●] Shares American Resources Corporation Underwriting Agreement
Exhibit 1.1
Loeb draft November 29, 2018
[●] Shares
American Resources Corporation
December
[●], 2018
Maxim
Group LLC
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Ladies
and Gentlemen:
American Resources
Corporation, a Florida corporation (the “Company”),
proposes, subject to the terms and conditions stated herein, to
issue and sell to the underwriter or underwriters, as the case may
be, named in Schedule I hereto (each, an
“Underwriter” and, collectively, the
“Underwriters;” in the event that only a sole
Underwriter is named on Schedule I hereto, then all references
to “Underwriters” shall be deemed to mean and refer to
such sole Underwriter), for whom Maxim Group LLC
(“Maxim”) is acting as the representative (the
“Representative”), an aggregate of [●] shares
(the “Firm Shares”) of the Company’s Class A
common stock, par value $0.0001 per share (the “Common
Stock”). The Company has also agreed to grant to the
Representative on behalf of the Underwriters an option (the
“Option”) to purchase up to an additional shares (the
“Optional Shares”) of Common Stock (the Firm Shares and
the Optional Shares that the Underwriters elect to purchase
pursuant to Section 1(b) hereof are herein collectively called the
“Shares”).
The
Company confirms as follows its agreement with each of the
Underwriters:
1. Agreement to Sell and
Purchase.
(a) Purchase of Firm Shares. On the basis
of the representations and warranties herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to
issue and sell, severally and not jointly, to the several
Underwriters, an aggregate of [_____] Firm Shares of the Company at
a purchase price (net of discounts and commissions) of $[___] per
Firm Share. The Underwriters, severally and not jointly, agree to
purchase from the Company the number of Firm Shares set forth
opposite their respective names on Schedule I attached hereto and
made a part hereof at a purchase price (net of discounts and
commissions) of $[___] per Firm Share.
(b) Purchase of Option Shares. Subject to
all the terms and conditions of this Agreement, the Company grants
to the Representative on behalf of the Underwriters the Option to
purchase, severally and not jointly, up to [__] Option Shares. The
purchase price to be paid for the Option Shares (net of discounts
and commissions) will be $[____] per Option Share. The Option may
be exercised in whole or in part at any time on or before the 45th
day after the date of this Agreement, upon written notice (the
“Option Notice”) by the Representative to the Company
no later than 12:00 noon, New York City time, at least one and no
more than five business days before the date specified for closing
in the Option Notice (the “Option Closing Date”)
setting forth the aggregate number of shares of Common Stock to be
purchased and the time and date for such purchase. Upon exercise of
the Option, the Company will become obligated to convey to the
Underwriters, and, subject to the terms and conditions set forth
herein, the Underwriters will become obligated to purchase, the
number of shares of Common Stock specified in the Option Notice. If
any Option Shares are to be purchased, each Underwriter agrees,
severally and not jointly, to purchase the number of Option Shares
(as adjusted by the Representative in such manner as it deems
advisable to avoid fractional securities) that bears the same
proportion to the number of Firm Shares to be purchased by it as
set forth on Schedule I opposite such Underwriter’s name as
the total number of Option Shares to be purchased bears to the
total number of Firm Shares.
(c) Representative’s Warrants. The
Company hereby agrees to issue to the Representative (and/or its
designees) on the Closing Date and each Option Closing Date, as the
case may be, Warrants to purchase an aggregate of seven percent
(7%) of the shares of Common Stock issued at such closing (the
“Representative’s Warrants”). The
Representative’s Warrants shall be exercisable, in whole or
in part, commencing 180 days after the Effective Date and expiring
on the three-year anniversary thereof, at an initial exercise price
of $[●] per share, which is equal to one hundred and ten
percent (110%) of the initial public offering price of the Firm
Shares issued at such closing. The Representative’s Warrants
and the shares of Common Stock issuable upon exercise of the
Representative’s Warrants are hereinafter referred to
collectively as the “Representative’s Securities”
and the Representative’s Securities together with the Shares
are hereinafter referred to as the
“Securities.”
2. Delivery and
Payment.
(a) Closing. Delivery of the
Firm Shares shall be made to the Representative through the
facilities of the Depository Trust Company (“DTC”) for
the respective accounts of the Underwriters against payment of the
Purchase Price by wire transfer of immediately available funds to
the order of the Company. Such payment shall be made at
10:00 a.m., New York City time, on the second business day
(the third business day, should the offering be priced after
4:00 p.m., New York City Time) after the date of this
Agreement or at such time on such other date, not later than ten
business days after such date, as may be agreed upon by the Company
and the Representative (such date is hereinafter referred to as the
“Closing Date”).
(b) Option Closing. To the
extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner and at the
location specified above) shall take place at the time and date
(which may be the Closing Date, but not earlier than the Closing
Date) specified in the Option Notice.
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(c) Electronic
Transfer. Electronic transfer of the Shares shall
be made at the time of purchase in such names and in such
denominations as the Representative shall specify.
(d) Tax Stamps. The cost of
original issue tax stamps, if any, in connection with the issuance
and delivery of the Shares by the Company to the Underwriters shall
be borne by the Company. The Company shall pay and hold each
Underwriter and any subsequent holder of the Shares harmless from
any and all liabilities with respect to or resulting from any
failure or delay in paying United States federal and state and
foreign stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original
issuance, sale and delivery to such Underwriter of the
Securities.
3. Representations and Warranties of the
Company.
(a) Compliance with Registration
Requirements. A registration statement on
Form S-1 (Registration No. 333-226042) relating to the
Securities, including a preliminary prospectus and such amendments
to such registration statement as may have been required prior to
the date of this Agreement, has been prepared by the Company under
the provisions of the Securities Act of 1933, as amended (the
“Act”), and the rules and regulations (collectively
referred to as the “Rules and Regulations”) of the
Securities and Exchange Commission (the “Commission”)
thereunder, and has been filed with the Commission. Copies of such
registration statement and of each amendment thereto, if any,
including the related preliminary prospectuses, heretofore filed by
the Company with the Commission have been delivered to the
Underwriters. The term “Registration Statement” means
such registration statement on Form S-1 as amended at the time it
becomes or became effective, including financial statements, all
exhibits and any information deemed to be included or incorporated
by reference therein, including any information deemed to be
included pursuant to Rule 430A or Rule 430B of the Rules and
Regulations, as applicable. If the Company files a registration
statement to register a portion of the Securities and relies on
Rule 462(b) of the Rules and Regulations for such registration
statement to become effective upon filing with the Commission (the
“Rule 462 Registration Statement”), then any
reference to the “Registration Statement” shall be
deemed to include the Rule 462 Registration Statement, as
amended from time to time. The term “preliminary
prospectus” as used herein means a preliminary prospectus as
contemplated by Rule 430 or Rule 430A of the Rules and
Regulations included at any time as part of, or deemed to be part
of or included in, the Registration Statement. The term
“Prospectus” means the final prospectus in connection
with this offering as first filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations or, if no such filing
is required, the form of final prospectus included in the
Registration Statement at the effective date, except that if
any revised prospectus or prospectus supplement shall be
provided to the Representative by the Company for use in
connection with the Shares which differs from the
Prospectus (whether or not such revised prospectus or prospectus
supplement is required to be filed by the Company pursuant to Rule
424(b)), the term “Prospectus” shall also refer to such
revised prospectus or prospectus supplement, as the case may be,
from and after the time it is first provided to
the Representative for such use. Any reference
herein to the terms “amend”, “amendment” or
“supplement” with respect to the Registration
Statement, any preliminary prospectus or the Prospectus shall be
deemed to refer to and include: (i) the filing of any document
under the Securities Exchange Act of 1934, as amended, and together
with the rules and regulations promulgated thereunder
(collectively, the “Exchange Act”) after the
effective date of the Registration Statement, the date of such
preliminary prospectus or the date of the Prospectus, as the case
may be, which is incorporated therein by reference, and (ii) any
such document so filed.
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(b) Effectiveness of
Registration. The Registration Statement, any
Rule 462 Registration Statement and any post-effective
amendment thereto have been declared effective by the Commission
under the Act or have become effective pursuant to Rule 462 of the
Rules and Regulations. The Company has responded to all requests,
if any, of the Commission for additional or supplemental
information. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462 Registration Statement
is in effect and no proceedings for such purpose have been
instituted or are pending or, to the knowledge of the Company, are
threatened by the Commission.
(c) Accuracy of Registration
Statement. Each of the Registration Statement,
any Rule 462 Registration Statement and any post-effective
amendment thereto, at the time it became effective, when any
document filed under the Exchange Act was or is filed and at
all subsequent times, complied and will comply in all material
respects with the Act and the Rules and Regulations, and did not
and will 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.
The Prospectus, as amended or supplemented, as of its date and at
all subsequent times when a prospectus is delivered or required
(or, but for the provisions of Rule 172, would be required) by
applicable law to be delivered in connection with sales of
Securities, complied and will comply in all material respects with
the Act, the Exchange Act and the Rules and Regulations, and did
not or will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein not misleading, in the light of the circumstances under
which they were made. Each preliminary prospectus (including the
preliminary prospectus or prospectuses filed as part of the
Registration Statement or any amendment thereto) complied when so
filed in all material respects with Act, the Exchange Act and the
Rules and Regulations, and each preliminary prospectus and the
Prospectus delivered to the Representative for use in connection
with this offering is identical to the electronically transmitted
copies thereof filed with the Commission on ▇▇▇▇▇, except to the
extent permitted by Regulation S-T. The foregoing representations
and warranties in this Section 3(c) do not apply to any statements
or omissions made in reliance on and in conformity with information
relating to the Underwriters furnished in writing to the Company by
the Underwriters through the Representative specifically for
inclusion in the Registration Statement or Prospectus or any
amendment or supplement thereto. For all purposes of this
Agreement, the information set forth in the Prospectus (i) in the
third paragraph under the caption "Underwriting" setting forth the
amount of the selling concession, and (ii) in the eleventh, twelfth
and thirteenth paragraphs under the caption "Underwriting"
regarding stabilization, short positions and penalty bids
constitutes the only information (the “Underwriters’
Information”) relating to the Underwriters furnished in
writing to the Company by the Underwriters through the
Representative specifically for inclusion in the preliminary
prospectus, the Registration Statement or the
Prospectus.
(d) Company Not Ineligible
Issuer. (i) At the time of filing the
Registration Statement relating to the Securities and (ii) as of
the date of the execution and delivery of this Agreement (with such
date being used as the determination date for purposes of this
clause (ii)), the Company was not and is not an “ineligible
issuer” (as defined in Rule 405 of the Rules and
Regulations).
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(e) Disclosure at the Time of
Sale. As of the Applicable Time, neither (i) the
Issuer General Use Free Writing Prospectus(es) (as defined below)
issued at or prior to the Applicable Time, the most recent
preliminary prospectus related to this offering, and the
information included on Schedule II hereto, all
considered together (collectively, the “General Disclosure
Package”), nor (ii) any individual Issuer Limited Use Free
Writing Prospectus, when considered together with the General
Disclosure Package, included any untrue statement of a material
fact or omitted to state any material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading. The preceding sentence
does not apply to statements in or omissions from the General
Disclosure Package based upon and in conformity with written
information furnished to the Company by the Underwriters through
the Representative specifically for use therein, it being
understood and agreed that the only such information furnished by
the Underwriters consists of the Underwriters’
Information.
As used
in this subsection and elsewhere in this Agreement:
“Applicable
Time” means [8:15 a.m.] (New York City Time) on [__], 2018 or
such other time as agreed by the Company and the
Representative.
“Issuer Free
Writing Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433 of the Rules and
Regulations, relating to the Securities that (i) is required
to be filed with the Commission by the Company, (ii) is
“a written communication that is a road show” within
the meaning of Rule 433(d)(8)(i), whether or not required to be
filed with the Commission or (iii) is exempt from filing
pursuant to Rule 433(d)(5)(i) because it contains a description of
the Securities or of the Offering that does not reflect the final
terms, in each case in the form filed or required to be filed with
the Commission or, if not required to be filed, in the form
retained in the Company’s records pursuant to Rule
433(g).
“Issuer
General Use Free Writing Prospectus” means any Issuer Free
Writing Prospectus that is intended for general distribution to
prospective investors, as evidenced by its being specified
in Schedule II hereto.
“Issuer
Limited Use Free Writing Prospectus” means any Issuer Free
Writing Prospectus that is not an Issuer General Use Free Writing
Prospectus.
(f) Issuer Free Writing
Prospectuses. Each Issuer Free Writing
Prospectus, as of its issue date and at all subsequent times
through the Prospectus Delivery Period (as defined below), does not
include any information that conflicts with the information
contained in the Registration Statement. The foregoing sentence
does not apply to statements in or omissions from any Issuer Free
Writing Prospectus based upon and in conformity with the
Underwriters’ Information. If at any time following the
issuance of an Issuer Free Writing Prospectus there occurred an
event or development as a result of which such Issuer Free Writing
Prospectus conflicted with the information contained in the
Registration Statement relating to the Securities or included an
untrue statement of material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of
the circumstances prevailing at that subsequent time, not
misleading, the Company has promptly notified the Representative
and has promptly amended or supplemented, at its own expense, such
Issuer Free Writing Prospectus to eliminate or correct such
conflict, untrue statement or omission.
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(g) Distribution of Offering Material by the
Company. The Company has not distributed and will
not distribute, prior to the later of the Closing Date, any Option
Closing Date and the completion of the Underwriters’
distribution of the Securities, any offering material in connection
with the offering or sale of the Securities, the Registration
Statement, the preliminary prospectus, the Permitted Free Writing
Prospectuses reviewed and consented to by the Representative and
included in Schedule II hereto, and the
Prospectus. None of the Marketing Materials, as of their
respective issue dates and at all subsequent times through the
Prospectus Delivery Period (as defined below), include any
information that conflicts with the information contained in the
Registration Statement. If at any time following the issuance of
any Marketing Material there occurred an event or development as a
result of which such Marketing Material conflicted with the
information contained in the Registration Statement relating to the
Securities or included an untrue statement of material fact or
omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances prevailing at
that subsequent time, not misleading, the Company has promptly
notified the Representative and has promptly amended or
supplemented, at its own expense, such Marketing Material to
eliminate or correct such conflict, untrue statement or
omission.
(h) Subsidiaries. The names and
jurisdictions of incorporation or formation of each of the
Company’s subsidiaries (the “Subsidiaries”) are
set forth in the Registration Statement, the General Disclosure
Package and the Prospectus. Except as described in the Registration
Statement, the General Disclosure Package and the Prospectus, (i)
the Company does not own or control, directly or indirectly, any
corporation, association or other entity that is
“significant” to the Company within the meaning of
Rule 1-02(w) of Regulation S-X and (ii) the Company owns, directly or
indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any lien, charge, pledge,
security interest, encumbrance, right of first refusal, preemptive
right or other similar restriction (each, a
“Lien”), and all of the issued and outstanding shares
of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.
(i) Organization and Qualification. The
Company and each of the Subsidiaries is an entity duly incorporated
or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization,
with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of this
Agreement, the Warrant Agreement (as hereinafter defined), the
Warrants, the Underwriters’ Warrants or any other
agreement, document, certificate or instrument required to be
delivered pursuant to this Agreement (collectively, the
“Transaction Documents”), (ii) a material adverse
effect on the results of operations, assets, business, prospects or
condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect
on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no action, claim, suit or proceeding (including,
without limitation, a partial proceeding, such as a deposition),
whether commenced or threatened (each, a “Proceeding”)
has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and
authority or qualification.
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(j) Authorization;
Enforcement. The Company has
the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by this Agreement and each
of the other Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of
this Agreement and each of the other Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required
by the Company, the Board of Directors or the Company’s
stockholders in connection herewith or therewith other than in
connection with the Required Approvals (as hereinafter defined
in Section 3(l)). This Agreement and each other Transaction
Document to which it is a party has been (or upon delivery will
have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, assuming due
authorization, execution and delivery by the Representative, will
constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
(k) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under,
result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as would not have or reasonably be
expected to result in a Material Adverse Effect.
(l) Filings, Consents and Approvals. The
Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filing with the
Commission of the Registration Statement and the Prospectus, (ii)
application(s) to the Nasdaq Capital Market for the listing of the
Shares for trading thereon in the time and manner required thereby,
(iii) such filings, if any, as are required to be made under
applicable state securities laws, (iv) such notices, filings or
authorizations as are required to be obtained or made under
applicable rules of the Financial Industry Regulatory Authority,
Inc. (“FINRA”) and The Nasdaq Stock Market, and (v)
such notices, filings or authorizations as have been obtained,
given or made as of the date hereof (collectively, the
“Required Approvals”).
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(m) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens.
(n) Capitalization. The capitalization of
the Company as of the date hereof is as set forth in the
Registration Statement, the General Disclosure Package and the
Prospectus. The Company has not issued any capital stock since its
most recently filed periodic report under the Exchange Act, other
than pursuant to the Company’s equity incentive plans, the
issuance of shares of Common Stock to employees, directors or
consultants pursuant to the Company’s equity incentive plans
and pursuant to the conversion and/or exercise of any securities of
the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including, without limitation, any
debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common
Stock (“Common Stock Equivalents”) and is
outstanding as of the date of the most recently filed periodic
report under the Exchange Act. No individual or corporation,
partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of
any kind (each, a “Person”) has any right of first
refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the
Transaction Documents. Except as a result of the purchase and sale
of the Securities or as disclosed in the Registration
Statement, the General Disclosure Package and the Prospectus, there
are no outstanding options, warrants, scrip rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into
or exercisable or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock
or the capital stock of any Subsidiary, or contracts, commitments,
understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents or capital stock of any
Subsidiary. The issuance and sale of the Securities will not
obligate the Company or any Subsidiary to issue shares of Common
Stock or other securities to any Person (other than the
Underwriters) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or
reset price under any of such securities. There are no securities
of the Company or any Subsidiary that have any anti-dilution or
similar adjustment rights (other than adjustments for stock splits,
recapitalizations, and the like) to the exercise or conversion
price, have any exchange rights, or reset rights. Except as set
forth in the Registration Statement, the General Disclosure Package
and the Prospectus, there are no outstanding securities or
instruments of the Company or any Subsidiary that contain any
redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to redeem a security of the
Company or such Subsidiary. The Company does not have any stock
appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement. All of the outstanding
shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable, have been issued in
compliance in all material respects with all federal and state
securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of
any stockholder, the Board of Directors or others is required for
the issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company
is a party or, to the knowledge of the Company, between or among
any of the Company’s stockholders.
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(o) SEC Reports; Financial Statements. The
Company has filed all reports, schedules, forms, statements and
other documents required to be filed by the Company under the Act
and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law or regulation to
file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein,
together with the Registration Statement, the General Disclosure
Package and the Prospectus, being collectively referred to herein
as the “SEC Reports”) on a timely basis or has received
a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their
respective dates, the SEC
Reports complied in all material respects with the requirements of
the Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. The Company has never been an issuer subject to Rule
144(i) under the Act. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied
on a consistent basis during the periods involved
(“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit
adjustments. The agreements and documents described in the SEC
Reports conform to the descriptions thereof contained therein and
there are no agreements or other documents required by the Act and
the rules and regulations thereunder to be described in the SEC
Reports or to be filed with the Commission as exhibits to the
Registration Statement, that have not been so described or filed.
Each agreement or other instrument (however characterized or
described) to which the Company is a party or by which it is or may
be bound or affected and (i) that is referred to in the SEC
Reports, or (ii) is material to the Company’s business, has
been duly authorized and validly executed by the Company, is in
full force and effect in all material respects and is enforceable
against the Company and, to the Company’s knowledge, the
other parties thereto, in accordance with its terms, except (x) as
such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights
generally, (y) as enforceability of any indemnification or
contribution provision may be limited under the federal and state
securities laws, and (z) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject
to the equitable defenses and to the discretion of the court before
which any proceeding therefore may be brought. Except as
disclosed in the SEC Reports, none of such agreements or
instruments has been assigned by the Company, and neither the
Company nor, to the best of the Company’s knowledge, any
other party is in default thereunder and, to the best of the
Company’s knowledge, no event has occurred that, with the
lapse of time or the giving of notice, or both, would constitute a
default thereunder. To the best of the Company’s knowledge,
performance by the Company of the material provisions of such
agreements or instruments will not result in a violation of any
existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign,
having jurisdiction over the Company or any of its assets or
businesses, including, without limitation, those relating to
environmental laws and regulations.
9
(p) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the date of the latest
audited financial statements included within the SEC Reports,
except as reflected or specifically disclosed in a subsequent SEC
Report filed prior to the date hereof, (i) there has been no event,
occurrence or development that has had or that would reasonably be
expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any material liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in
filings made with the Commission, (iii) the Company has not altered
its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company equity
incentive plans or as set forth in the Registration Statement, the
General Disclosure Package and the Prospectus. The Company does not
have pending before the Commission any request for confidential
treatment of information. Except for the issuance of the Securities
contemplated by this Agreement, no event, liability, fact,
circumstance, occurrence or development has occurred or exists or
is reasonably expected to occur or exist with respect to the
Company or its Subsidiaries or their respective businesses,
prospects, properties, operations, assets or financial condition
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.
(q) Litigation. There is no action, suit,
inquiry, notice of violation or proceeding pending or, to the
knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) would, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Except as disclosed in the Registration Statement, the
General Disclosure Package and the Prospectus, neither the Company
nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the knowledge
of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any
current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the
Act.
(r) Labor Relations. No labor dispute
exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company, which would
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment
practices, terms and
conditions of employment and wages and hours, except where the
failure to be in compliance would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
10
(s) Compliance. Except as disclosed in the
SEC Reports and except as set forth in the Registration Statement,
the General Disclosure Package and the Prospectus, neither the
Company nor any Subsidiary: (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in
violation of any judgment, decree or order of any court, arbitrator
or other governmental authority or (iii) is or has been in
violation of any statute, rule, ordinance or regulation of any
governmental authority, including, without limitation, all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
would not have or reasonably be expected to result in a Material
Adverse Effect.
(t) Environmental Laws. The Company and its
Subsidiaries (i) are in compliance in all material respects with
all federal, state, local and foreign laws relating to pollution or
protection of human health or the environment (including ambient
air, surface water, groundwater, land surface or subsurface
strata), including laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes (collectively,
“Hazardous Materials”) into the environment, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees,
demands, or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations,
issued, entered, promulgated or approved thereunder
(“Environmental Laws”); (ii) have received
all permits licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where in each
clause (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(u) Regulatory Permits. The Company and the
Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the
failure to possess such permits would not reasonably be expected to
result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has
received any written notice of proceedings relating to the
revocation or modification of any Material Permit.
(v) Title to Assets. The Company and the
Subsidiaries have good and marketable title in all personal
property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all
Liens, except for (i) Liens as do not materially affect the value
of such property and do not materially interfere with the use
made and proposed to be
made of such property by the Company and the Subsidiaries and (ii)
Liens for the payment of federal, state or other taxes, for which
appropriate reserves have been made therefor in accordance with
GAAP and, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company
and the Subsidiaries are in compliance in all material
respects.
11
(w) Intellectual Property. To the knowledge
of the Company, the Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or required for use in
connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”). None of, and neither the Company nor any Subsidiary
has received a notice (written or otherwise) that any of, the
Intellectual Property Rights has expired, terminated or been
abandoned, or is expected to expire or be abandoned, within two (2)
years from the date of this Agreement, except where such action
would not reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Subsidiary has received, since the date
of the latest audited financial statements included within the SEC
Reports, a written notice of a claim or otherwise has any knowledge
that the Intellectual Property Rights violate or infringe upon the
rights of any Person, except as would not have or reasonably be
expected to not have a Material Adverse Effect. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of
the Intellectual Property Rights. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties,
except where failure to do so would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. The Company has no knowledge that it lacks or will be
unable to obtain any rights or licenses to use all Intellectual
Property Rights that are necessary to conduct its
business.
(x) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the
aggregate Purchase Price. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in
cost.
(y) Transactions With Affiliates and
Employees. Except as set forth in the SEC Reports, none of
the officers or directors of the Company or any Subsidiary and, to
the knowledge of the Company, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from,
providing for the borrowing of money from or lending of money to or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer,
director, trustee, stockholder, member or partner, in each case in
excess of $120,000 other than for (i) payment of salary or
consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf of the Company and (iii) other employee
benefits, including stock option agreements under any stock option
plan of the Company.
12
(z) ▇▇▇▇▇▇▇▇-▇▇▇▇▇; Internal Accounting
Controls. The Company and the Subsidiaries are in compliance
with any and all applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of 2002 that are effective and applicable to the Company as of the
date hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of
the date hereof and as of the Closing Date or the Option Closing
Date, as applicable. Except as set forth in the SEC Reports, the
Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company and the Subsidiaries have established disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the disclosure
controls and procedures of the Company and the Subsidiaries as of
the end of the period covered by the most recently filed periodic
report under the Exchange Act (such date, the “Evaluation
Date”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no
changes in the internal control over financial reporting (as such
term is defined in the Exchange Act) of the Company and its
Subsidiaries that have materially affected, or is reasonably likely
to materially affect, the internal control over financial reporting
of the Company and its Subsidiaries.
(aa) Certain
Fees; FINRA Affiliation. Except as set forth in the
Registration Statement, the General Disclosure Package and the
Prospectus, no brokerage or finder’s fees or commissions are
or will be payable by the Company or any Subsidiary to any broker,
financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. To the
Company’s knowledge, there are no other arrangements,
agreements or understandings of the Company or, to the
Company’s knowledge, any of its stockholders that may affect
the Underwriters’ compensation, as determined by FINRA. The
Company has not made any direct or indirect payments (in cash,
securities or otherwise) to (i) any person, as a finder’s
fee, investing fee or otherwise, in consideration of such person
raising capital for the Company or introducing to the Company
persons who 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
12-month period prior to the date on which the Registration
Statement was filed with the Commission (the “Filing
Date”) or thereafter. To the Company’s knowledge, no
(i) officer or director of the Company or its subsidiaries,
(ii) owner of 5% or more of the Company’s unregistered
securities or that of its subsidiaries or (iii) owner of any amount
of the Company’s unregistered securities acquired within the
180-day period prior to the Filing Date, has any direct or indirect
affiliation or association with any FINRA member. The Company will
advise the Underwriters and their respective counsel if it becomes
aware that any officer, director or stockholder of the Company or
its subsidiaries is or becomes an affiliate or associated person of
a FINRA member participating in the
Offering.
13
(bb) Investment
Company. The Company is not, and is not an affiliate of, and
immediately after receipt of payment for the Securities, will not
be or be an affiliate of, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended.
(cc) Registration
Rights. Except as set forth in the Registration Statement,
the General Disclosure Package and the Prospectus, no Person has
any right to cause the Company or any Subsidiary to effect the
registration under the Act of any securities of the Company or any
Subsidiary.
(dd) Listing
and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act nor has the Company
received any notification that the Commission is contemplating
terminating such registration. The Common Stock has been approved
for listing on the Nasdaq Capital Market (the
“Exchange”) subject to notice of issuance on the
Exchange, and the Company has taken no action designed to, or
likely to have the effect of, delisting the Common Stock from the
Exchange, nor has the Company received any notification that the
Exchange is contemplating terminating such listing. Except as
disclosed in the SEC Reports, the Company is, and has no reason to
believe that it will not in the foreseeable future continue to be,
in compliance with all such listing and maintenance requirements.
The Common Stock is currently eligible for electronic transfer
through the Depository Trust Company or another established
clearing corporation and the Company is current in payment of the
fees to the Depository Trust Company (or such other established
clearing corporation) in connection with such electronic
transfer.
(ee) No
Integrated Offering. Neither the Company or any Person
acting on its behalf, nor, to the Company’s knowledge, any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with the Company (as such terms are used in and construed
under Rule 405 under the Act) (each, an “Affiliate”) or any Person
acting on their behalf, has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the
Company.
(ff) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date and as of the Option Closing Date, after giving
effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder, the current cash flow of the
Company, together with the proceeds the Company would receive, were
it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, may be insufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). Except as set forth in the Registration
Statement, the General Disclosure Package and the Prospectus, the
Company has no knowledge of any facts or circumstances which lead
it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date or the Option Closing
Date, as applicable. The Registration Statement, the General
Disclosure Package and the Prospectus sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the
Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed
money or amounts owed in excess of $50,000 (other than trade
accounts payable incurred in the ordinary course of business), (y)
all guaranties, endorsements and other contingent obligations in
respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s consolidated balance
sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the
present value of any lease payments in excess of $50,000 due
under leases required to be capitalized in accordance with GAAP.
Except as set forth in the Registration Statement, the General
Disclosure Package and the Prospectus, neither the Company nor any
Subsidiary is in default with respect to any
Indebtedness.
14
(gg) Tax
Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, each of the Company and its Subsidiaries
(i) has made or filed all United States federal, state and local
income and all foreign income and franchise tax returns,
reports and declarations required by any jurisdiction to which it
is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations and
(iii) has set aside on its books provision reasonably adequate for
the payment of all material taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the
Company or of any Subsidiary know of no basis for any such
claim.
(hh) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary, has
(i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) which is
in violation of law, or (iv) violated in any material respect any
provision of Foreign Corrupt Practices Act of 1977, as
amended.
(ii) Accountants.
The Company’s accounting firm is MaloneBailey, LLP (the
“Accountants”). The Accountants have certified the
financial statements and supporting schedules of the Company
included in the Registration Statement and the Prospectus, and are
independent registered public accountants as required by the Act,
the Exchange Act and the Rules and Regulations, and such
Accountants are not in violation of the auditor independence
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 with respect to the
Company.
(jj) Regulation
M Compliance. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another
to purchase any other securities of the Company, other than, in the
case of clauses (ii) and (iii), compensation paid to the
Underwriters in connection with the offering.
(kk) Office
of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company’s knowledge, any director,
officer, agent, employee or Affiliate of the Company or any
Subsidiary is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”).
(ll) U.S.
Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon the
Representative’s request.
15
(mm) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”), and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(nn) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money
Laundering Laws”), and no Action or Proceeding by or before
any court or governmental agency, authority or body or any
arbitrator involving the Company or any Subsidiary with respect to
the Money Laundering Laws is pending or, to the knowledge of the
Company or any Subsidiary, threatened.
(oo) Benefit
Plans. 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
Section 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 (other
than events as to which the requirement of notice has been waived
by the Pension Benefit Guaranty Corporation) with respect to any
“employee benefit plan” established or maintained by
the Company or any of its ERISA Affiliates (without regard to Code
Sections 414(m) and (o)) for which the Company would have any
material liability; 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 (A) Title IV of ERISA
with respect to termination of, or withdrawal from, any
“employee benefit plan” or (B) 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 nothing has occurred whether
by action or failure to act, which would cause the loss of such
qualification. Each share option granted by the Company under the
Company’s share option plans was granted (i) in accordance
with the terms of the Company’s share option plans and (ii)
with an exercise price at least equal to the fair market value of
the Common Stock on the date such share option would be considered
granted under GAAP and applicable law. No share option granted
under the Company’s share option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, share options prior
to, or otherwise knowingly coordinate the grant of share options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects
16
(pp) Statistical
Data. Any statistical and market related data contained in
the Registration Statement, the General Disclosure Package and the
Prospectus are based on or derived from sources which the Company
believes are reliable and accurate and the Company has obtained the
written consent to the use of such data from such sources to the
extent required;
(qq) Officer’s
Certificates. Any certificate signed by any officer of the
Company or any of its Subsidiaries delivered to the Representative
or its counsel shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered
thereby.
4. Agreements of the Company. The
Company agrees with each of the Underwriters:
(a) Amendments and Supplements to Registration
Statement. The Company shall not, either prior to
any effective date or thereafter during such period as the
Prospectus is required by law to be delivered (whether physically
or through compliance with Rule 172 of the Rules and Regulations or
any similar rule) (the “Prospectus Delivery Period”) in
connection with sales of the Securities by an Underwriter or
dealer, amend or supplement the Registration Statement, the General
Disclosure Package or the Prospectus, unless a copy of such
amendment or supplement thereof shall first have been submitted to
the Representative within a reasonable period of time prior to the
filing or, if no filing is required, the use thereof and the
Representative shall not have objected thereto in good
faith.
(b) Amendments and Supplements to the Registration
Statement, the General Disclosure Package, and the Prospectus and
Other Act Matters. During the Prospectus Delivery
Period, the Company will comply with all requirements imposed upon
it by the Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, and by the Exchange Act
so far as necessary to permit the continuance of sales of or
dealings in the Securities as contemplated by the provisions
hereof, the General Disclosure Package, the Registration Statement
and the Prospectus. If, during the Prospectus Delivery Period,
any event or development shall occur or condition exist as a result
of which the General Disclosure Package or the Prospectus, as then
amended or supplemented, would include any untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements therein, in the light of the circumstances
then prevailing or under which they were made, as the case may be,
not misleading, or if it shall be necessary to amend or supplement
the General Disclosure Package or the Prospectus in order to make
the statements therein, in the light of the circumstances then
prevailing or under which they were made, as the case may be, not
misleading, or if in the opinion of the Representative it is
otherwise necessary to amend or supplement the Registration
Statement, the General Disclosure Package or the
Prospectus, or to file a new registration statement containing the
Prospectus, in order to comply with the Act, the Rules and
Regulations, the Exchange Act or the Exchange Act Rules, including
in connection with the delivery of the Prospectus, the Company
agrees to (i) promptly notify the Representative of any such event
or condition and (ii) promptly prepare (subject to Section 4(a) and
4(f) hereof), file with the Commission (and use its best efforts to
have any amendment to the Registration Statement or any new
registration statement to be declared effective) and furnish at its
own expense to the Representative (and, if applicable, to dealers),
amendments or supplements to the Registration Statement, the
General Disclosure Package or the Prospectus, or any new
registration statement, necessary in order to make the statements
in the General Disclosure Package or the Prospectus as so amended
or supplemented, in the light of the circumstances then prevailing
or under which they were made, as the case may be, not misleading,
or so that the Registration Statement or the Prospectus, as amended
or supplemented, will comply with the Act, the Rules and
Regulations, the Exchange Act or the Exchange Act Rules or any
other applicable law.
17
(c) Notifications to the
Underwriters. The Company shall use its best
efforts to cause the Registration Statement to become effective,
and shall notify the Representative promptly, and shall confirm
such advice in writing, (i) when any post-effective amendment to
the Registration Statement has become effective and when
any post-effective amendment thereto becomes effective, (ii) of any
request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional
information, (iii) of the commencement by the Commission or by any
state securities commission of any proceedings for the suspension
of the qualification of any of the Securities for offering or sale
in any jurisdiction or of the initiation, or the threatening, of
any proceeding for that purpose, including, without limitation, the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose or the threat thereof, (iv) of the
happening of any event during the Prospectus Delivery Period that
in the judgment of the Company makes any statement made in the
Registration Statement or the Prospectus misleading (including by
omission) or untrue or that requires the making of any changes in
the Registration Statement or the Prospectus in order to make the
statements therein, in light of the circumstances in which they are
made, not misleading (including by omission), and (v) of
receipt by the Company or any representative of the Company of any
other communication from the Commission relating to the Company,
the Registration Statement, any preliminary prospectus or the
Prospectus. If at any time the Commission shall issue any order
suspending the effectiveness of the Registration Statement, the
Company shall use best efforts to obtain the withdrawal of such
order at the earliest possible moment. The Company shall comply
with the provisions of and make all requisite filings with the
Commission pursuant to Rules 424(b), 430A, 430B and 462(b) of
the Rules and Regulations and to notify the Representative promptly
of all such filings.
(d) Executed Registration
Statement. The Company shall furnish to the
Representative, without charge, one signed copy of the Registration
Statement, and of any post-effective amendment thereto, including
financial statements and schedules, and all exhibits thereto, and
shall furnish to the Representative, without charge, a copy of the
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules but without
exhibits.
(e) Undertakings. The Company
shall comply with all the provisions of any undertakings contained
and required to be contained in the Registration
Statement.
(f) Prospectus. The Company
shall prepare the Prospectus in a form approved by the
Representative and shall file such Prospectus with the Commission
pursuant to Rule 424(b) of the Rules and Regulations with a filing
date not later than the second business day following the execution
and delivery of this Agreement. Promptly after the effective date
of the Registration Statement, and thereafter from time to time
during the period when the Prospectus is required (or, but for the
provisions of Rule 172 under the Act, would be required) to be
delivered, the Company shall deliver to the Representative, without
charge, as many copies of the Prospectus and any amendment or
supplement thereto as the Representative may reasonably request.
The Company consents to the use of the Prospectus and any amendment
or supplement thereto by the Representative and by all dealers to
whom the Securities may be sold, both in connection with the
offering or sale of the Securities and for any period of time
thereafter during the Prospectus Delivery Period. If, during the
Prospectus Delivery Period any event shall occur that in the
judgment of the Company or counsel to the Underwriters should be
set forth in the Prospectus in order to make any statement therein,
in the light of the circumstances under which it was made, not
misleading (including by omission), or if it is necessary to
supplement or amend the Prospectus to comply with law, the Company
shall forthwith prepare and duly file with the Commission an
appropriate supplement or amendment thereto, and shall deliver to
the Representative, without charge, such number of copies thereof
as the Representative may reasonably request.
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(g) Permitted Free Writing
Prospectuses. The Company represents and agrees
that it has not made and, unless it obtains the prior consent of
the Representative, will not make, any offer relating to the
Securities that would constitute a “free writing
prospectus” as defined in Rule 405 of the Rules and
Regulations, required to be filed with the Commission or
retained by the Company under Rule 433 of the Rules and
Regulations; provided that the prior written
consent of the Representative hereto shall be deemed to have been
given in respect of the Issuer Free Writing Prospectuses included
in Schedule II hereto. Any such free writing prospectus
consented to by the Representative is herein referred to as a
“Permitted Free Writing Prospectus.” The Company agrees
that (i) it has treated and will treat, as the case may be, each
Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus, and (ii) has complied and will comply, as the case may
be, with the requirements of Rules 164 and 433 of the Act
applicable to any Permitted Free Writing Prospectus, including in
respect of timely filing with the Commission, legending and record
keeping. If at any time following the issuance of an Issuer Free
Writing Prospectus there occurs an event or development as a result
of which such Issuer Free Writing Prospectus would conflict with
the information contained in the Registration Statement relating to
the Securities or would include an untrue statement of material
fact or would omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances
prevailing at that subsequent time, not misleading, the Company
will promptly notify the Representative and will promptly amend or
supplement, at its own expense, such Issuer Free Writing Prospectus
to eliminate or correct such conflict, untrue statement, or
omission. The Company represents that it has satisfied and
agrees that it will satisfy the conditions in Rule 433 to avoid a
requirement to file with the Commission any electronic road
show.
(h) Compliance with Blue Sky
Laws. Prior to any public offering of the
Securities by the Underwriters, the Company shall cooperate with
the Representative and counsel to the Underwriters in connection
with the registration or qualification (or the obtaining of
exemptions from the application thereof) of the Securities for
offer and sale under the securities or Blue Sky laws of such
jurisdictions as the Representative may request
limitation, provided, however, that in no event shall the
Company be obligated to qualify a public offering outside the
United States or to do business as a foreign corporation in
any jurisdiction where it is not now so qualified, to qualify or
register as a dealer in securities, to take any action which would
subject it to general service of process in any jurisdiction where
it is not now so subject or subject itself to ongoing taxation in
respect of doing business in any jurisdiction in which it is not so
subject.
(i) Delivery of Financial
Statements. During the period of five years
commencing on the effective date of the Registration Statement
applicable to the Underwriters, the Company shall furnish to the
Representative and each other Underwriter who may so request copies
of such financial statements and other periodic and special reports
as the Company may from time to time distribute generally to the
holders of any class of its capital stock, and will furnish to the
Representative and each other Underwriter who may so request a copy
of each annual or other report it shall be required to file with
the Commission; provided, however, that the availability of
electronically transmitted copies filed with the Commission
pursuant to ▇▇▇▇▇ shall satisfy the Company’s obligation to
furnish copies hereunder.
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(j) Availability of Earnings
Statements. The Company shall make generally
available to holders of its securities as soon as may be
practicable but in no event later than the last day of the
fifteenth (15th) full calendar
month following the calendar quarter in which the most recent
effective date occurs in accordance with Rule 158 of the Rules and
Regulations, an earnings statement (which need not be audited but
shall be in reasonable detail) for a period of twelve
(12) months ended commencing after the effective date, and
satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and
Regulations).
(k) Consideration; Payment of
Expenses. In consideration of the services to be
provided for hereunder, the Underwriters or their respective
designees their pro rata portion (based on the Securities
purchased) of the following compensation with respect to the
Securities they are offering:
(i) An underwriting
discount equal to seven percent (7%) of the aggregate gross
proceeds raised in the Offering; and
(ii) The
Representative’s Warrants.
(iii) Additionally,
the Company grants the Representative the right of first refusal
for a period of twelve (12) months from the date of commencement of
sales pursuant to the Prospectus to act as lead managing
underwriter and sole book runner (or minimally as a co-lead manager
and co-book runner and/or co-lead placement agent with at least 80%
of the economics) for any and all future public or private equity,
equity-linked or debt offerings (excluding commercial bank debt)
undertaken by the Company, its Subsidiary(ies), or any successor
thereto. The Company shall provide written notice to the
Representative with the terms of such offering and if the
Representative fails to accept in writing any such proposal within
twenty (20) days after receipt of such written notice, then the
Representative will have no claim or right with respect to any such
offering(s).
(iv) The
Representative reserves the right to reduce any item of
compensation or adjust the terms thereof as specified herein in the
event that a determination shall be made by FINRA to the effect
that the Underwriters’ aggregate compensation is in
excess of FINRA rules or that the terms thereof require
adjustment.
(v) Whether or not the
transactions contemplated by this Agreement, the Registration
Statement and the Prospectus are consummated or this Agreement is
terminated, the Company hereby agrees to pay the
following:
(1) all expenses in
connection with the preparation, printing, formatting for ▇▇▇▇▇ and
filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and any and all exhibits, amendments and
supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers;
(2) all filing
fees in connection with filings with FINRA’s Public Offering
System;
20
(3) all fees,
disbursements and expenses of the Company’s counsel,
accountants and other agents and representatives in connection with
the registration of the Securities under the Act and the
Offering;
(4) all expenses in
connection with the qualifications of the Securities for offering
and sale under state or foreign securities or blue sky laws
(including, without limitation, all filing and registration fees,
and the fees and disbursements of Underwriters’
counsel;
(5) all fees and
expenses in connection with listing the Securities on a national
securities exchange;
(6) all expenses,
including travel and lodging expenses, of the Company’s
officers, directors and employees and any other expense of the
Company incurred in connection with attending or hosting meetings
with prospective purchasers of the Securities and any fees and
expenses associated with the i-Deal system and
NetRoadshow;
(7) any stock transfer
taxes or other taxes incurred in connection with this Agreement or
the offering, including any stock transfer taxes payable upon the
transfer of securities to the Underwriters;
(8) the costs
associated with preparing, printing and delivering certificates
representing the Securities;
(9) the cost and
charges of any transfer agent or registrar for the
Securities;
(10) (subject
to the following proviso, other costs (including
Underwriters’ counsel’s fees and expenses) and expenses
incident to the Offering that are not otherwise specifically
provided for in this Section 4(k);
(11) costs
relating to background checks of the Company’s officers and
directors, up to $15,000 in the aggregate;
provided, however, that all such costs
and expenses (including Underwriters’ counsel’s fees
and expenses) that are incurred by the Underwriters shall not
exceed $50,000 in the aggregate.
21
(l) Reimbursement
of Expenses upon Termination of Agreement. If
this Agreement shall be terminated by the Company pursuant to any
of the provisions hereof or if for any reason the Company shall be
unable to perform its obligations or to fulfill any conditions
hereunder, or if the Underwriters shall terminate this Agreement
pursuant to the last paragraph of Section 5, Section 7(a),
Section 7(e) or Section 7(f), the Company shall reimburse the
Underwriters for all out-of-pocket expenses (including the
reasonable fees, disbursements and other charges of counsel to the
Underwriter) actually incurred by the Underwriters in connection
herewith and as allowed under FINRA Rule 5110; provided, however, that the maximum amount of
costs and expenses to be reimbursed by Company to the Underwriters
pursuant to this Section 4(l) shall not exceed $50,000 (including
the reasonable fees, disbursements and other charges of counsel to
the Underwriters).
(m) No
Stabilization or Manipulation. The Company shall
not at any time, directly or indirectly, take any action intended
to cause or result in, or which might reasonably be expected to
cause or result in, or which will constitute, stabilization or
manipulation, under the Act or otherwise, of the price of the
Shares or the Securities to facilitate the sale or resale of any of
the Securities.
(n) Use
of Proceeds. The Company shall apply the net
proceeds from the offering and sale of the Securities to be sold by
the Company in the manner set forth in the General Disclosure
Package and the Prospectus under “Use of Proceeds” and
shall file such reports with the Commission with respect to the
sale of the Securities and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under
the Act.
(o) Lock-Up Agreements of Company, Management and
Affiliates. The Company shall not, for a period
of one hundred and eighty (180) days after the Closing Date (the
“Lock-Up Period”), without the prior written consent of
Maxim (which consent may be withheld in its sole discretion), (1)
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, or file with the Commission
a registration statement under the Act to register, any shares of
common stock, warrants, or any securities convertible into or
exercisable or exchangeable for common stock or (2) enter into any
swap or other derivatives transaction that transfers to another, in
whole or in part, directly or indirectly, any of the economic
benefits or risks of ownership of shares of Common Stock, whether
any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or
otherwise, or publicly disclose the intention to enter into any
transaction described in clause (1) or (2) above. The
foregoing sentence shall not apply to (A) the Securities to be sold
hereunder, (B) any shares of common stock issued pursuant to a
trading plan established prior to July 1, 2018 pursuant to Rule
10b5-1 of the Exchange Act, and (C) the issuance of Common Stock
upon the exercise of warrants as disclosed as outstanding in the
Registration Statement, the General Disclosure Package or the
Prospectus, provided that such warrants have not been amended
since the date of this Agreement to increase the number of such
warrants or warrant shares or to decrease the exercise price of
such warrants or to extend the term of such warrants. The Company
has caused each of its officers and directors and certain
shareholders of five percent (5%) or more of the outstanding Common
Stock of the Company (other than Golden Properties, Ltd. and/or
▇▇▇▇ ▇▇▇, the control person of Golden Properties, Ltd.) to enter
into agreements with the Representative in the form set
forth in Annex II.
22
(p) Lock-Up
Releases. If Maxim, in its sole discretion,
agrees to release or waive the restrictions set forth in a lock-up
letter described in Section 4(o) hereof for an officer or director
of the Company and provides the Company with notice of the
impending release or waiver at least three 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 Annex III hereto through a
major news service at least two business days before the effective
date of such release or waiver, or any other method that satisfies
the obligations described in FINRA Rule 5131(d)(2) at least two
business days before the effective date of the release or
waiver.
(q) NASDAQ
listing. The Company will use its reasonable best efforts to
effect and maintain the listing of the common stock on the NASDAQ
Capital Market for at least three (3) years after the Closing
Date.
(r) Accountants.
Upon conclusion of the Offering, the Company will continue the
engagement of the Accountants for no less than three (3) years from
the Closing Date, or another nationally recognized,
PCAOB-registered mutually acceptable to the Company’s audit
committee and the Representative.
(s) Resales
of Representative’s Securities. The Company shall use
its best efforts to maintain the effectiveness of the Registration
Statement and a current Prospectus relating thereto for as long as
the Warrants and the Represenative’s Warrants remain
outstanding. During any period when the Company fails to have
maintained an effective Registration Statement or a current
Prospectus relating thereto and a holder of a
Representative’s Warrant desires to exercise such warrant
and, in the opinion of counsel to the holder, Rule 144 is not
available as an exemption from registration for the resale of the
shares of Common Stock underlying such warrant (such shares, the
“Warrant Shares”), the Company shall immediately file a
registration statement registering the resale of the Warrant Shares
and use its best efforts to have it declared effective by the
Commission within thirty (30) days.
(t) Key Person Insurance. The Company has
obtained and will use its good faith best efforts to maintain its
key person life insurance in the amount of $[____] on the life of
[____] in full force and effect for a period of three (3) years
from the Closing Date. The Company is and shall be the sole
beneficiary of such policy.
(u) Public
Relations Firm. Upon conclusion of the Offering, the Company
will engage (for no less than two (2) years from the Closing Date)
a financial public relations firm mutually acceptable to the
Company and the Representative.
(v) Transfer
Agent. The Company has or will retain a transfer agent reasonably
acceptable to the Representative for the Shares and shall continue
to retain such transfer agent for a period of three (3) years
following the Closing Date.
5. Conditions of the Obligations of the
Underwriters. The obligation of the Underwriters to purchase
the Firm Securities on the Closing Date or the Option Securities on
the Option Closing Date, as the case may be, as provided herein is
subject to the accuracy of the representations and warranties of
the Company, the performance by the Company of its covenants and
other obligations hereunder and to the following additional
conditions:
23
(a) Post Effective Amendments and Prospectus
Filings. Notification that the Registration
Statement has become effective shall be received by the
Representative not later than 4:30 p.m., New York City time, on the
date of this Agreement or at such later date and time as shall be
consented to in writing by the Representative and all filings made
pursuant to Rules 424, 430A, or 430B of the Rules and
Regulations, as applicable, shall have been made or will be made
prior to the Closing Date in accordance with all such applicable
rules.
(b) No Stop Orders, Requests for
Information and No Amendments. (i) No stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no proceedings for that purpose shall be pending or are, to the
knowledge of the Company, threatened by the Commission, (ii) no
order suspending the qualification or registration of the
Securities 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 the
authorities of any such jurisdiction, (iii) any request for
additional information on the part of the staff of the Commission
or any such authorities 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
Registration Statement or the Prospectus shall have been filed
unless a copy thereof was first submitted to the Representative and
the Representative did not object thereto in good faith, and the
Representative shall have received certificates, dated the Closing
Date and the Option Closing Date and signed by the Chief Executive
Officer or the Chairman of the Board of Directors and the Chief
Financial Officer of the Company in their capacities as such, and
not individually, (who may, as to proceedings threatened, certify
to their knowledge), to the effect of clauses (i), (ii) and
(iii).
(c) No Material Adverse
Changes. Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, except as set forth in the Registration Statement, the
General Disclosure Package and the Prospectus (i) there shall not
have been a Material Adverse Change, (ii) the Company shall not
have incurred any material liabilities or obligations, direct or
contingent, (iii) the Company shall not have entered into any
material transactions not in the ordinary course of business other
than pursuant to this Agreement and the transactions referred to
herein, (iv) the Company shall not have issued any securities
(other than the Securities or the Shares issued in the ordinary
course of business pursuant to existing employee benefit plans of
the Company referred to in the Registration Statement, General
Disclosure Package and the Prospectus) or declared or paid any
dividend or made any distribution in respect of its capital stock
of any class or debt (long-term or short-term), and (v) no material
amount of the assets of the Company shall have been pledged,
mortgaged or otherwise encumbered.
(d) No Actions, Suits or
Proceedings. Since the respective dates as of
which information is given in the Registration Statement, the
General Disclosure Package and the Prospectus, there shall have
been no actions, suits or proceedings instituted, or to the
Company’s knowledge, threatened against or affecting, the
Company or its subsidiaries or any of their respective officers in
their capacity as such, before or by any federal, state or local
court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign.
24
(e) All
Representations True and Correct and All Conditions
Fulfilled. Each of the representations and
warranties of the Company contained herein shall be true and
correct as of the date of the Agreement and at the Closing Date as
if made at the Closing Date and any Option Closing Date, as the
case may be, and all covenants and agreements contained herein to
be performed by the Company and all conditions contained herein to
be fulfilled or complied with by the Company at or prior to the
Closing Date and any Option Closing Date, shall have been duly
performed, fulfilled or complied with.
(f) Opinions
of Counsel to the Company. The Underwriters shall
have received the opinion, dated the Closing Date and any Option
Closing Date, as the case may be, reasonably satisfactory in form
and substance to the Representative and counsel for the
Underwriters, from the Law Office of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, P.A., as
corporate/securities counsel.
(g) Accountants’
Comfort Letter. On the date of the Prospectus,
the Representative shall have received from the Accountants a
letter dated the date of its delivery, addressed to the
Underwriters, in form and substance reasonably satisfactory to the
Representative and counsel to the Underwriters, containing
statements and information of the type ordinarily included in
accountant’s “comfort letters” to underwriters,
delivered according to Statement of Auditing Standards No. 72 (or
any successor bulletin), with respect to the audited and unaudited
financial statements and certain financial information contained in
the Registration Statement and the Prospectus. At the Closing Date
and any Option Closing Date, as the case may be, the Representative
shall have received from the Accountants a letter dated such date,
in form and substance reasonably satisfactory to the Representative
and counsel to the Underwriters, to the effect that they reaffirm
the statements made in the letter furnished by them pursuant to the
preceding sentence and have conducted additional procedures with
respect to certain financial figures included in the Prospectus,
except that the specified date referred to therein for the
carrying out of procedures shall be no
more than three business days prior to the Closing Date or any
Option Closing Date, as the case may be.
(h) Officers’
Certificates. At the
Closing Date and any Option Closing Date, there shall be furnished
to the Representative an accurate certificate, dated the date of
its delivery, signed by each of the Chief Executive Officer and the
Chief Financial Officer of the Company, in their capacities as
such, and not individually, in form and substance satisfactory to
the Representative and counsel to the Underwriters, to the effect
that:
(i) each
signer of such certificate has carefully examined the Registration
Statement and the Prospectus;
(ii) there
has not been a Material Adverse Change; and
(iii) with
respect to the matters set forth in Sections 5(b)(i) and
5(e).
25
(i) Transfer
Agent’s Certificate. The Company’s
transfer agent shall have furnished or caused to be furnished to
the Representative a certificate satisfactory to the Representative
of one of its authorized officers with respect to the issuance of
the and such other customary matters related thereto as the
Representative may reasonably request.
(j) Eligible
for DTC Clearance. At or prior to the Closing
Date and each Option Closing Date, the Shares shall be eligible for
clearance and settlement through the facilities of the
DTC.
(k) Lock-Up Agreements. At the
date of this Agreement, the Representative shall have received the
executed “lock-up” agreements referred to in Section
4(o) hereof from the Company’s officers and
directors.
(l) Compliance with Blue Sky
Laws. The Securities shall be qualified for sale
in such states and jurisdictions as the Representative may
reasonably request, including, without limitation, qualification
for exemption from registration or prospectus delivery requirements
in the provinces and territories of Canada and other jurisdictions
outside the United States, and each such qualification shall be in
effect and not subject to any stop order or other proceeding on the
Closing Date and the Option Closing Date.
(m) Stock Exchange Listing. The
Shares shall have been duly authorized for listing on the NASDAQ
Capital Market, subject to official notice of
issuance.
(n) Exchange Act
Registration. One or more registration statements
in respect of the Shares have been filed on Form 8-A pursuant to
Section 12(b) of the Exchange Act, each of which registration
statement complies in all material respects with the Exchange
Act.
(o) Good
Standing. At the Closing Date and any Option
Closing Date, the Company shall have furnished to
the Representative satisfactory evidence of the good
standing of the Company and its subsidiaries Quest Energy Inc.,
▇▇▇▇▇ Elkhorn Coal LLC, ▇▇▇▇▇ Mining LLC, ▇▇▇▇▇ County Coal LLC,
Wyoming County Coal LLC, ERC Mining Indiana Corp. and Quest
Processing LLC, in their respective jurisdictions of organization
(to the extent the concept of “good standing” or such
equivalent concept exists under the laws of the applicable
jurisdictions) and their good standing as foreign entities in
such other jurisdictions as the Representative may
reasonably request, in each case in writing or any standard form of
telecommunication from the appropriate governmental authorities of
such jurisdictions. If the applicable jurisdiction does
not have a concept of “good standing,” the Company will
furnish evidence in writing or any standard form of
telecommunication from the appropriate governmental authorities
that the relevant company was duly incorporated and remains duly
registered in the jurisdiction of its incorporation.
(p) Company Certificates. The
Company shall have furnished to the Representative such
certificates, in addition to those specifically mentioned herein,
as the Representative may have reasonably requested as to the
accuracy and completeness at the Closing Date and any Option
Closing Date of any statement in the Registration Statement, the
General Disclosure Package or the Prospectus, as to the accuracy at
the Closing Date and any Option Closing Date of the representations
and warranties of the Company herein, 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 Underwriters.
26
(q) No
Objection. FINRA has
confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and
arrangements relating to the offering of the
Securities.
If
any of the conditions hereinabove provided for in this Section 5
shall not have been fulfilled when and as required by this
Agreement to be fulfilled, the obligations of the Underwriters
hereunder may be terminated by the Representative by notifying the
Company of such termination in writing at or prior to the Closing
Date or any Option Closing Date, as the case may be.
6. Indemnification.
(a) Indemnification
of the Underwriters. The Company shall indemnify
and hold harmless each Underwriter, its affiliates, the directors,
officers, employees and agents of such Underwriter and each person,
if any, who controls such Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act
from and against any and all losses, claims, liabilities, expenses
and damages (including any and all investigative, legal and other
expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding between any
of the indemnified parties and any indemnifying parties or between
any indemnified party and any third party, or otherwise, or any
claim asserted), to which they, or any of them, may become subject
under the Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such
losses, claims, liabilities, expenses or damages arise out of or
are based on (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration
Statement (or any amendment thereto), including the
information deemed to be a part of the Registration Statement at
the time of effectiveness and at any subsequent time pursuant to
Rules 430A and 430B of the Rules and Regulations, as applicable, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading
or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, any
preliminary prospectus supplement, any Issuer Free Writing
Prospectus or the Prospectus (or any amendment or supplement to any
of the foregoing) or the omission or alleged omission therefrom of
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 (iii) any untrue statement or alleged untrue
statement of a material fact contained in any materials or
information provided to investors by, or with the approval of, the
Company in connection with the marketing of the offering of the
Securities, including any roadshow or investor presentations made
to investors by the Company (whether in person or electronically)
(collectively, Marketing Materials”) or the omission or
alleged omission therefrom of 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 (iv) in whole or in
part any inaccuracy in any material respect in the representations
and warranties of the Company contained
herein; provided, however, that the Company shall not be liable to the
extent that such loss, claim, liability, expense or damage is based
on any untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with
Underwriters’ Information. This indemnity agreement will be
in addition to any liability that the Company might otherwise
have.
27
(b) Indemnification
of the Company. Each
Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, its affiliates, the directors,
officers, employees and agents of the Company and each other person
or entity, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, against
any losses, liabilities, claims, damages and expenses whatsoever,
as incurred (including but not limited to reasonable
attorneys’ fees and any and all reasonable expenses
whatsoever, incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim
or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement at the time of
effectiveness and at any subsequent time pursuant to Rules 430A and
430B of the Rules and Regulations, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement to any of them, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability,
claim, damage or expense (or action in respect thereof) arises out
of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance
upon the Underwriters’ Information; provided, however,
that in no case shall any Underwriter be liable or responsible for
any amount in excess of the underwriting discount and commissions
applicable to the Securities purchased by such Underwriter
hereunder. The parties agree that such information provided by or
on behalf of the Underwriters through the Representative consists
solely of the material referred to in the last sentence of Section
3(c) hereof.
28
(c) Indemnification
Procedures. Any party that proposes to assert the
right to be indemnified under this Section 6 shall, promptly
after receipt of notice of commencement of any action against such party in respect of which
a claim is to be made against an indemnifying party or parties
under this Section 6, notify each such indemnifying party of
the commencement of such action, enclosing a copy of all papers
served, but the omission so to notify such indemnifying party shall
not relieve the indemnifying party from any liability that it may
have to any indemnified party under the foregoing provisions of
this Section 6 unless, and only to the extent that, such
omission results in the forfeiture of substantive rights or
defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies the indemnifying
party of its commencement, the indemnifying party will be entitled
to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified
party, jointly with any other indemnifying party similarly
notified, to assume the defense of the action, with counsel
satisfactory to the indemnified party, and after notice from the
indemnifying party to the indemnified party of its election to
assume the defense, the indemnifying party will not be liable to
the indemnified party for any legal or other expenses except as
provided below and except for the reasonable out-of-pocket costs of
investigation subsequently incurred by the indemnified party in
connection with the defense. The indemnified party will have the
right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense
of such indemnified party unless (i) the employment of counsel by
the indemnified party has been authorized in writing by one of the
indemnifying parties in connection with the defense of such action,
(ii) the indemnified party has reasonably concluded (based on
advice of counsel) that there may be legal defenses available to it
or other indemnified parties that are different from or in addition
to those available to the indemnifying party, (iii) the indemnified
party has reasonably concluded that a conflict or potential
conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in
which case the indemnifying party shall not have the right to
direct the defense of such action on behalf of the indemnified
party), (iv) the indemnifying party does not diligently defend
the action after assumption of the defense, or (v) the
indemnifying party has not in fact employed counsel satisfactory to
the indemnified party to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements
and other charges of counsel shall be at the expense of the
indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be
liable for the reasonable fees, disbursements and other charges of
more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges shall be
reimbursed by the indemnifying party promptly as they are incurred.
An indemnifying party shall not be liable for any settlement of any
action or claim effected without its written consent (which consent
will not be unreasonably withheld or delayed). No indemnifying
party shall, without the prior written consent of each indemnified
party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding relating
to the matters contemplated by this Section 6 (whether or not
any indemnified party is a party thereto), unless (x) such
settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising or
that may arise out of such claim, action or proceeding 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, and (y) the indemnifying party confirms in writing its
indemnification obligations hereunder with respect to such
settlement, compromise or judgment. Notwithstanding the foregoing,
if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel, such indemnifying party agrees that it shall
be liable for any settlement of the nature contemplated by Section
6(a) effected without its written consent if (A) such settlement is
entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request, (B) such indemnifying party shall
have received notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the
date of such settlement.
29
(d) Contribution. In
order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the
foregoing paragraphs of this Section 6 is applicable in
accordance with its terms but for any reason is held to be
unavailable, the Company and the Underwriters shall contribute to
the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons
other than the Underwriters, such as persons who control the
Company within the meaning of the Act, officers of the Company who
signed the Registration Statement and directors of the Company, who
may also be liable for contribution), to which the Company and the
Underwriter may be subject in such proportion as shall be
appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other from the
offering of the Securities pursuant to this Agreement. The
relative benefits received by the Company and the Underwriters
shall be deemed to be in the same proportion as (x) the total
proceeds from the Offering (net of underwriting discount and
commissions but before deducting expenses) received by the Company
bears to (y) the underwriting discount and commissions received by
the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such
proportion as is appropriate to reflect not only the relative
benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the
Underwriters, on the other, with respect to the statements or
omissions which resulted in such loss, claim, liability, expense or
damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters, the intent of the
parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 6(d) were to be
determined by pro rata allocation or by any other method of
allocation (even if the Underwriters were treated as one entity for
such purpose) which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, liability,
expense or damage, or action in respect thereof, referred to above
in this Section 6(d) shall be deemed to include, for purpose of
this Section 6(d), 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 6(d), no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts
and commissions received by it. No person found guilty of
fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section
6(d), any person who controls a party to this Agreement within the
meaning of the Act will have the same rights to contribution as
that party, and each officer of the Company who signed the
Registration Statement will have the same rights to contribution as
the Company, and each director, officer, employee, counsel or agent
of an Underwriter will have the same rights to contribution as such
Underwriter, subject in each case to the provisions hereof. Any
party entitled to contribution, promptly after receipt of notice of
commencement of any action against such party in respect of which a
claim for contribution may be made under this Section 6(d), will
notify any such party or parties from whom contribution may be
sought, but the omission so to notify will not relieve the party or
parties from whom contribution may be sought from any other
obligation it or they may have under this Section 6(d). The
obligations of the Underwriters to contribute pursuant to this
Section 6(d) are several in proportion to the respective number of
Securities to be purchased by each of the Underwriters hereunder
and not joint. No party will be liable for contribution
with respect to any action or claim settled without its written
consent (which consent will not be unreasonably
withheld).
30
(e) Survival. The
indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the
Company contained in this Agreement shall remain operative and in
full force and effect regardless of (i) any investigation made by
or on behalf of any Underwriter or any controlling Person thereof,
(ii) acceptance of any of the Securities and payment therefor or
(iii) any termination of this Agreement.
7. Termination. The
obligations of the Underwriters under this Agreement may be
terminated at any time prior to the Closing Date (or, with respect
to the Option Securities, on or prior to the Option Closing Date),
by notice to the Company from the Representative, without liability
on the part of the Underwriters to the Company, if, prior to
delivery and payment for the Firm Securities (or the Option
Securities, as the case may be), in the sole judgment of the
Representative, any of the following shall occur:
(a) trading
or quotation in any of the equity securities of the Company shall
have been suspended or limited by the Commission, The Nasdaq Stock
Market or by an exchange or otherwise;
(b) trading
in securities generally on the New York Stock Exchange, the NYSE
MKT, the NASDAQ Capital Market, the NASDAQ Global Market, the
NASDAQ Global Select Market shall have been suspended or limited or
minimum or maximum prices shall have been generally established on
such exchange, or additional material governmental restrictions,
not in force on the date of this Agreement, shall have been imposed
upon trading in securities generally by such exchange or by order
of the Commission or any court or other governmental
authority;
(c) a
general banking moratorium shall have been declared by any of U.S.
federal, New York authorities;
(d) the United States
shall have become engaged in new hostilities, there shall have been
an escalation in hostilities involving the United States or there
shall have been a declaration of a national emergency or war by the
United States or there shall have occurred such a material adverse
change in general economic, political or financial conditions,
including, without limitation, as a result of terrorist activities
after the date hereof (or the effect of international conditions on
the financial markets in the United States shall be such), or any
other calamity or crisis shall have occurred, the effect of any of
which is such as to make it impracticable or inadvisable to market
the Securities on the terms and in the manner contemplated by the
Prospectus;
(e) the
Company shall have sustained a loss material or substantial to the
Company by reason of flood, fire, accident, hurricane, earthquake,
theft, sabotage, or other calamity or malicious act, whether or not
such loss shall have been insured, the effect of any of which is
such as to make it impracticable or inadvisable to market the
Securities on the terms and in the manner contemplated by the
Prospectus; or
(f) there shall have
been a Material Adverse Change.
31
8. Underwriter
Default.
(a) If
any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Securities hereunder, and if the
Securities with respect to which such default relates (the
“Default
Securities”) do not (after giving effect to
arrangements, if any, made by the Representative pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of
the Firm Securities, each non-defaulting Underwriter, acting
severally and not jointly, agrees to purchase from the Company that
number of Default Securities that bears the same proportion to the
total number of Default Securities then being purchased as the
number of Firm Securities set forth opposite the name of such
Underwriter on Schedule A hereto bears to
the aggregate number of Firm Securities set forth opposite the
names of the non-defaulting Underwriters; subject, however, to such
adjustments to eliminate fractional shares as the Representative in
its discretion shall make.
(b) In the event that
the aggregate number of Default Securities exceeds 10% of the
number of Firm Securities, the Representatives may in their
discretion arrange for themselves or for another party or parties
(including any non-defaulting Underwriter or Underwriters who so
agree) to purchase the Default Securities on the terms contained
herein. In the event that within five (5) calendar days after such
a default the Representative does not arrange for the purchase of
the Default Securities as provided in this Section 8, this
Agreement shall thereupon terminate, without liability on the part
of the Company with respect thereto (except in each case as
provided in Sections 4(k), 6 and 8) or the Underwriters, but
nothing in this Agreement shall relieve a defaulting Underwriter or
Underwriters of its or their liability, if any, to the other
Underwriters and the Company for damages occasioned by its or their
default hereunder.
(c) In
the event that any Default Securities are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another
party or parties as aforesaid, the Representatives or the
Company shall have the right to postpone the Closing Date for a
period, not exceeding five (5) Business Days, in order to effect
whatever changes may thereby be necessary in the Registration
Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment
or supplement to the Registration Statement or the Prospectus
which, in the reasonable opinion of Underwriters’ Counsel,
may be necessary or advisable. The term “Underwriter”
as used in this Agreement shall include any party substituted
under this Section 8 with like effect as if it had originally
been a party to this Agreement with respect to such Firm
Securities.
9. Miscellaneous.
(a) Notices. Notice
given pursuant to any of the provisions of this Agreement shall be
in writing and, unless otherwise specified, shall be mailed, hand
delivered or telecopied (a) if to the Company, at the office of the
Company, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, telecopy number:
606-393-0190, Attention: Chief Executive Officer, or (b)
if to the Representative or any Underwriter, to Maxim Group LLC,
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Attention: Legal
Department, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇. Any such notice shall
be effective only upon receipt. Any notice under Section 6
hereof may be made by telecopy or telephone, but if so made shall
be subsequently confirmed in writing.
32
(b) No
Third Party Beneficiaries. This Agreement has
been and is made solely for the benefit of the Underwriters, the
Company and, with respect to Section 6, the controlling persons,
directors, officers, employees, counsel and agents referred to in
Section 6 hereof, and their respective successors and assigns,
and no other person shall acquire or have any right under or by
virtue of this Agreement. The term “successors and
assigns” as used in this Agreement shall not include a
purchaser of Securities from any Underwriter in his, her or its
capacity as such a purchaser, as such purchaser of Securities from
such Underwriter.
(c) Survival of Representations and
Warranties. All representations, warranties and
agreements of the Company contained herein or in certificates or
other instruments delivered pursuant hereto shall remain operative
and in full force and effect regardless of any investigation made
by or on behalf of the Underwriters or any of their controlling
persons and shall survive delivery of and payment for the
Securities hereunder.
(d) Disclaimer
of Fiduciary Relationship. The Company
acknowledges and agrees that (i) the purchase and sale of the
Securities pursuant to this Agreement, including the determination
of the public offering price of the Securities and any related
discounts and commissions, is an arm’s-length commercial
transaction between the Company, on the one hand, and the
Underwriters, on the other hand, (ii) in connection with the
Offering contemplated by this Agreement and the process leading to
such transaction, the Underwriters are and have been
acting pursuant to a contractual relationship created solely
by this Agreement and are not agents or fiduciaries of the
Company or its securityholders, creditors, employees or any other
party, (iii) no Underwriter has assumed nor will it assume any
advisory or fiduciary responsibility in favor of the Company with
respect to the offering of the Securities contemplated by this
Agreement or the process leading thereto (irrespective of whether
such Underwriter or its affiliates has advised or is currently
advising the Company on other matters) and each such Underwriter
has no obligation to the Company with respect to the offering of
the Securities contemplated by this Agreement except the
obligations expressly set forth in this Agreement, (iv) the
Underwriters and their affiliates may be engaged in a broad range
of transactions that involve interests that differ from those of
the Company, and (v) no Underwriter has provided any legal,
accounting, regulatory or tax advice with respect to the Offering
contemplated by this Agreement and the Company has consulted its
own legal, accounting, regulatory and tax advisors to the extent it
deemed appropriate.
(e) Governing
Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE.
(f) Submission to
Jurisdiction. The Company irrevocably submits to
the non-exclusive jurisdiction of any New York State or United
States federal court sitting in The City of New York, Borough of
Manhattan, over any suit, action or proceeding arising out of or
relating to this Agreement, the Disclosure Package, the Prospectus,
the Registration Statement, or the offering of the Securities. The
Company irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of
venue of any such suit, action or proceeding brought in such a
court and any claim that any such suit, action or proceeding
brought in such a court has been brought in an inconvenient forum.
To the extent that the Company has or hereafter may acquire any
immunity (on the grounds of sovereignty or otherwise) from the
jurisdiction of any court or from any legal process with respect to
itself or its property, the Company irrevocably waives, to the
fullest extent permitted by law, such immunity in respect of any
such suit, action or proceeding including without limitation, any
immunity pursuant to the U.S. Foreign Sovereign Immunities Act of
1976, as amended. Each of the Underwriters and the Company
further agrees to accept and acknowledge service of any and all
process which may be served in any such suit, action or proceeding
in the Supreme Court of the State of New York, New York County, or
in the United States District Court for the Southern District of
New York and agrees that service of process upon the Company mailed
by certified mail or delivered by Federal Express via overnight
delivery to the Company’s address shall be deemed in every
respect effective service of process upon the Company in any such
suit, action or proceeding, and service of process upon an
Underwriter mailed by certified mail or delivered by Federal
Express via overnight delivery to the Underwriters’ address
shall be deemed in every respect effective service of process upon
such Underwriter in any such suit, action or
proceeding.
33
(g) Judgment
Currency. If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due
hereunder into any currency other than United States dollars, the
parties hereto agree, to the fullest extent permitted by law, that
the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Underwriters could purchase
United States dollars with such other currency in The City of New
York on the business day preceding that on which final judgment is
given. The obligation of the Company with respect to any sum due
from it to an Underwriter or any person controlling such
Underwriter shall, notwithstanding any judgment in a currency other
than United States dollars, not be discharged until the first
business day following receipt by such Underwriter or controlling
person of any sum in such other currency, and only to the extent
that such Underwriter or controlling person may in accordance with
normal banking procedures purchase United States dollars with such
other currency. If the United States dollars so purchased are less
than the sum originally due to such Underwriter or controlling
person hereunder, the Company agrees as a separate obligation and
notwithstanding any such judgment, to indemnify such Underwriter or
controlling person against such loss. If the United States dollars
so purchased are greater than the sum originally due to such
Underwriter or controlling person hereunder, such Underwriter or
controlling person agrees to pay to the Company an amount equal to
the excess of the dollars so purchased over the sum originally due
to such Underwriter or controlling person hereunder.
(h) Counterparts. This
Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
(i) Survival of Provisions Upon Invalidity of Any
Single Provision. In case any provision in this
Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
(j) Waiver of Jury
Trial. The Company
and each Underwriter each hereby irrevocably waive any right they
may have to a trial by jury in respect of any claim based upon or
arising out of this Agreement or the transactions contemplated
hereby.
(k) Titles and
Subtitles. The
titles of the sections and subsections of this Agreement are for
convenience and reference only and are not to be considered in
construing this Agreement.
(l) Entire
Agreement. This
Agreement embodies the entire agreement and understanding between
the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof. This
Agreement may not be amended or otherwise modified or any provision
hereof waived except by an instrument in writing signed by the
parties hereto.
[Signature
page follows]
34
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Very
truly yours,
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AMERICAN
RESOURCES CORPORATION.
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By:
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Name:
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Title:
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Accepted
as of the date hereof:
MAXIM
GROUP LLC
By:
___________________________________
Name:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
Executive Managing Director
Head
of Investment Banking
SCHEDULE I
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Underwriter
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Total Number of Firm Shares to be Purchased
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Number of Optional Shares to be Purchased if Maximum Option
Exercised
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Maxim
Group LLC
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SCHEDULE II
Free
Writing Prospectuses
ANNEX
I
Opinion of Counsel
(1)
The Company has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Florida, with
corporate power and authority to own, lease and operate its
properties and conduct its business as described in the
Registration Statement, the General Disclosure Package and the
Prospectus and to enter into and perform its obligations under the
Underwriting Agreement;
(2)
The Shares to be
issued and sold by the Company to the Underwriters pursuant to the
Underwriting Agreement have been duly and validly authorized and,
when issued and delivered to and paid for by the Underwriters in
accordance with the terms of the Underwriting Agreement, will be
duly and validly issued and fully paid and non-assessable and will
conform to the descriptions thereof contained in the Registration
Statement, the General Disclosure Package and the Prospectus; and
the issuance of such Shares is not subject to any preemptive or
similar rights;
(3)
The Underwriting
Agreement has been duly authorized, executed and delivered by the
Company and the Company has all the requisite corporate power and
authority to enter into the Underwriting Agreement and to perform
its obligations thereunder;
(4)
The issue and sale
of the Shares to be sold by the Company pursuant to the
Underwriting Agreement, the execution of the Underwriting Agreement
by the Company and the compliance by the Company with all of the
provisions of the Underwriting Agreement and the consummation of
the transactions therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries is bound or to which any of the
property or assets of the Company or any of the Subsidiaries is
subject, nor will such action result in any violation of the
provisions of the certificate of incorporation or by-laws of the
Company or, to our knowledge, any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries or any of
their properties; and, to our knowledge, no consent, approval,
authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue
and sale of the Shares to be sold by the Company to the
Underwriters pursuant to the Underwriting Agreement or the
consummation by the Company of the transactions contemplated by the
Underwriting Agreement, except the registration under the Act of
the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters, as to which we
express no opinion;
(5)
Other than as set
forth in the Registration Statement, the General Disclosure Package
and the Prospectus, to our knowledge, there are no legal or
governmental proceedings pending to which the Company or any of the
Subsidiaries is a party or of which any property of the Company or
any of the Subsidiaries is the subject which, if determined
adversely to the Company or any of the Subsidiaries, individually
or in the aggregate, would have or would reasonably be expected to
have a material adverse effect on the general affairs, business,
prospects, management, financial position, shareholders’
equity or results of operations of the Company and the
Subsidiaries, considered as one enterprise, or would prevent or
impair the consummation of the transactions contemplated by the
Underwriting Agreement, or which are required to be described in
the Registration Statement, the General Disclosure Package and the
Prospectus; and, to our knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
others;
(6)
The Company is not
and, after giving effect to the offering and sale
of the
Shares as contemplated herein and the application of the net
proceeds therefrom as described in the Registration Statement, the
General Disclosure Package and the Prospectus, will not be an
“investment company”, as such term is defined in the
Investment Company Act of 1940;
(7) The
Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the Act; any required
filing of the Prospectus pursuant to Rule 424(b) under the Act has
been made in the manner and within the time period required by Rule
424(b); all material required to be filed by the Company pursuant
to Rule 433(d) under the Act shall have been filed with the
Commission within the applicable time period prescribed for such
filing by Rule 433 under the Act; and no stop order suspending the
effectiveness or use of the Registration Statement, the General
Disclosure Package and the Prospectus has been issued under the Act
and no proceedings for that purpose have been instituted or are
pending or, to our knowledge, threatened by the
Commission;
(8) To
our knowledge, there are no statutes or regulations that are
required to be described in the Registration Statement, the General
Disclosure Package and the Prospectus that are not described as
required;
(9) The
Common Stock has been approved for listing on The NASDAQ Capital
Market, subject to official notice of issuance;
(10) The
Registration Statement, the General Disclosure Package and the
Prospectus and any further amendments and supplements thereto made
by the Company (other than the financial statements, related
schedules and other financial data therein, as to which we do not
express an opinion), comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations; and
we do not know of any amendment to the Registration Statement, the
General Disclosure Package and the Prospectus required to be filed
or of any contracts or other documents of a character required to
be filed as an exhibit to the Registration Statement or required to
be described in the Registration Statement, the General Disclosure
Package and the Prospectus which are not filed or described as
required; and
(11) To
our knowledge, except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to
file a registration statement under the Act with respect to shares
of Common Stock or other securities to include such shares of
Common Stock or other securities as part of the offering
contemplated hereby.
In
addition, although we are not passing upon and do not assume any
responsibility for nor have we independently verified, the
accuracy, completeness or fairness of the statements contained in
the Registration Statement, the General Disclosure Package and the
Prospectus, in connection with the preparation of the Registration
Statement, the General Disclosure Package and the Prospectus, we
have participated in conferences with representatives and counsel
of the Representative and with certain officers and employees of,
and independent certified public accountants for, the Company, at
which conferences the contents of the Registration Statement, the
General Disclosure Package and the Prospectus and related matters
were discussed, and we advise the Underwriters that nothing has
come to our attention that would lead us to believe
that:
●
as of its effective
date, the Registration Statement (other than the financial
statements, related schedules and other financial data therein, as
to which we do express no opinion), contained an untrue statement
of a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that,
●
as of the
Applicable Time, the General Disclosure Package (other than the
financial statements, related schedules and other financial and
statistical data therein, as to which express no opinion) contains
an untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or
that
●
as of its date or
as of the Closing Date, the Prospectus (other than the financial
statements, related schedules and other financial data therein, as
to which we express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
ANNEX
II
Form of Lock-Up Agreement
December
__, 2018
Maxim
Group LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
The
undersigned understands that Maxim Group LLC (“Maxim” or the
“Underwriter”)
proposes to enter into an Underwriting Agreement (the
“Underwriting
Agreement”) with American
Resources Corporation, a Florida corporation (the
“Company”),
providing for the public offering (the “Public Offering”) by the
Underwriter of Shares (the “Shares”) of the Company’s
Class A common stock, par value $0.0001 per share (the
“Common
Stock”).
To
induce the underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering,
the undersigned hereby agrees that, without the prior written
consent of Maxim, he or she will not, during the period commencing
on the date hereof and ending 180 days after the date of the final
prospectus relating to the Public Offering (the “Prospectus”) (the
“Lock-Up
Period”), sell, offer, agree to sell, contract to
sell, hypothecate, pledge, grant any option to purchase, make any
short sale of, or otherwise dispose of or hedge, directly or
indirectly, any shares of Common Stock , or any securities
convertible into or exercisable or exchangeable for shares of
Common Stock, whether any such transaction described above is to be
settled by delivery of shares of Common Stock, in cash or
otherwise. The foregoing sentence shall not apply to (a)
transactions relating to shares of Common Stock or other securities
acquired in open market transactions after the completion of the
Public Offering, (b) transfers of shares of Common Stock or
securities convertible into or exercisable or exchangeable for
shares of Common Stock to (i) the spouse or any lineal descendant
of the undersigned, (ii) any trust for the benefit of the
undersigned or the spouse or lineal descendant of the undersigned
(or by gift to a charitable organization), (iii) the estate of the
undersigned, or (iv) any affiliate of the undersigned; provided that in the case of any
transfer or distribution pursuant to clause(b), each donee or
distributee shall sign and deliver a lock-up agreement
substantially in the form of this agreement. In addition, the
undersigned agrees that, without the prior written consent of
Maxim, it will not, during the Lock-Up Period, make any demand for
or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock. 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 shares of Common
Stock except in compliance with the foregoing
restrictions.
No
provision in this agreement shall be deemed to restrict or prohibit
the exercise or exchange by the undersigned of any option or
warrant to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of
Common Stock; provided that
the undersigned does not transfer the shares of Common Stock
acquired on such exercise or exchange during the Lock-Up Period,
unless otherwise permitted pursuant to the terms of this 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 shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock within the
Lock-Up Period).
The
undersigned understands that the Company and the Underwriter are
relying upon this agreement in proceeding toward consummation of
the Public Offering. The undersigned further understands that this
agreement is irrevocable and shall be binding upon the
undersigned’s heirs, legal representatives, successors and
assigns.
The
undersigned understands that, if the Underwriting Agreement is not
executed, or if the Underwriting Agreement (other than the
provisions thereof which survive termination) shall terminate or be
terminated prior to payment for and delivery of the Shares to be
sold thereunder, the undersigned shall be released from all
obligations under this letter agreement.
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
Underwriter.
|
Very
truly yours,
|
ANNEX III
Form of Press Release
[ ]
[Date]
American Resources Corporation, a Delaware corporation (the
“Company”), announced today that Maxim Group LLC, the
lead book-running manager in the Company’s recent public sale
of common stock, is [waiving][releasing] a lock-up restriction with
respect to [___] of the Company’s Shares held by [certain
officers or directors][an officer or director] of the Company. The
[waiver][release] will take effect on [___], and the Shares may be
sold on or after such date.
This press release is not an offer for sale of the securities in
the United States or in any other jurisdiction where such offer is
prohibited, and such securities may not be offered or sold in the
United States absent registration or an exemption from registration
under the United States Securities Act of 1933, as
amended.