selling Agent’s
Warrant Agreement. On the Closing Date, the Company shall
have delivered to the Lead Selling Agent executed copies of the
Selling Agent’s Warrant Agreement.
(q)
Secretary’s
Certificate. At each of the Closing Date and the Additional
Closing Date, if any, the Selling Agents 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) to the good standing of the
Company and the Subsidiaries in their respective jurisdiction of
organization and their good standing as foreign entities in such
other jurisdictions as the Selling Agents may reasonably request,
in each case evidenced in writing or any standard form of
telecommunication from the appropriate governmental authorities of
such jurisdictions; (ii) that each of the Charter and Bylaws is
true and complete, has not been modified and is in full force and
effect; (iii) 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; (iv) as to the accuracy and
completeness of all correspondence between the Company or its
counsel and the Commission; and (v) as to the incumbency of
the officers of the Company. The documents referred to in such
certificate shall be attached to such certificate.
28
(r)
No Events. On or
after the Applicable Time there shall not have occurred any of the
following: (a) a suspension or material limitation in trading in
securities generally on any national securities exchange,
including, but not limited to, the New York Stock Exchange, Inc.,
the New York Stock Exchange American, LLC or The Nasdaq Stock
Market; (b) a general moratorium on commercial banking activities
declared by either Federal or New York authorities or a material
disruption in commercial banking or securities settlement or
clearance services in the United States; (c) the outbreak or
escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war,
(d) the occurrence of any other calamity or crisis or any change in
financial, political or economic conditions in the United States or
elsewhere, and (e) there has not been, subsequent to the date of
the most recent audited financial statements included or
incorporated by reference in the Final Offering Circular, or
Pricing Disclosure Materials, 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 Final Offering Circular, or
Pricing Disclosure Materials, if the effect of any such event
specified in clause (c), (d) or (e) in the judgment of the Selling
Agents makes it impracticable or inadvisable to proceed with the
offering or the delivery of the Shares being delivered on any
Closing Date on the terms and in the manner contemplated in the
Final Offering Circular.
8. Indemnification.
(a)
Indemnification of the
Selling Agents. Subject to the conditions set forth below,
the Company agrees to indemnify and hold harmless each Selling
Agent and each of the Dealers, and each of their respective
directors, officers, members, employees, representatives, partners,
shareholders, affiliates, counsel, and agents and each person, if
any, who controls and such Selling Agent within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
(each an “Indemnified
Party”), from and against any and all losses, claims,
liabilities, expenses and damages whatsoever, joint or several
(including, but not limited to, any and all legal or other expenses
reasonably incurred in investigating, preparing, settling or
defending against any litigation, commenced or threatened, or any
claim whatsoever, whether arising out of any action between any of
the Indemnified Parties and the Company or between any of the
Indemnified Parties and any third party, or otherwise, whether or
not such Indemnified Party is a party thereto)), to which it, or
any of them, may become subject under the Securities Act, the
Exchange Act or other statute or regulation, at common law or
otherwise or under the laws of foreign countries (a
“Claim”),
insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based upon (i) any untrue statement or alleged
untrue statement made by the Company in Section 3 of this
Agreement, (ii) any untrue statement or alleged untrue statement of
any material fact contained in (A) any Preliminary Offering
Circular, the Offering Statement or the Final Offering Circular or
any amendment or supplement thereto, (B) the Pricing Disclosure
Materials, (C) any Written Testing-the-Waters Communication, (D)
any application or other document, or any amendment or supplement
thereto, executed by the Company based upon written information
furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Shares under the securities or Blue Sky
laws thereof or filed with the Commission or any securities
association or securities exchange (each, an “Application”), (E) 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) the omission or alleged omission to state in
the Offering Statement, any Preliminary Offering Circular, the
Final Offering Circular, the Pricing Disclosure Materials, or any
Written Testing-the-Waters Communication, or any amendment or
supplement thereto, or in any Permitted Issuer Information or any
Application a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not
misleading; provided, however, that the Company will
not be liable to the extent that such loss, claim, liability,
expense or damage arises from the sale of the Shares in the
offering to any person and is based solely on an untrue statement
or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished
to the Company by any Indemnified Party through the Selling Agents
expressly for inclusion in the Offering Statement, any Preliminary
Offering Circular, the Final Offering Circular, or in any amendment
or supplement thereto, it being understood and agreed that the only
such information furnished by any Indemnified Party consists of the
Selling Agents’ Information (as defined in Section 8(b)
below), or (iv) otherwise arising in connection with or allegedly
in connection with the Offering. With respect to any untrue
statement or omission or alleged untrue statement or omission made
in the Pricing Disclosure Materials, the indemnity agreement
contained in this Section 8(a) shall not inure to the benefit of
any Indemnified Party to the extent that any loss, liability,
claim, damage or expense of such Indemnified Party results from the
fact that a copy of the Pricing Disclosure Materials was not given
or sent to the person asserting any such loss, liability, claim or
damage at or prior to the written confirmation of sale of the
Shares to such person as required by the Securities Act and the
Securities Act Regulations, and if the untrue statement or omission
has been corrected in the Pricing Disclosure Materials, unless such
failure to deliver the Pricing Disclosure Materials was a result of
non-compliance by the Company with its obligations under Section
4(f) hereof or with the Securities Act and Securities Act
Regulations. This indemnity agreement will be in addition to any
liability which the Company may otherwise have. The Company also
agrees that it will reimburse each 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 Indemnified Parties and the Company or between any of the
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 Indemnified Party in investigating,
preparing, pursuing or defending any Claim.
29
(b)
Indemnification of the
Company. Each Selling Agent, severally and not jointly,
agrees to indemnify and hold harmless the Company, its directors,
its officers who signed the Offering 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 losses, claims, damages, expenses or liabilities described in
the foregoing indemnity from the Company to the several selling
agents, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made in the
Offering Statement, any Preliminary Offering Circular, the Final
Offering Circular, the Pricing Disclosure Materials, or any Written
Testing-the-Waters Communication, or any amendment or supplement
thereto, or in any Application, solely in reliance upon, and in
strict conformity with, the Selling Agents’ Information (as
defined below). In case any action shall be brought against the
Company or any other person so indemnified based on the Offering
Statement, any Preliminary Offering Circular, the Final Offering
Circular, or the Pricing Disclosure Materials, or any amendment or
supplement thereto, or any Application, and in respect of which
indemnity may be sought against any Selling Agent, such Selling
Agent 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 Indemnified Parties by the
provisions of Section 8(a). The Company agrees promptly to notify
the Lead Selling Agent 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 Shares or in
connection with the Offering Statement, any Preliminary Offering
Circular, the Final Offering Circular, the Pricing Disclosure
Materials, or any Written Testing-the-Waters Communication, or any
amendment or supplement thereto, or any Application. The parties
acknowledge that, for all purposes under this Agreement, the
statements set forth in the first two paragraphs under
“Commissions and Expenses” under the “Plan of
Distribution” section in the Final Offering Circular
constitute the only information relating to the Selling Agents
furnished in writing to the Company by the Selling Agents expressly
for inclusion in the Offering Statement, any Preliminary Offering
Circular or the Final Offering Circular (collectively, the
“Selling Agents’
Information”).
(c)
Procedure. If any
action is brought against an Indemnified Party in respect of which
indemnity may be sought against the Company pursuant to
Section 8, such
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 Indemnified Party) and
payment of actual expenses if an Indemnified Party requests that
the Company do so. Such 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 the Company,
and shall be advanced by the Company, provided however, that the
Company shall not be obligated to bear the reasonable fees and
expenses of more than one firm of attorneys selected by the
Indemnified Party (in addition to local counsel). 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
Selling Agents, 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 Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination (i) includes an
unconditional release of each Indemnified Party, acceptable to such
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 Indemnified Party.
30
(d)
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 Selling Agents, on the other, from the Offering of the Shares,
or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, on the one hand,
and the Selling Agents, 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 Selling Agents, 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
Shares purchased under this Agreement (before deducting expenses)
received by the Company, as set forth in the table on the cover
page of the Final Offering Circular, on the one hand, and the total
fees and commissions received by the Selling Agents 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 Final Offering
Circular, 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 Selling
Agents, 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 Selling Agents agree
that it would not be just and equitable if contributions pursuant
to this Section
8(d) were to be determined by pro rata allocation (even if
the Selling Agents 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
8 shall be deemed to include, for purposes of this
Section 8, 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 8 in no event shall a
Selling Agent be required to contribute any amount in excess of the
amount by which the total fees and commissions received by such
Selling Agent with respect to the Offering of the Shares exceeds
the amount of any damages that such Selling Agent 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.
(e)
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 8(e) 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 Selling Agent’s obligations to
contribute pursuant to this Section 8 are several and not
joint.
31
9. Termination.
(a) The
obligations of the Selling Agents under this Agreement may be
terminated at any time prior to the initial Closing Date, by notice
to the Company from the Lead Selling Agent, without liability on
the part of the Selling Agents to the Company if, prior to delivery
and payment for the Shares, in the sole judgment of the Lead
Selling Agent: (i) there has occurred any material adverse change
in the securities markets or any event, act or occurrence that has
materially disrupted, or in the opinion of the Lead Selling Agent,
will in the future materially disrupt, the securities markets or
there shall be such a material adverse change in general financial,
political or economic conditions or the effect of international
conditions on the financial markets in the United States is such as
to make it, in the judgment of the Lead Selling Agent, inadvisable
or impracticable to market the Shares or enforce contracts for the
sale of the Shares; (ii) there has occurred any outbreak of
hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in
national or international political, financial or economic
conditions, including without limitation as a result of terrorist
activities, such as to make it, in the judgment of the Lead Selling
Agent, inadvisable or impracticable to market the Shares or enforce
contracts for the sale of the Shares; (iii) trading in the Shares
or any securities of the Company has been suspended or materially
limited; (iv) trading generally on the New York Stock Exchange or
the Nasdaq Stock Market LLC has been
suspended or materially limited, or minimum or maximum ranges for
prices for securities shall have been fixed, or maximum ranges for
prices for securities have been required, by any of said exchanges
or by such system or by order of the Commission, FINRA, or any
other governmental or regulatory authority; (v) a banking
moratorium has been declared by any state or Federal authority; or
(vi) in the judgment of the Lead Selling Agent, there has been,
since the time of execution of this Agreement or since the
respective dates as of which information is given in the Final
Offering Circular, any material adverse change in the assets,
properties, condition, financial or otherwise, or in the results of
operations, business affairs or business prospects of the Company
and its Subsidiaries considered as a whole, whether or not arising
in the ordinary course of business.
(b) If
this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other
party except as provided in paragraph
(c)below.
(c)
Expenses.
Notwithstanding anything to the contrary in this Agreement, 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 Lead Selling Agent its actual and
accountable out-of-pocket expenses related to the transactions
contemplated herein then due and payable (including the fees and
disbursements of the Lead Selling Agent’s Counsel) up to
$150,000, inclusive of the $30,000 advance for non-accountable
expenses previously paid by the Company to the Lead Selling Agent
(the “Advance”)
and upon demand the Company shall pay the full amount thereof to
the Lead Selling Agent on behalf of the Selling Agents; 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 Lead
Selling Agent will be reimbursed to the Company to the extent not
actually incurred in compliance with FINRA Rule
5110(f)(2)(C).
10. 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,sent by facsimile transmission or e-mail and
confirmed and shall be deemed given when so delivered, faxed, or
e-mailed and confirmed or if mailed, two (2) days after such
mailing.
32
If to
the Selling Agents:
▇▇▇▇▇▇
▇▇▇▇▇▇ & Co., LLC
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇. ▇▇▇▇ ▇▇▇▇, Head of Investment
Banking/Underwritings
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail
address: ▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Tripoint Global
Equities, LLC
▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail
address: ▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
with a
copy (which shall not constitute notice) to:
Gracin
& ▇▇▇▇▇▇ LLP
The
Chrysler Building
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
If to
the Company:
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer
Telephone No: (▇▇▇)
▇▇▇-▇▇▇▇
E-mail
address: ▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
with a
copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ Law Group,
LLP
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq.
Fax No:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail
address: ▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
11.
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.
33
12. Successors. This
Agreement shall inure to the benefit of and shall be binding upon
the Selling Agents, the Company and their respective successors,
and nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole
and exclusive benefit of such persons and for the benefit of no
other person except that (i) the indemnification and contribution
contained in Sections 8(i)
and (iv) of this Agreement shall also be for the benefit of
the directors, officers, employees and agents of the Selling Agents
and any person or persons who control the Selling Agents within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act and (ii) the indemnification and contribution
contained in Sections
8(ii) and (iv) of this Agreement shall also be for the
benefit of the directors of the Company, the officers of the
Company who have signed the Offering Statement and any person or
persons who control the Company within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act. No purchaser
of Shares shall be deemed a successor because of such
purchase.
13.
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 Selling Agents 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.
14. Acknowledgement. The
Company acknowledges and agrees that the Selling Agents are acting
solely in the capacity of an arm’s length contractual
counterparty to the Company with respect to the offering of Shares
contemplated hereby. Additionally, the Selling Agents is not
advising the Company or any other person as to any legal, tax,
investment, accounting or regulatory matters in any jurisdiction
with respect to the offering contemplated hereby or the process
leading thereto (irrespective of whether the Selling Agents has
advised or is advising the Company on other matters). The Company
has conferred with its own advisors concerning such matters and
shall be responsible for making its own independent investigation
and appraisal of the transactions contemplated hereby, and the
Selling Agents shall have no responsibility or liability to the
Company or any other person with respect thereto. The Selling
Agents advises that it and its affiliates are engaged in a broad
range of securities and financial services and that it or its
affiliates may have business relationships or enter into
contractual relationships with purchasers or potential purchasers
of the Company’s securities. Any review by the Selling Agents
of the Company, the transactions contemplated hereby or other
matters relating to such transactions will be performed solely for
the benefit of the Selling Agents and shall not be on behalf of, or
for the benefit of, the Company.
34
15. 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.
16. 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC., dated July 11, 2016,
shall remain in full force and effect.
17.
Amendment. This
Agreement may only be amended by a written instrument executed by
each of the parties hereto.
18.
Binding Effect.
This Agreement shall inure solely to the benefit of and shall be
binding upon the Selling Agents, the Company and the controlling
persons, directors and officers referred to in Section 8 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 the
Company.
19.
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.
20.
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
8 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.
21.
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 Selling
Agent or its Affiliates or selling agents, any person controlling
any Selling Agent, its officers or directors or any person
controlling the Company or (ii) delivery of and payment for
the Shares.
[signature
page follows]
35
IN
WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below.
|
|
|
|
Confirmed as of the
date first written above mentioned:
▇▇▇▇▇▇
▇▇▇▇▇▇ & CO., LLC
By:
Name:
▇▇▇▇ ▇▇▇▇
Title:
Head of Investment Banking/Underwritings
TRIPOINT
GLOBAL EQUITIES, LLC
By:_______________________________________
Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title:
Chief Executive Officer
|
|
36
EXHIBIT A
[See
Exhibit 3.6 to Offering Statement on Form 1-A, SEC File No.
024-10741]
A-1
EXHIBIT B
Form of Lock-Up Agreement
[●],
2017
▇▇▇▇▇▇
▇▇▇▇▇▇ & Co., LLC
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
The
undersigned understands that ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC (the
“Lead Selling
Agent”) proposes to enter into a Selling Agency
Agreement (the “Selling
Agency Agreement”) with Level Brands, Inc., a North
Carolina corporation (the “Company”), providing for the
public offering (the “Public
Offering”) of shares of common stock, par value $0.001
per share, of the Company (the “Shares”).
To
induce the Lead Selling Agent to continue its efforts in connection
with the Public Offering, the undersigned hereby agrees that,
without the prior written consent of the Lead Selling Agent, the
undersigned will not, during the period commencing on the date
hereof and ending [180 or 365 if a director or officer] days after
the date of the Final Offering Circular (the “Final Offering Circular”) relating
to the Public Offering (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 Lead Selling
Agent 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 Lead
Selling Agent 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.
B-1
The
undersigned agrees that, prior to engaging in any transaction or
taking any other action that is subject to the terms of this
lock-up agreement during the period from the date hereof to and
including the 34th day following the
expiration of the initial Lock-Up Period, the undersigned will give
notice thereof to the Company and will not consummate any such
transaction or take any such action unless it has received written
confirmation from the Company that the Lock-Up Period (as may have
been extended pursuant to the previous paragraph) has
expired.
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; (ii) the Lead Selling Agent agrees that, at least
three (3) business days before the effective date of any release or
waiver of the foregoing restrictions in connection with a transfer
of Lock-Up Securities, the Lead Selling Agent will notify the
Company of the impending release or waiver; and (iii) the Company
has agreed in the Selling Agency Agreement to announce the
impending release or waiver by press release through a major news
service at least two (2) business days before the effective date of
the release or waiver. Any release or waiver granted by the Lead
Selling Agent 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 release or 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 Lead Selling Agent
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 Selling Agency Agreement is
not executed by [●], 2017, or if the Selling Agency 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 Lead Selling
Agent.
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Very
truly yours,
(Name -
Please Print)
(Signature)
(Name
of Signatory, in the case of entities - Please Print)
(Title
of Signatory, in the case of entities - Please Print)
Address:
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B-3
EXHIBIT C
Form of Press Release
[Date]
Level
Brands, Inc. (the “Company”) announced today that
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC, acting as sole book-runner and lead
selling agent 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.
C-1
EXHIBIT
D
Form of
Opinion of Counsel
(i) The Company has
been duly organized and is validly existing as a corporation and is
in good standing under the laws of the State of North Carolina
with the requisite corporate power and
authority to own or lease, as the case may be, and operate its
respective properties, and to conduct its business, as described in
the Offering Statement, the Final Offering Circular and the Pricing
Disclosure Materials and to enter into and perform its
obligations under the Selling Agency Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure to so qualify
or to be in good standing would not result in a Material Adverse
Change.
(ii) The
Company has an authorized capitalization as set forth in the
Offering Statement, the Final Offering Circular and the Pricing
Disclosure Materials under the heading
“Capitalization”; all issued and outstanding securities
of the Company have been duly authorized and validly issued and are
fully paid and non-assessable and none of such securities were
issued in violation of the preemptive rights of any stockholder of
the Company arising by operation of law or under the Charter, the
Bylaws or, to such counsel’s knowledge, the Material
Contracts (as defined below). The offers and sales of the
outstanding securities were at all relevant times either registered
under the Securities Act or exempt from such registration
requirements. The authorized and outstanding shares of capital
stock of the Company is as set forth in the Final Offering
Circular.
(iii) The
Shares have been duly authorized for issuance and sale to the
Investors pursuant to the Selling Agency Agreement and, when issued
and paid for pursuant to the terms of the Selling Agency Agreement
and any subscription agreement, will be validly issued and fully
paid and non-assessable; the holders thereof are not and will not
be subject to personal liability solely by reason of being such
holders. The issuance of the Shares is not and will not be subject
to the preemptive or similar rights of any holders of any security
of the Company arising by operation of law or under the Charter,
the Bylaws or the Material Contracts.
(iv) The
Company has full right, power and authority to execute and deliver
the Selling Agency Agreement and the Escrow Agreements and to
perform its obligations thereunder; and all action required to be
taken for the due and proper authorization, execution and delivery
by the Company of the Selling Agency Agreement, the Escrow
Agreements and the consummation by the Company of the transactions
contemplated thereby or by the Offering Statement, Pricing
Disclosure Materials and the Final Offering Circular has been duly
and validly taken.
(v) The Selling Agency
Agreement has been duly and validly authorized, executed and
delivered by the Company.
(vi) Each
of the Escrow Agreements and the Selling Agent’s Warrant
Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes the valid and legally
binding obligation of the Company, enforceable against the Company
in accordance with its terms, except (a) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors’ rights generally, (b) as
enforceability of any indemnification or contribution provisions
may be limited under the Federal and state securities laws, and (c)
that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses
and to the discretion of the court before which any proceeding
therefore may be brought. The shares of Common Stock issuable upon
exercise of the Selling Agent’s Warrant Agreement have been
duly authorized and reserved for issuance by all necessary
corporate action on the part of the Company and, when issued in
accordance with the terms of the Selling Agent’s Warrant
Agreement, will be validly issued, fully paid and non-assessable
and will not be subject to the preemptive or similar rights of any
holders of any security of the Company arising by operation of law
or under the Charter, the Bylaws or the Material
Contracts.
D-1
(vii) The
execution, delivery and performance of the Selling Agency
Agreement, the Escrow Agreements and the Selling Agent’s
Warrant Agreement, and compliance by the Company with the terms and
provisions thereof and the consummation of the transactions
contemplated thereby, and the issuance and sale of the Shares and
the Selling Agents’ Securities, do not and will not, whether
with or without the giving of notice or the lapse of time or both,
(a) violate, conflict with, or result in a breach of, any of
the terms or provisions of, or constitute a default under, or
result in the creation or modification of any lien, security
interest, charge or encumbrance upon any of the properties or
assets of the Company pursuant to the terms of, any mortgage, deed
of trust, note, indenture, loan, contract, commitment or other
agreement or instrument filed or incorporated by reference as an
exhibit to the Offering Statement or the Final Offering Circular
(collectively, the “Material
Contracts”), (b) result in any violation of the
provisions of the Charter, the Bylaws or any other governing
documents of the Company, or (c) violate any law, statute or
any judgment, order or decree, rule or regulation applicable to the
Company of any Governmental Entity.
(viii) The
shares of Common Stock offered pursuant to the Final Offering
Circular conform in all material respects to the description
thereof contained in the Offering Statement, the Final Offering
Circular and the Pricing Disclosure Materials. No United States or
state statute or regulation required to be described in the Final
Offering Circular is not described as required (except as to the
“blue sky” laws of the various states, as to which such
counsel expresses no opinions), nor are any contracts or documents
of a character required to be described in the Offering Statement,
the Final Offering Circular and the Pricing Disclosure Materials or
to be filed or incorporated by reference as exhibits to the
Offering Statement, the Final Offering not so described or filed as
required.
(ix) The
form of certificate used to evidence the Common Stock complies in
all material respects with all applicable North Carolina law
requirements, with any applicable requirements of the Charter and
Bylaws and with the requirements of the Exchange.
(x) The
statements in the Offering Statement, the Final Offering
Circular and the Pricing Disclosure Materials under the heading “Description of
Securities,” insofar as such statements purport to summarize
legal matters, legal conclusions, the Charter, the Bylaws, or other
agreements or documents discussed therein, are correct in all
material respects.
(xi) The
Offering Statement has been qualified by the Commission under the
Securities Act and the Securities Act Rules and
Regulations. The Offering
Statement, at the time it became qualified, as of the date hereof,
and as of each Closing Date, conformed and will conform in all
material respects to the requirements of Regulation A, the
Securities Act and the Securities Act Rules and
Regulations.
(xii) No
stop order suspending the qualification of the Offering Statement
has been issued under the Securities Act or any order preventing or
suspending the use of any Preliminary Final Offering Circular, any
Issuer Free Writing Final Offering Circular or the Final Offering
Circular has been issued, and no proceedings for any such purpose
have been instituted or, to such counsel’s knowledge, are
pending by the Commission or any other Governmental
Entity. Any required filing of the
Final Offering Circular, and any required supplement thereto,
pursuant to the Securities Act Rules and
Regulations, has been made in the
manner and within the time period required by the Securities
Act Rules and Regulations.
(xiii) The
Company is not required and, after giving effect to the Offering
and sale of the Shares and the application of the proceeds thereof
as described in the Offering Statement, the Final Offering Circular
and the Pricing Disclosure Materials, will not be required, to
register as an “investment company,” under the
Investment Company Act of 1940, as amended.
D-2
(xiv) From
the time of the initial confidential submission of the Offering
Statement to the Commission (or, if earlier, the first date on
which the Company engaged directly in or through any Person
authorized to act on its behalf in any Testing-the Waters
Communication) through the date hereof, the Company has been and is
an “emerging growth company,” as defined in Section
2(a) of the Securities Act.
(xv) No
filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any Governmental Entity
(other than under the Securities Act and the Securities Act Rules
and Regulations, which have been obtained, or as may be required
under the securities or blue sky laws of the various states, as to
which we need express no opinion) is necessary or required for the
performance by the Company of its obligations under the Selling
Agency Agreement, in connection with the offering, issuance or sale
of the Shares thereunder or the consummation of the transactions
contemplated thereby, except such as have been already made or
obtained or as may be required under the rules of the Exchange,
state securities laws or the rules of FINRA.
(xvi) The
Reverse Stock Split has been authorized by all necessary
corporation action of the Company. The Reverse Stock Split was duly
effected by the Company on December 5, 2016 in accordance with all
applicable North Carolina law requirements.
(xvii) The
Shares have been approved for listing on the Exchange upon official
notice of issuance.
(xviii) The
Company has not sold or issued any securities that would be
integrated with the offering of the Shares contemplated by the
Selling Agency Agreement pursuant to the Securities Act, the
Securities Rules and Regulations or the interpretations thereof by
the Commission or that would fail to come within the safe harbor
for integration under Regulation A.
(xix) To
such counsel’s knowledge, there are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registrant Statement or otherwise
registered for sale by the Company under the Securities Act, except
as disclosed in the Offering Statement, the Final Offering Circular
and the Pricing Disclosure Materials.
(xx) To
such counsel’s knowledge, there are not (a) any pending legal
proceedings to which the Company is a party or of which the
Company’s property is the subject, or (b) any proceedings
contemplated by any Governmental Authority, in each case, which are
required to be disclosed in the Offering Statement, the Pricing
Disclosure Materials and the Final Offering Circular and are not so
disclosed.
(xxi) To
such counsel’s knowledge, neither the Company, nor any of its
affiliates, nor any person acting on its 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, which would require the
registration of the sales of any such securities under the
Securities Act.
(xxii) Each
of (a) the Offering Statement, as of the time it became qualified
effective, (b) the Pricing Disclosure Materials, as of the
Applicable Time, and (c) the Final Offering Circular, as of its
date (in each case other than the financial statements and
supporting schedules included therein, as to which no opinion need
be rendered), complied as to form in all material respects with the
requirements of the Securities Act and Securities Act Rules and
Regulations.
D-3
The
opinion shall further include the following:
Nothing
has come to such counsel’s attention that caused such counsel
to believe that (1) the Offering Statement, as of the time it
became effective, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; (2) the
Pricing Disclosure Materials, as of the Applicable Time, contained
an untrue statement of a material fact or omitted 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; or (3) the Final Offering Circular, as of its date and
as of the Closing Date or Additional Closing Date, as applicable,
contained or contains an untrue statement of a material fact or
omitted or omits 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 (except that, in each
case, such counsel need express no view, and make no statement,
with respect to the financial statements and schedules and notes
thereto and other financial data derived therefrom that are
contained in or omitted from the Offering Statement, the Pricing
Disclosure Materials or the Final Offering Circular).
In
rendering such opinion, such counsel may rely as to matters of fact
on certificates of responsible officers of the Company and public
officials that are furnished to the Selling Agents.
The
opinion of counsel described above shall be rendered to the Selling
Agents at the request of the Company and shall so state
therein.
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