UNDERWRITING AGREEMENT between cbdMD, Inc. and THINKEQUITY, A DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC., as Representative of the Several Underwriters cbdMD, Inc. UNDERWRITING AGREEMENT
Exhibit 1.1
EXECUTION VERSION
between
and
THINKEQUITY,
A DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC.,
as Representative of the Several Underwriters
1
June
28, 2021
ThinkEquity,
A
Division of Fordham Financial Management, Inc.
As
Representative of the several Underwriters named on Schedule 1
attached hereto
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Ladies
and Gentlemen:
The
undersigned, cbdMD, Inc., a corporation formed under the laws of
the State of North Carolina (collectively with its subsidiaries and
affiliates, including, without limitation, all entities disclosed
or described in the Registration Statement (as hereinafter defined)
as being subsidiaries or affiliates of cbdMD, Inc., the
“Company”),
hereby confirms its agreement (this “Agreement”) with ThinkEquity, a
division of Fordham Financial Management, Inc. (hereinafter
referred to as “you” (including its correlatives) or
the “Representative”), and with the
other underwriters named on Schedule 1 hereto for which the
Representative is acting as representative (the Representative and
such other underwriters being collectively called the
“Underwriters”
or, individually, an “Underwriter”) as
follows:
1. Purchase
and Sale of Shares.
1.1 Firm
Shares.
1.1.1 Nature
and Purchase of Firm Shares.
(i) On
the basis of the representations and warranties herein contained,
but subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the several Underwriters, an
aggregate of 1,913,100 shares (the “Firm Shares”) of the
Company’s 8.0% Series A Cumulative Convertible Preferred
Stock, par value $0.001 per share (the “Preferred Stock”), each share of
Preferred Stock convertible into 1.667 shares, subject to
adjustments (the “Preferred
Conversion Shares”) of the Company’s common
stock, par value $0.001 per share (the “Common Stock”), at a conversion
price of $6.00 per share, subject to adjustments.
(ii) The
Underwriters, severally and not jointly, agree to purchase from the
Company the number of Firm Shares set forth opposite their
respective names on Schedule 1 attached hereto and
made a part hereof at a purchase price of $6.95625 per Firm
Share (92.75% of the per Firm Share offering price). The Firm
Shares are to be offered initially to the public at the offering
price set forth on the cover page of the Prospectus (as defined in
Section 2.1.1
hereof).
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1.1.2
Shares Payment and
Delivery.
1.2
Over-allotment
Option.
1.2.2 Exercise
of Over-allotment Option. The Over-allotment Option granted
pursuant to Section
1.2.1 hereof may be exercised by the Representative as to
all (at any time) or any part (from time to time) of the Option
Shares within 45 days after the date of the Prospectus (as defined
below). The Underwriters shall not be under any obligation to
purchase any Option Shares prior to the exercise of the
Over-allotment Option. The Over-allotment Option granted hereby may
be exercised by the giving of oral notice to the Company from the
Representative, which must be confirmed in writing by overnight
mail or facsimile or other electronic transmission setting forth
the number of Option Shares to be purchased and the date and time
for delivery of and payment for the Option Shares (the
“Option Closing
Date”), which shall not be later than one (1) full
Business Day after the date of the notice or such other time as
shall be agreed upon by the Company and the Representative, at the
offices of Representative Counsel or at such other place (including
remotely by facsimile or other electronic transmission) as shall be
agreed upon by the Company and the Representative. If such delivery
and payment for the Option Shares does not occur on the Closing
Date, the Option Closing Date will be as set forth in the notice.
Upon exercise of the Over-allotment Option with respect to all or
any portion of the Option Shares, subject to the terms and
conditions set forth herein, (i) the Company shall become obligated
to sell to the Underwriters the number of Option Shares specified
in such notice and (ii) each of the Underwriters, acting severally
and not jointly, shall purchase that portion of the total number of
Option Shares then being purchased as set forth in Schedule 1 opposite the name of
such Underwriter bears to the total number of Firm Shares, subject,
in each case, to such adjustments as the Representative, in its
sole discretion, shall determine.
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1.2.3 Payment
and Delivery. Payment for the Option Shares shall be made on
the Option Closing Date by wire transfer in Federal (same day)
funds, payable to the order of the Company upon delivery to you of
certificates (in form and substance satisfactory to the
Underwriters) representing the Option Shares (or through the
facilities of DTC) for the account of the Underwriters. The Option
Shares shall be registered in such name or names and in such
authorized denominations as the Representative may request in
writing at least one (1) full Business Day prior to the Option
Closing Date. The Company shall not be obligated to sell or deliver
the Option Shares except upon tender of payment by the
Representative for applicable Option Shares. The Option Closing
Date may be simultaneous with, but not earlier than, the Closing
Date; and in the event that such time and date are simultaneous
with the Closing Date, the term “Closing Date” shall refer to the
time and date of delivery of the Firm Shares and Option
Shares.
1.3 Representative’s
Warrants.
1.3.1.
Purchase Warrants.
The Company hereby agrees to issue and sell to the Representative
(and/or its designees) on the Closing Date an option (the
“Representative’s
Warrant”) for the purchase of an aggregate of 143,482
shares of Common Stock, representing 3.0% of the quotient of the
gross proceeds from this Offering (excluding any exercise of the
over-allotment option) divided by $3.00, which is the last closing
price of the Common Stock on the NYSE American LLC
(“NYSE
American”) prior to the execution of this Agreement,
for an aggregate purchase price of $100.00. The
Representative’s Warrant agreement, in the form attached
hereto as Exhibit A
(the “Representative’s
Warrant Agreement”), shall be exercisable, in whole or
in part, commencing on a date that is one hundred and eighty (180)
days after the commencement of sales
of the Public Securities issued in connection with this Offering
(the “Commencement
Date”) and expiring on the five-year anniversary of
the Commencement Date at an initial exercise price per share of
Common Stock of $3.75, which is equal to 125.0% of $3.00, which is
the last closing price of the Common Stock on the NYSE American
prior to the execution of this Agreement. The
Representative’s Warrant Agreement and the shares of Common
Stock issuable upon exercise thereof are hereinafter referred to
together as the “Representative’s
Securities.” The Representative understands and agrees
that there are significant restrictions pursuant to FINRA Rule 5110
against transferring the Representative’s Warrant and the
underlying shares of Common Stock during the one hundred eighty
(180) days immediately following the Commencement Date and by its
acceptance thereof shall agree that the Representative’s
Warrant and the underlying shares of Common Stock shall not be sold
during the Offering, or sold, transferred, assigned, pledged, or
hypothecated, or be the subject of any hedging, short sale,
derivative, put, or call transaction that would result in the
effective economic disposition of the Representative’s
Warrant or the underlying shares of Common Stock by any person for
a period of one hundred eighty (180) days immediately following the
Commencement Date, except as provided for in FINRA Rule
5110(e)(1).
1.3.2.
Delivery. Delivery
of the Representative’s Warrant Agreement shall be made on
the Closing Date and shall be issued in the name or names and in
such authorized denominations as the Representative may
request.
2. Representations
and Warranties of the Company. The Company represents and
warrants to the Underwriters as of the Applicable Time (as defined
below), as of the Closing Date and as of the Option Closing Date,
if any, as follows:
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2.1
Filing of Registration
Statement.
2.1.1 Pursuant
to the Securities Act. The Company has filed with the U.S.
Securities and Exchange Commission (the “Commission”) a “shelf”
registration statement on Form S-3 (File No. 333-228773), including
any related prospectus or prospectuses for the registration of the
Public Securities under the Securities Act, which registration
statement was prepared by the Company in all material respects in
conformity with the requirements of the Securities Act and the
rules and regulations of the Commission under the Securities Act
(the “Securities Act
Regulations”) and contains and will contain all
material statements that are required to be stated therein in
accordance with the Securities Act and the Securities Act
Regulations. Except as the context may otherwise require, such
registration statement on file with the Commission at any given
time, including any amendments thereto to such time, exhibits and
schedules thereto at such time, documents filed as a part thereof
or incorporated pursuant to Item 12 of Form S-3 under the
Securities Act at such time and the documents and information
otherwise deemed to be a part thereof or included therein pursuant
to Rule 430B of the Securities Act Regulations (the
“Rule 430B
Information”) or otherwise pursuant to the Securities
Act Regulations at such time, is referred to herein as the
“Registration
Statement.” The Registration Statement at the time it
originally became effective is Initial Registration Statement.”
If the Company files any registration statement pursuant to Rule
462(b) of the Securities Act Regulations, then after such filing,
the term “Registration Statement” shall include such
registration statement filed pursuant to Rule 462(b). The
Registration Statement was declared effective by the Commission on
April 9, 2019.
The
prospectus in the form in which it was filed with the Commission in
connection with the Initial Registration Statement is herein called
the “Base
Prospectus.” Each preliminary prospectus supplement to
the Base Prospectus (including the Base Prospectus as so
supplemented) that described the Public Securities and the Offering
and omitted the Rule 430B Information and that was used prior to
the filing of the final prospectus supplement referred to in the
following paragraph is herein called a “Preliminary
Prospectus.”
Promptly after the
execution and delivery of this Agreement, the Company will prepare
and file with the Commission a final prospectus supplement to the
Base Prospectus relating to the Public Securities and the Offering
in accordance with the provisions of Rule 430B and Rule 424(b) of
the Securities Act Regulations. Such final prospectus supplement
(including the Base Prospectus as so supplemented), in the form
filed with the Commission pursuant to Rule 424(b) under the
Securities Act is herein called the “Prospectus.” Any reference herein
to the Base Prospectus, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act as of the date of such
prospectus.
“Applicable Time” means 5:10p.m.,
Eastern time, on the date of this Agreement.
“Issuer Free Writing Prospectus”
means any “issuer free writing prospectus,” as defined
in Rule 433 of the Securities Act Regulations (“Rule 433”), including without
limitation any “free writing prospectus” (as defined in
Rule 405 of the Securities Act Regulations) relating to the Public
Securities that is (i) required to be filed with the Commission by
the Company, (ii) a “road show that is a written
communication” within the meaning of Rule 433(d)(8)(i),
whether or not required to be filed with the Commission, or (iii)
exempt from filing with the Commission pursuant to Rule
433(d)(5)(i) because it contains a description of the Public
Securities or of the Offering that does not reflect the final
terms, in each case in the form filed or required to be filed with
the Commission or, if not required to be filed, in the form
retained in the Company’s records pursuant to Rule
433(g).
“Issuer General Use Free Writing
Prospectus” means any Issuer Free Writing Prospectus
that is intended for general distribution to prospective investors
(other than a “bona
fide electronic road show,” as defined in Rule 433),
as evidenced by its being specified in Schedule 2-B
hereto.
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“Issuer Limited Use Free Writing
Prospectus” means any Issuer Free Writing Prospectus
that is not an Issuer General Use Free Writing
Prospectus.
“Pricing Disclosure Package” means
any Issuer General Use Free Writing Prospectus issued at or prior
to the Applicable Time, the Preliminary Prospectus dated June 24,
2021 and the information included on Schedule 2-A hereto, all
considered together.
2.1
Pursuant to the Exchange
Act—Common Stock. The shares of Common Stock are
registered pursuant to Section 12(b) under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). The Company has
taken no action designed to, or likely to have the effect of,
terminating the registration of the shares of Common Stock under
the Exchange Act, nor has the Company received any notification
that the Commission is contemplating terminating such
registration.
2.2 Pursuant
to the Exchange Act—Preferred Stock. The shares of
Preferred Stock are registered pursuant to Section 12(b) under the
Exchange Act. The Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the
shares of Preferred Stock under the Exchange Act, nor has the
Company received any notification that the Commission is
contemplating terminating such registration.
2.3 Stock
Exchange Listing—Common Stock. The shares of Common
Stock are listed on the NYSE American Stock Exchange (the
“Exchange”)
under the symbol “YCBD”, and the Company has taken no
action designed to, or likely to have the effect of, delisting the
shares of Common Stock from the Exchange, nor has the Company
received any notification that the Exchange is contemplating
terminating such listing. The Company has submitted the Additional
Listing Application with the Exchange with respect to the Offering
of the Preferred Conversion Shares and the shares of Common Stock
underlying the Representative’s Warrants, which application
has been approved by the Exchange, subject to official notice of
issuance.
2.4 Stock
Exchange Listing—Preferred Stock. The shares of
Preferred Stock are listed on the Exchange under the symbol
“YCBDpA”, and the Company has taken no action designed
to, or likely to have the effect of, delisting the shares of
Preferred Stock from the Exchange, nor has the Company received any
notification that the Exchange is contemplating terminating such
listing. The Company has submitted the Additional Listing
Application with the Exchange with respect to the Offering of the
Preferred Stock, which application has been approved by the
Exchange, subject to official notice of issuance.
2.5 No
Stop Orders. Neither the Commission nor, to the
Company’s knowledge, any state regulatory authority has
issued any order preventing or suspending the use of the
Registration Statement, any Preliminary Prospectus or the
Prospectus or has instituted or, to the Company’s knowledge,
threatened to institute, any proceedings with respect to such an
order. The Company has complied with each request (if any) from the
Commission for additional information.
2.6
Disclosures in
Registration Statement.
2.6.1 Compliance
with the Securities Act and 10b-5
Representation.
(i) Each
of the Registration Statement and any post-effective amendment
thereto, at the time it became effective, complied in all material
respects with the requirements of the Securities Act and the
Securities Act Regulations. Each Preliminary Prospectus, including
the prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment or supplement thereto,
and the Prospectus, at the time each was filed with the Commission,
complied in all material respects with the requirements of the
Securities Act and the Securities Act Regulations. Each Preliminary
Prospectus delivered to the Underwriters for use in connection with
this Offering and the Prospectus was or will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
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(ii) Neither
the Registration Statement nor any amendment thereto, at its
effective time, as of the Applicable Time, at the Closing Date or
at any Option Closing Date (if any), contained, contains or will
contain an untrue statement of a material fact or omitted, omits or
will omit to state a material fact required to be stated therein or
necessary to make the statements therein not
misleading.
(iii) The
Pricing Disclosure Package, as of the Applicable Time, at the
Closing Date or at any Option Closing Date (if any), did not, does
not and will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; and any Issuer Limited Use Free
Writing Prospectus hereto does not conflict with the information
contained in the Registration Statement, any Preliminary
Prospectus, the Preliminary Prospectus or the Prospectus, and each
such Issuer Limited Use Free Writing Prospectus, as supplemented by
and taken together with the Prospectus as of the Applicable Time,
did not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading; provided,
however, that this
representation and warranty shall not apply to statements made or
statements omitted in reliance upon and in conformity with written
information furnished to the Company with respect to the
Underwriters by the Representative expressly for use in the
Registration Statement, the Preliminary Prospectus, the Pricing
Disclosure Package or the Prospectus or any amendment thereof or
supplement thereto. The parties acknowledge and agree that such
information provided by or on behalf of any Underwriter consists
solely of the following statements concerning the Underwriters (the
“Underwriters
Information”) contained in “Underwriting”
section of the Prospectus: (i) the first paragraph of the section
entitled “Discount and Commissions”; and (ii) the
section entitled “Price Stabilization, Short Positions and
Penalty Bids.”
(iv) Neither
the Prospectus nor any amendment or supplement thereto (including
any prospectus wrapper), as of its issue date, at the time of any
filing with the Commission pursuant to Rule 424(b), at the Closing
Date or at any Option Closing Date, included, includes or will
include an untrue statement of a material fact or omitted, omits or
will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation and
warranty shall not apply to the Underwriters’
Information.
(v) The
documents incorporated by reference in the Registration Statement,
the Preliminary Prospectus, the Pricing Disclosure Package and the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects
to the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder and none of such documents contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; and any further documents so filed and
incorporated by reference in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, when such documents
become effective or are filed with the Commission, as the case may
be, will conform in all material respects to the requirements of
the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and will not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
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2.7 Disclosure
of Agreements. The agreements and documents described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus conform in all material respects to the descriptions
thereof contained or incorporated by reference therein and there
are no agreements or other documents required by the Securities Act
and the Securities Act Regulations to be described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus or to be filed with the Commission as exhibits to the
Registration Statement or to be incorporated by reference in the
Registration Statement, the Pricing Disclosure Package or the
Prospectus, that have not been so described or filed or
incorporated by reference. Each agreement or other instrument
(however characterized or described) to which the Company is a
party or by which it is or may be bound or affected and (i) that is
referred to or incorporated by reference in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, or
(ii) is material to the Company’s business, has been duly
authorized and validly executed by the Company, is in full force
and effect in all material respects and is enforceable against the
Company and, to the Company’s knowledge, the other parties
thereto, in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights
generally, (y) as enforceability of any indemnification or
contribution provision may be limited under the federal and state
securities laws, and (z) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject
to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. None of such
agreements or instruments has been assigned by the Company, and
neither the Company nor, to the Company’s knowledge, any
other party is in default thereunder and, to the Company’s
knowledge, no event has occurred that, with the lapse of time or
the giving of notice, or both, would constitute a default
thereunder except for a default or event which would not reasonably
be expected to result in a Material Adverse Change (as such term is
defined in Section
2.11 below). To the Company’s knowledge, performance
by the Company of the material provisions of such agreements or
instruments will not result in a violation of any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses
(each, a “Governmental
Entity”), including, without limitation, those
relating to environmental laws and regulations.
2.8 Prior
Securities Transactions. No securities of the Company have
been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by or under
common control with the Company, except as disclosed in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus.
2.9 Regulations.
The disclosures in the Registration Statement, the Pricing
Disclosure Package and the Prospectus concerning the effects of
federal, state, local and all foreign regulation on the Offering
and the Company’s business as currently contemplated are
correct in all material respects and no other such regulations are
required to be disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus that are not so
disclosed.
2.10 No
Other Distribution of Offering Materials. The Company has
not, directly or indirectly, distributed and will not distribute
any offering material in connection with the Offering other than
any Preliminary Prospectus, the Preliminary Prospectus, the Pricing
Disclosure Package, the Prospectus, Issuer General Use Free Writing
Prospectus and other materials, if any, permitted under the
Securities Act and consistent with Section 3.2 below.
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2.11 No
Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, except as otherwise
specifically stated therein: (i) there has been no material
adverse change in the financial position or results of operations
of the Company, nor any change or development that, singularly or
in the aggregate, would involve a material adverse change or a
prospective material adverse change, in or affecting the condition
(financial or otherwise), results of operations, business, assets
or prospects of the Company (a “Material Adverse Change”);
(ii) there have been no material transactions entered into by
the Company, other than as contemplated pursuant to this Agreement;
and (iii) no officer or director of the Company has resigned
from any position with the Company.
2.12 Transactions
and Agreement. Since the date as of which information is
given in the Preliminary Prospectus, neither the Company nor any
Subsidiary has entered or will before the Closing Date or any
Option Closing Date enter into any transaction or agreement, not in
the ordinary course of business, that is material to the Company
and its Subsidiaries taken as a whole or incurred or will incur any
liability or obligation, direct or contingent, not in the ordinary
course of business, that is material to the Company and its
Subsidiaries taken as a whole, and neither the Company nor any
Subsidiary has any plans to do any of the foregoing.
2.13 Disclosures
in Commission Filings. (i) None of the Company’s
filings with the Commission contained any untrue statement of a
material fact or omitted to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (ii)
the Company has made all filings with the Commission required under
the Exchange Act and the rules and regulations of the Commission
promulgated thereunder (the “Exchange Act
Regulations”).
2.14 Recent
Securities Transactions, etc. Subsequent to the respective
dates as of which information is given in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, and
except as may otherwise be indicated or contemplated herein or
disclosed in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, the Company has not: (i) issued
any securities or incurred any liability or obligation, direct or
contingent, for borrowed money; or (ii) declared or paid any
dividend or made any other distribution on or in respect to its
capital stock.
2.15 Independent
Accountants. To the knowledge of the Company, Cherry Bekaert
LLP (the “Auditor”), whose report is filed
with the Commission and included or incorporated by reference in
the Registration Statement, the Pricing Disclosure Package and the
Prospectus, is an independent registered public accounting firm as
required by the Securities Act and the Securities Act Regulations
and the Public Company Accounting Oversight Board. The
Auditor has not, during
the periods covered by the financial statements included or
incorporated by reference in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, provided to the
Company any non-audit services, as such term is used in Section
10A(g) of the Exchange Act.
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2.16 Financial
Statements, etc. The financial statements, including the
notes thereto and supporting schedules included or incorporated by
reference in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, fairly present the financial position
and the results of operations of the Company at the dates and for
the periods to which they apply; and such financial statements have
been prepared in conformity with U.S. generally accepted accounting
principles (“GAAP”), consistently applied
throughout the periods involved (provided that unaudited interim
financial statements are subject to year-end audit adjustments that
are not expected to be material in the aggregate and do not contain
all footnotes required by GAAP); and the supporting schedules
included or incorporated by reference in the Registration Statement
present fairly the information required to be stated therein. The
pro forma financial statements and the related notes, if any,
included or incorporated by reference in the Registration
Statement, the Pricing Disclosure Package and the Prospectus have
been properly compiled and prepared in accordance with the
applicable requirements of the Securities Act, the Securities Act
Regulations, the Exchange Act or the Exchange Act Regulations and
present fairly the information shown therein, and the assumptions
used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the transactions and
circumstances referred to therein. Except as included therein, no
historical or pro forma financial statements are required to be
included in the Registration Statement, the Pricing Disclosure
Package or the Prospectus under the Securities Act, the Securities
Act Regulations, the Exchange Act or the Exchange Act Regulations.
The pro forma and pro forma as adjusted financial information and
the related notes, if any, included or incorporated by reference in
the Registration Statement, the Pricing Disclosure Package and the
Prospectus have been properly compiled and prepared in accordance
with the applicable requirements of the Securities Act, the
Securities Act Regulations, the Exchange Act or the Exchange Act
Regulations and present fairly the information shown therein, and
the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein. All disclosures
contained in the Registration Statement, the Pricing Disclosure
Package or the Prospectus, or incorporated or deemed incorporated
by reference therein, regarding “non-GAAP financial
measures” (as such term is defined by the rules and
regulations of the Commission), if any, comply with Regulation G of
the Exchange Act and Item 10 of Regulation S-K of the Securities
Act, to the extent applicable. Each of the Registration Statement,
the Pricing Disclosure Package and the Prospectus discloses all
material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the
Company with unconsolidated entities or other persons that may have
a material current or future effect on the Company’s
financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or
significant components of revenues or expenses. Except as disclosed
in the Registration Statement, the Pricing Disclosure Package and
the Prospectus, (a) neither the Company nor any of its direct and
indirect subsidiaries, including each entity disclosed or described
in the Registration Statement, the Pricing Disclosure Package and
the Prospectus as being a subsidiary of the Company (each, a
“Subsidiary”
and, collectively, the “Subsidiaries”), has incurred any
material liabilities or obligations, direct or contingent, or
entered into any material transactions other than in the ordinary
course of business, (b) except for dividends on the presently
outstanding shares of Preferred Stock, the Company has not declared
or paid any dividends or made any distribution of any kind with
respect to its capital stock, (c) there has not been any change in
the capital stock of the Company or any of its Subsidiaries, or,
other than in the course of business or any grants under any stock
compensation plan, and (d) there has not been any Material Adverse
Change in the Company’s long-term or short-term
debt.
2.17 Authorized
Capital; Options, etc. The Company had, at the date or dates
indicated in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, the duly authorized, issued and
outstanding capitalization as set forth therein. Based on the
assumptions stated in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein.
Except as set forth in, or contemplated by, the Registration
Statement, the Pricing Disclosure Package and the Prospectus, on
the Effective Date, as of the Applicable Time and on the Closing
Date and any Option Closing Date, there will be no stock options,
warrants, or other rights to purchase or otherwise acquire any
authorized, but unissued shares of Common Stock of the Company or
any security convertible or exercisable into shares of Common Stock
of the Company, or any contracts or commitments to issue or sell
shares of Common Stock or any such options, warrants, rights or
convertible securities.
10
2.18 Outstanding
Securities. All issued and outstanding securities of the
Company issued prior to the transactions contemplated by this
Agreement have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any
holders of any security of the Company or similar contractual
rights granted by the Company. The authorized shares of Common
Stock and Preferred Stock conform in all material respects to all
statements relating thereto contained in the Registration
Statement, the Pricing Disclosure Package and the Prospectus. The
offers and sales of the outstanding shares of Common Stock and
Preferred Stock were at all relevant times either registered under
the Securities Act and the applicable state securities or
“blue sky” laws or, based in part on the
representations and warranties of the purchasers of such Public
Securities, exempt from such registration
requirements.
2.19 Securities
Sold Pursuant to this Agreement. The Public Securities have
been duly authorized for issuance and sale and, when issued and
paid for, will be validly issued, fully paid and non-assessable,
free and clear of all liens; the holders thereof are not and will
not be subject to personal liability by reason of being such
holders; Public Securities are not and will not be subject to the
preemptive rights of any holders of any security of the Company or
similar contractual rights granted by the Company; and all
corporate action required to be taken for the authorization,
issuance and sale of the Public Securities has been duly and
validly taken, the Preferred Conversion Shares have been duly
authorized and reserved for issuance by all necessary corporate
action on the part of the Company and when paid for and issued in
accordance with the Certificate of Designations (as defined below),
such shares of Common Stock will be validly issued, fully paid and
non-assessable; the holders thereof are not and will not be subject
to personal liability by reason of being such holders; and such
Preferred Conversion Shares are not and will not be subject to the
preemptive rights of any holders of any security of the Company or
similar contractual rights granted by the Company. Public
Securities conform in all material respects to all statements with
respect thereto contained in the Registration Statement, the
Pricing Disclosure Package and the Prospectus. The statements made
in the Registration Statement, the Pricing Disclosure Package and
the Prospectus under the caption “Description of the Series A
Convertible Preferred Stock,” “Prospectus Supplement
Summary”, “The Offering,” “Risk
Factors,” and “Certain U.S. Federal Income Tax
Considerations,” insofar as such statements constitute
summaries of the terms of statutes, rules or regulations, legal
matters or governmental proceedings or agreements, contracts and
other documents, are accurate and fair summaries of the terms of
such statutes, rules or regulations, legal matters or governmental
proceedings or agreements, contracts and other documents in all
material respects. All corporate action required to be taken for
the authorization, issuance and sale of the Representative’s
Warrant has been duly and validly taken; the shares of Common Stock
issuable upon exercise of the Representative’s Warrant have
been duly authorized and reserved for issuance by all necessary
corporate action on the part of the Company and when paid for and
issued in accordance with the Representative’s Warrant and
the Representative’s Warrant Agreement, such shares of Common
Stock will be validly issued, fully paid and non-assessable, free
and clear of all liens; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; and
such shares of Common Stock are not and will not be subject to the
preemptive rights of any holders of any security of the Company or
similar contractual rights granted by the Company. The Certificate
of Designations of Rights and Preferences of the Preferred Stock
that forms a part of the Company’s articles of incorporation
and sets forth the terms of the Preferred Stock (the
“Certificate of
Designations”) has been, duly authorized, executed and
filed by the Company with the Secretary of State of the State of
North Carolina and is in full force and effect on the date
hereof.
2.20 Registration
Rights of Third Parties. Except as set forth in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus, no holders of any securities of the Company or any
rights exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to
register any such securities of the Company under the Securities
Act or to include any such securities in a Registration Statement
to be filed by the Company.
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2.21 Validity
and Binding Effect of Agreements. This Agreement and the
Representative’s Warrant Agreement have been duly and validly
authorized by the Company, and, when executed and delivered, will
constitute, the valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective
terms, except: (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting
creditors’ rights generally; (ii) as enforceability of
any indemnification or contribution provision may be limited under
the federal and state securities laws; and (iii) that the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefor
may be brought.
2.22 No
Conflicts, etc. The execution, delivery and performance by
the Company of this Agreement, the Representative’s Warrant
Agreement and all ancillary documents, the consummation by the
Company of the transactions herein and therein contemplated and the
compliance by the Company with the terms hereof and thereof do not
and will not, with or without the giving of notice or the lapse of
time or both: (i) result in a material breach of, or conflict
with any of the terms and provisions of, or constitute a material
default under, or result in the creation, modification, termination
or imposition of any lien, charge or encumbrance upon any property
or assets of the Company pursuant to the terms of any agreement or
instrument to which the Company is a party; (ii) result in any
violation of the provisions of the Company’s Articles of
Incorporation (as the same may be amended or restated from time to
time, the “Charter”) or the Company’s
bylaws (as the same may be amended or restated from time to time,
the “Bylaws”);
or (iii) violates any existing applicable law, rule,
regulation, judgment, order or decree of any Governmental Entity as
of the date hereof.
2.23 No
Defaults; Violations. No material default exists in the due
performance and observance of any term, covenant or condition of
any material license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not
in violation of any term or provision of its Charter, the
Certificate of Designations or Bylaws, or in violation of any
franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any Governmental Entity, except for any
violation which would not reasonably be expected to result in a
Material Adverse Change.
2.24 Conduct
of Business. (i) The Company has all requisite corporate
power and authority, and has all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from
all governmental regulatory officials and bodies that it needs as
of the date hereof to conduct its business purpose as described in
the Registration Statement, the Pricing Disclosure Package and the
Prospectus, except for the absence of which would not reasonably be
expected to result in a Material Adverse Change. The Company
believes that the sales of its hemp-derived products are in
compliance with all applicable regulations since all of its
products that contain hemp, contain less than 0.3% THC content and
are sold only in states in the United States that have not
prohibited the sale of hemp products. No regulatory authority,
including the Exchange, has indicated that it will prohibit the
listing of the Company’s securities based upon its sale of
CBD products nor will the Underwriters or any broker or other FINRA
(as defined below) member participating in this Offering be
prohibited from depositing, clearing or settling the Public
Securities, including through DTC or otherwise, on account of the
Company’s sale of CBD products.
(ii)
Neither the Company nor any of its
Subsidiaries has engaged in, or will engage in: (i) any direct
or indirect dealings or transactions in violation of U.S. federal
or state criminal laws, including, without limitation, the
Controlled Substances Act, except where any such violation
would not, individually or in the aggregate, have any material
adverse effect, the Racketeer Influenced and Corrupt Organizations
Act, or the Travel Act, (ii) any “aiding and
abetting” in any violation of U.S. federal or state criminal
laws, or (iii) any activity similar to (i) or (ii) where
such activity is not fully lawful under all applicable federal,
state, provincial or territorial laws of any other federal,
provincial, territorial, state or foreign
jurisdiction.
12
(iii)
The Company and each of its
Subsidiaries and any person acting on behalf of the Company or any
of its Subsidiaries are and have been in compliance with applicable
health care, cannabis, controlled drug and substance,
pharmaceutical, privacy and personal health information laws and
the regulations promulgated pursuant to such laws and all other
federal, provincial, territorial, state, municipal, local or
foreign laws, manual provisions, policies and administrative
guidance relating to the regulation of the Company or its
Subsidiaries in the United States or any other country, except
where any non-compliance would not, individually or in
the aggregate, have any material adverse effect. Neither the
Company nor any of its Subsidiaries has, either voluntarily or
involuntarily, initiated, conducted or issued or caused to be
initiated, conducted or issued, any recall, market withdrawal or
replacement, safety alert, post-sale warning or other notice or
action relating to the alleged safety or efficacy of any product or
any alleged product defect or violation and there is no basis for
any such notice or action.
2.25 Transactions
Contemplated Herein. The Company has all corporate power and
authority to enter into this Agreement and the
Representative’s Warrant Agreement and to carry out the
provisions and conditions hereof and thereof, and all consents,
authorizations, approvals and orders required in connection
therewith have been obtained. No consent, authorization or order
of, and no filing with, any court, government agency or other body
is required for the valid issuance, sale and delivery of Public
Securities and the consummation of the transactions and agreements
contemplated by this Agreement and the Representative’s
Warrant Agreement and as contemplated by the Registration
Statement, the Pricing Disclosure Package and the Prospectus,
except with respect to applicable federal and state securities laws
and the rules, the rules and regulations of Exchange and the
regulations of the Financial Industry Regulatory Authority, Inc.
(“FINRA”).
2.26 D&O
Questionnaires. To the Company’s knowledge, without
investigation, all information contained in the questionnaires,
including information included in bring-down questionnaires (the
“Questionnaires”), completed by
each of the Company’s directors and officers in connection
with its filings with the Commission (each an “Insider”) as supplemented by all
information concerning the Company’s directors, officers and
principal shareholders as described in the Registration Statement,
the Pricing Disclosure Package and the Prospectus, as well as in
the Lock-Up Agreement (as defined in Section 2.40 below), provided
to the Representative, is true and correct in all material respects
and the Company has not become aware of any information which would
cause the information disclosed in the Questionnaires to become
materially inaccurate and incorrect.
2.27 Litigation;
Governmental Proceedings. There is no material action, suit,
proceeding, inquiry, arbitration, investigation, litigation or
governmental proceeding pending or, to the Company’s
knowledge, threatened against, or involving the Company or, to the
Company’s knowledge, any executive officer or director which
has not been disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus or in connection with the
Company’s listing application for the listing of the Public
Securities on the Exchange.
2.28 Good
Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of
the State of North Carolina as of the date hereof, and is duly
qualified to do business and is in good standing in each other
jurisdiction in which its ownership or lease of property or the
conduct of business requires such qualification, except where the
failure to qualify, singularly or in the aggregate, would not have
or reasonably be expected to result in a Material Adverse
Change.
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2.29 Insurance.
The Company carries or is entitled to the benefits of insurance,
with reputable insurers, in such amounts and covering such risks
which the Company believes are adequate, including, but not limited
to, directors and officers insurance coverage at least equal to
$5,000,000 and the Company will use its best efforts to include
each Underwriter as an additional insured party to the directors
and officers insurance coverage and all such insurance is in full
force and effect. The Company has no reason to believe that it will
not be able (i) to renew its existing insurance coverage as and
when such policies expire or (ii) to obtain comparable coverage
from similar institutions as may be necessary or appropriate to
conduct its business as now conducted and at a cost that would not
result in a Material Adverse Change.
2.30 Finder’s
Fees. There are no claims, payments, arrangements,
agreements or understandings relating to the payment of a
finder’s, consulting or origination fee by the Company or any
Insider with respect to the sale of the Company’s securities
hereunder or any other arrangements, agreements or understandings
of the Company or, to the Company’s knowledge, any of its
shareholders that may affect the Underwriters’ compensation,
as determined by FINRA.
2.31 Payments
Within 180 Days. Except as described in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, the
Company has not made any direct or indirect payments (in cash,
securities or otherwise) to: (i) any person, as a finder’s
fee, consulting fee or otherwise, in consideration of such person
raising capital for the Company or introducing to the Company
persons who raised or provided capital to the Company; (ii) any
FINRA member; or (iii) any person or entity that has any direct or
indirect affiliation or association with any FINRA member, within
180 days prior to the date of this Agreement, other than the
payment to the Underwriters as provided hereunder in connection
with the Offering.
2.32 Use
of Proceeds. None of the net proceeds of the Offering will
be paid by the Company to any participating FINRA member or its
affiliates, except as specifically authorized herein.
2.33 FINRA
and FINRA Affiliation. The Base Prospectus has been filed
with FINRA and the requisite FINRA fee has been paid. There is no
(i) officer or director of the Company, (ii) beneficial owner of 5%
or more of any class of the Company’s securities or (iii)
beneficial owner of the Company's unregistered equity securities
which were acquired during the 180-day period immediately preceding
the filing of the Registration Statement that is an affiliate or
associated person of a FINRA member participating in the Offering
(as determined in accordance with the rules and regulations of
FINRA).
2.34 Information.
All information provided by the Company in its FINRA questionnaire
to Representative Counsel specifically for use by the
Representative Counsel in connection with any Public Offering
System filings (and related disclosure) with FINRA and any
bring-down thereto is true, correct and complete in all material
respects.
2.35 Foreign
Corrupt Practices Act. None of the Company and its
Subsidiaries or, to the Company’s knowledge, any director,
officer, agent, employee or affiliate of the Company and its
Subsidiaries or any other person acting on behalf of the Company
and its Subsidiaries, has, directly or indirectly, given or agreed
to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was,
is, or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed
transaction) that (i) might subject the Company to any damage
or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, might have had a
Material Adverse Change or (iii) if not continued in the
future, might adversely affect the assets, business, operations or
prospects of the Company. The Company has taken reasonable steps to
ensure that its accounting controls and procedures are sufficient
to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
14
2.36 Compliance
with OFAC. None of the Company and its Subsidiaries or, to
the Company’s knowledge, any director, officer, agent,
employee or affiliate of the Company and its Subsidiaries or any
other person acting on behalf of the Company and its Subsidiaries,
is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Department of the
Treasury (“OFAC”), and the Company will not,
directly or indirectly, use the proceeds of the Offering hereunder,
or lend, contribute or otherwise make available such proceeds to
any subsidiary, joint venture partner or other person or entity,
for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC.
2.37 Money
Laundering Laws. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial recordkeeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the money laundering statutes of all jurisdictions, the
rules and regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any
Governmental Entity (collectively, the “Money Laundering Laws”); and no
action, suit or proceeding by or before any Governmental Entity
involving the Company with respect to the Money Laundering Laws is
pending or, to the best knowledge of the Company,
threatened.
2.38 Forward-Looking
Statements. No forward-looking statement (within the meaning
of Section 27A of the Securities Act and Section 21E of the
Exchange Act) contained in either the Registration Statement,
Pricing Disclosure Package or Prospectus has been made or
reaffirmed without a reasonable basis or has been disclosed other
than in good faith.
2.39 Officers’
Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to you or to Representative
Counsel shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered
thereby.
2.40 Lock-Up
Agreements. Schedule 3 hereto contains a
complete and accurate list of the Company’s officers and
directors who own shares of Common Stock (or securities convertible
or exercisable into shares of Common Stock) (collectively, the
“Lock-Up
Parties”). The Company has caused each of the Lock-Up
Parties to deliver to the Representative an executed Lock-Up
Agreement, in the form attached hereto as Exhibit B (the
“Lock-Up
Agreement”), prior to the execution of this
Agreement.
2.41 Subsidiaries.
All direct and indirect Subsidiaries of the Company are duly
organized and in good standing under the laws of the place of
organization or incorporation, and each Subsidiary is in good
standing in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification,
except where the failure to qualify would not have a Material
Adverse Change on the assets, business or operations of the Company
taken as a whole. The Company’s ownership and control of each
Subsidiary is as described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus.
2.42 Related
Party Transactions.
2.42.1 Business
Relationships. There are no business relationships or
related party transactions involving the Company or any other
person required to be described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus that have not been
described as required.
15
2.42.2 No
Relationships with Customers and Suppliers. Except as
disclosed in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, no relationship, direct or indirect,
exists between or among the Company on the one hand, and the
directors, officers, 5% or greater stockholders, customers,
licensors of the Company or any of the Company’s affiliates
on the other hand, which is required to be described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus or a document incorporated by reference therein and
which is not so described.
2.42.3 No
Unconsolidated Entities. There are no transactions,
arrangements or other relationships between and/or among the
Company, any of its affiliates (as such term is defined in Rule 405
of the Securities Act) and any unconsolidated entity, including,
but not limited to, any structure finance, special purpose or
limited purpose entity that could reasonably be expected to
materially affect the Company’s liquidity or the availability
of or requirements for its capital resources required to be
described in the Pricing Disclosure Package and the Prospectus or a
document incorporated by reference therein which have not been
described as required.
2.42.4 No
Loans or Advances to Affiliates. There are no outstanding
loans, advances (except normal advances for business expenses in
the ordinary course of business) or guarantees or indebtedness by
the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members,
except as disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus.
2.43 Board
of Directors. The Board of Directors of the Company is
comprised of the persons disclosed in the Registration Statement,
the Pricing Disclosure Package and the Prospectus. The
qualifications of the persons serving as board members and the
overall composition of the board comply with the Exchange Act, the
Exchange Act Regulations, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the
rules promulgated thereunder (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act”) applicable to
the Company and the listing rules of the Exchange. At least one
member of the Audit Committee of the Board of Directors of the
Company qualifies as an “audit committee financial
expert,” as such term is defined under Regulation S-K and the
listing rules of the Exchange. In addition, at least a majority of
the persons serving on the Board of Directors qualify as
“independent,” as defined under the listing rules of
the Exchange.
2.44 Disclosure
Controls. The Company has developed and currently maintains
disclosure controls and procedures that will comply with Rule
13a-15 or 15d-15 under the Exchange Act Regulations, and such
controls and procedures are effective to ensure that all material
information concerning the Company will be made known on a timely
basis to the individuals responsible for the preparation of the
Company’s Exchange Act filings and other public disclosure
documents.
2.45 Compliance.
The Company is, and on the Applicable Time and the Closing Date
will be, in compliance with the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act applicable to it, and has implemented or will implement such
programs and taken reasonable steps to ensure the Company’s
future compliance (not later than the relevant statutory and
regulatory deadlines therefor) with all of the material provisions
of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
16
2.46 Accounting
Controls. The Company and its Subsidiaries maintain systems
of “internal control over financial reporting” (as
defined under Rules 13a-15 and 15d-15 under the Exchange Act
Regulations) that comply with the requirements of the Exchange Act
and have been designed by, or under the supervision of, their
respective principal executive and principal financial officers, or
persons performing similar functions, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP, including, but not limited to, internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s
general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company is not aware of any
material weaknesses in its internal controls. The Company’s
Auditor and the Audit Committee of the Board of Directors of the
Company have been advised of: (i) all significant deficiencies and
material weaknesses in the design or operation of internal controls
over financial reporting which are known to the Company’s
management and that have adversely affected or are reasonably
likely to adversely affect the Company’ ability to record,
process, summarize and report financial information; and (ii) any
fraud known to the Company’s management, whether or not
material, that involves management or other employees who have a
significant role in the Company’s internal controls over
financial reporting.
2.47 No
Investment Company Status. The Company is not and, after
giving effect to the Offering and the application of the proceeds
thereof as described in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, will not be, required to
register as an “investment company,” as defined in the
Investment Company Act of 1940, as amended (the “Investment Company Act”). The
Company is not a development stage company or a “business
development company” as defined in Section 2(a)(48) of the
Investment Company Act. The Company is not a blank check company
and is not an issuer of fractional undivided interests in oil or
gas rights or similar interests in other mineral rights. The
Company is not an issuer of asset-backed securities as defined in
Item 1101(c) of Regulation AB.
2.48 No
Labor Disputes. No labor dispute with the employees of the
Company or any of its Subsidiaries exists or, to the knowledge of
the Company, is imminent.
2.49 Market
Manipulation. None of the Company and its directors,
officers or controlling persons have taken, directly or indirectly,
any action intended, or which might reasonably be expected, to
cause or result, under the Securities Act or otherwise, in, or
which has constituted, stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of
the Preferred Stock.
17
2.50 Intellectual
Property Rights. The Company and each of its Subsidiaries
owns or possesses or has valid rights to use all patents, patent
applications, trademarks, service marks, trade names, trademark
registrations, service ▇▇▇▇ registrations, copyrights, licenses,
inventions, trade secrets and similar rights (“Intellectual Property Rights”)
necessary for the conduct of the business of the Company and its
Subsidiaries as currently carried on and as described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus. To the knowledge of the Company, no action or use by
the Company or any of its Subsidiaries necessary for the conduct of
its business as currently carried on and as described in the
Registration Statement and the Final Prospectus will involve or
give rise to any infringement of, or license or similar fees for,
any Intellectual Property Rights of others. Neither the Company nor
any of its Subsidiaries has received any notice alleging any such
infringement, fee or conflict with asserted Intellectual Property
Rights of others. Except as would not reasonably be expected to
result, individually or in the aggregate, in a Material Adverse
Change (i) to the knowledge of the Company, there is no
infringement, misappropriation or violation by third parties of any
of the Intellectual Property Rights owned by the Company; (ii)
there is no pending or, to the knowledge of the Company, threatened
action, suit, proceeding or claim by others challenging the rights
of the Company in or to any such Intellectual Property Rights, and
the Company is unaware of any facts which would form a reasonable
basis for any such claim, that would, individually or in the
aggregate, together with any other claims in this Section 2.5.1, reasonably be
expected to result in a Material Adverse Change; (iii) the
Intellectual Property Rights owned by the Company and, to the
knowledge of the Company, the Intellectual Property Rights licensed
to the Company have not been adjudged by a court of competent
jurisdiction invalid or unenforceable, in whole or in part, and
there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging
the validity or scope of any such Intellectual Property Rights, and
the Company is unaware of any facts which would form a reasonable
basis for any such claim that would, individually or in the
aggregate, together with any other claims in this clause (iii),
reasonably be expected to result in a Material Adverse Change; (iv)
there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others that the
Company infringes, misappropriates or otherwise violates any
Intellectual Property Rights or other proprietary rights of others,
the Company has not received any written notice of such claim and
the Company is unaware of any other facts which would form a
reasonable basis for any such claim that would, individually or in
the aggregate, together with any other claims in this clause (iv),
reasonably be expected to result in a Material Adverse Change; and
(v) to the Company’s knowledge, no employee of the Company is
in or has ever been in violation in any material respect of any
term of any employment contract, patent disclosure agreement,
invention assignment agreement, non-competition agreement,
non-solicitation agreement, nondisclosure agreement or any
restrictive covenant to or with a former employer where the basis
of such violation relates to such employee’s employment with
the Company, or actions undertaken by the employee while employed
with the Company and could reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Change. To
the Company’s knowledge, all material technical information
developed by and belonging to the Company which has not been
patented has been kept confidential. The Company is not a party to
or bound by any options, licenses or agreements with respect to the
Intellectual Property Rights of any other person or entity that are
required to be set forth in the Registration Statement, the Pricing
Disclosure Package and the Prospectus and are not described
therein. The Registration Statement, the Pricing Disclosure Package
and the Prospectus contain in all material respects the same
description of the matters set forth in the preceding sentence.
None of the technology employed by the Company has been obtained or
is being used by the Company in violation of any contractual
obligation binding on the Company or, to the Company’s
knowledge, any of its officers, directors or employees, or
otherwise in violation of the rights of any persons.
2.51 Taxes.
Each of the Company and its Subsidiaries has filed all returns (as
hereinafter defined) required to be filed with taxing authorities
prior to the date hereof or has duly obtained extensions of time
for the filing thereof. Each of the Company and its Subsidiaries
has paid all taxes (as hereinafter defined) shown as due on such
returns that were filed and has paid all taxes imposed on or
assessed against the Company or such respective Subsidiary. The
provisions for taxes payable, if any, shown on the financial
statements filed with or as part of the Registration Statement are
sufficient for all accrued and unpaid taxes, whether or not
disputed, and for all periods to and including the dates of such
consolidated financial statements. Except as disclosed in writing
to the Underwriters, (i) no issues have been raised (and are
currently pending) by any taxing authority in connection with any
of the returns or taxes asserted as due from the Company or its
Subsidiaries, and (ii) no waivers of statutes of limitation with
respect to the returns or collection of taxes have been given by or
requested from the Company or its Subsidiaries. The term
“taxes” means all federal, state, local, foreign and
other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind
whatever, together with any interest and any penalties, additions
to tax or additional amounts with respect thereto. The term
“returns” means all returns, declarations, reports,
statements and other documents required to be filed in respect to
taxes.
18
2.52 ERISA
Compliance. Except in each case that would not reasonably be
expected to result in a Material Adverse Change, the Company and
any “employee benefit plan” (as defined under the
Employee Retirement Income Security Act of 1974, as amended, and
the regulations and published interpretations thereunder
(collectively, “ERISA”)) established or maintained
by the Company or its “ERISA Affiliates” (as defined
below) are in compliance in all material respects with ERISA.
“ERISA Affiliate” means, with respect to the Company,
any member of any group of organizations described in Sections
414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations
thereunder (the “Code”) of which the Company is a
member. No “reportable event” (as defined under ERISA)
has occurred or is reasonably expected to occur with respect to any
“employee benefit plan” established or maintained by
the Company or any of its ERISA Affiliates. No “employee
benefit plan” established or maintained by the Company or any
of its ERISA Affiliates, if such “employee benefit
plan” were terminated, would have any “amount of
unfunded benefit liabilities” (as defined under ERISA).
Neither the Company nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any material liability under (i) Title
IV of ERISA with respect to termination of, or withdrawal from, any
“employee benefit plan” or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each “employee benefit plan”
established or maintained by the Company or any of its ERISA
Affiliates that is intended to be qualified under Section 401(a) of
the Code is so qualified and, to the knowledge of the Company,
nothing has occurred, whether by action or failure to act, which
would cause the loss of such qualification.
2.53 Compliance
with Laws. The Company: (i) reasonably believes it is and at
all times has been in compliance with all statutes, rules, or
regulations applicable to the ownership, testing, development,
manufacture, packaging, processing, use, distribution, marketing,
labeling, promotion, sale, offer for sale, storage, import, export
or disposal of any product manufactured or distributed by the
Company including, without limitation
the Federal Food, Drug and Cosmetic Act (21 U.S.C. §301 et
seq. and the applicable laws and regulations of the United
Kingdom(“Applicable
Laws”), except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Change; (ii) except as would not reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Change, has
not received any warning letter, untitled letter or other
correspondence or notice from any other governmental authority
alleging or asserting noncompliance with any Applicable Laws or any
licenses, certificates, approvals, clearances, authorizations,
permits and supplements or amendments thereto required by any such
Applicable Laws (“Authorizations”); (iii) possesses
all material Authorizations and such Authorizations are valid and
in full force and effect and are not in material violation of any
term of any such Authorizations; (iv) except as would not
reasonably be expected to result, individually or in the aggregate,
in a Material Adverse Change, has not received notice of any claim,
action, suit, proceeding, hearing, enforcement, investigation,
arbitration or other action from any governmental authority or
third party alleging that any product operation or activity,
including manufacturing of its products, is in violation of any
Applicable Laws or Authorizations and has no knowledge that any
such governmental authority or third party is considering any such
claim, litigation, arbitration, action, suit, investigation or
proceeding; (v) has not received notice that any governmental
authority has taken, is taking or intends to take action to limit,
suspend, modify or revoke any Authorizations and has no knowledge
that any such governmental authority is considering such action;
(vi) has filed, obtained, maintained or submitted all material
reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any
Applicable Laws or Authorizations and that all such reports,
documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete and correct
on the date filed (or were corrected or supplemented by a
subsequent submission); and (vii) has not, either voluntarily or
involuntarily, initiated, conducted, or issued or caused to be
initiated, conducted or issued, any recall, market withdrawal or
replacement, safety alert, post-sale warning, “dear
doctor” letter, or other notice or action relating to the
alleged lack of safety or efficacy of any product or any alleged
product defect or violation and, to the Company’s knowledge,
no third party has initiated, conducted or intends to initiate any
such notice or action.
2.54 Ineligible
Issuer. At the time of filing the Registration
Statement and any post-effective amendment thereto, at the time of
qualification of the Registration Statement and any amendment
thereto, at the earliest time thereafter that the Company or
another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) of the Securities Act Rules and
Regulations) of the Public Securities and at the date hereof, the
Company was not and is not an “ineligible issuer,” as
defined in Rule 405, without taking account of any determination by
the Commission pursuant to Rule 405 that it is not necessary that
the Company be considered an ineligible issuer.
19
2.55 Integration.
Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause the Offering to be
integrated with prior offerings by the Company for purposes of the
Securities Act that would require the registration of any such
securities under the Securities Act.
2.56 Real
Property. Except as set forth in the Registration Statement,
the Pricing Disclosure Package and the Prospectus, the Company and
its Subsidiaries have good and marketable title in fee simple to,
or have valid rights to lease or otherwise use, all items of real
or personal property which are material to the business of the
Company and its Subsidiaries taken as a whole, in each case free
and clear of all liens, encumbrances, security interests, claims
and defects that do not, singly or in the aggregate, materially
affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or its
Subsidiaries; and all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or any of its Subsidiaries
holds properties described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, are in full force
and effect, and neither the Company nor any Subsidiary has received
any notice of any material claim of any sort that has been asserted
by anyone adverse to the rights of the Company or any Subsidiary
under any of the leases or subleases mentioned above, or affecting
or questioning the rights of the Company or such Subsidiary to the
continued possession of the leased or subleased premises under any
such lease or sublease.
2.57 Loans
to Directors or Officers. There are no outstanding loans,
advances (except normal advances for business expenses in the
ordinary course of business) or guarantees or indebtedness by the
Company or its Subsidiaries to or for the benefit of any of the
officers or directors of the Company, its Subsidiaries or any of
their respective family members, except as disclosed in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus.
2.58 Smaller
Reporting Company. As of the time of filing of the
Registration Statement, the Company was a “smaller reporting
company,” as defined in Rule 12b-2 of the Exchange Act
Regulations.
2.59 Industry
Data. The statistical and market-related data included
in each of the Registration Statement, the Pricing Disclosure
Package and the Prospectus are based on or derived from sources
that the Company reasonably and in good faith believes are reliable
and accurate or represent the Company’s good faith estimates
that are made on the basis of data derived from such
sources.
2.60 [INTENTIONALLY
OMITTED].
2.61 Emerging
Growth Company. The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act
(an “Emerging Growth
Company”).
2.62 Exchange
Act Reports. The Company has filed in a timely manner all
reports required to be filed pursuant to Sections 13(a), 13(e), 14
and 15(d) of the Exchange Act during the preceding 12 months (or
such shorter period as time as required by the Exchange Act, except
to the extent that Section 15(d) requires reports to be filed
pursuant to Sections 13(d) and 13(g) of the Exchange Act, which
shall be governed by the next clause of this sentence); and the
Company has filed in a timely manner all reports required to be
filed pursuant to Sections 13(d) and 13(g) of the Exchange Act
since November 15, 2017.
2.63 Electronic
Road Show. If applicable, the Company has made available a
Bona Fide Electronic Road Show in compliance with
Rule 433(d)(8)(ii) of the Securities Act Rules and Regulations
such that no filing of any “road show” (as defined in
Rule 433(h) of the Securities Act Rules and Regulations) is
required in connection with the Offering.
20
2.64 Margin
Securities. The Company owns no “margin
securities” as that term is defined in Regulation U of the
Board of Governors of the Federal Reserve System (the
“Federal Reserve
Board”), and none of the proceeds of Offering will be
used, directly or indirectly, for the purpose of purchasing or
carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might
cause any of the shares of Common Stock to be considered a
“purpose credit” within the meanings of Regulation T, U
or X of the Federal Reserve Board.
2.65 XBRL.
The interactive data in eXtensible Business Reporting Language
included in the Registration Statement fairly presents the
information called for in all material respects and has been
prepared in accordance with the Commission’s rules and
guidelines applicable thereto.
2.66 No
Registration Rights. No person or entity has the right
to require registration of shares of Common Stock or other
securities of the Company or any of its subsidiaries because of the
filing or effectiveness of the Registration Statement or otherwise,
except for persons and entities who have expressly waived such
right in writing or who have been given timely and proper written
notice and have failed to exercise such right within the time or
times required under the terms and conditions of such right. Except
as described in the Registration Statement, the Pricing Disclosure
Package and Prospectus, there are no persons with registration
rights or similar rights to have any securities registered by the
Company or any of its subsidiaries under the Securities
Act.
2.67 Governing
Law; Consent to Jurisdiction. The Company has the power to
submit, and pursuant to Section 13 of this Agreement,
has legally, validly, effectively and irrevocably submitted, to the
personal jurisdiction of each United States federal court and New
York state court located in the Borough of Manhattan, in the City
of New York, New York, U.S.A. (each, a “New York Court”), and the Company
has the power to designate, appoint and authorize, and pursuant to
Section 9.7 of this
Agreement, has legally, validly, effectively and irrevocably
designated, appointed and authorized an agent for service of
process in any action arising out of or relating to this Agreement
or the Public Securities in any New York Court, and service of
process effected on such authorized agent will be effective to
confer valid personal jurisdiction over the Company as provided in
Section 9.7
hereof.
2.68 Insolvency.
The Company and its subsidiaries, individually and on a
consolidated basis, are not as of the date hereof, and after giving
effect to the transactions contemplated hereby to occur on the
Closing Date, will not be Insolvent (as defined below). For
purposes of this Section 2.68,
“Insolvent” means, with respect to any person,
(i) the present fair saleable value of such person’s
assets is less than the amount required to pay such person’s
total Indebtedness, (ii) such person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured,
(iii) such person intends to incur or believes that it will
incur debts that would be beyond its ability to pay as such debts
mature or (iv) such person has unreasonably small capital with
which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be
conducted.
2.69 Minute
Books. The minute books of the Company have been made
available to the Underwriters and Representative Counsel, and such
books (i) contain a complete summary of all meetings and actions of
the Board of Directors (including each board committee) and
stockholders of the Company (or analogous governing bodies and
interest holders, as applicable), and each of its Subsidiaries
since the time of its respective incorporation or organization
through the date of the latest meeting and action, and (ii)
accurately in all material respects reflect all transactions
referred to in such minutes. There are no material transactions,
agreements, dispositions or other actions of the Company that are
not properly approved and/or accurately and fairly recorded in the
minute books of the Company, as applicable.
21
2.70 Confidentiality
and Non-Competition. To the Company’s knowledge, no
director, officer, key employee or consultant of the Company is
subject to any confidentiality, non-disclosure, non-competition
agreement or non-solicitation agreement with any employer or prior
employer that could reasonably be expected to materially affect his
or her ability to be and act in his or her respective capacity of
the Company or be expected to result in a Material Adverse Change
and each such director, officer, key employee or key consultant of
the Company has a written obligation of confidentiality with the
Company.
2.71
Form S-3 Eligibility;
FINRA.
2.71.1
At the (i) time the Registration Statement was declared effective,
(ii) time of the most recent amendment thereto for the purposes of
complying with Section 10(a)(3) of the Securities Act (whether such
amendment was by post-effective amendment, a report filed pursuant
to Section 13 or 15(d) of the Exchange Act and incorporated therein
by reference or form of prospectus), and (iii) at the date hereof,
the Company, the Company met or meets the then applicable
requirements for the use of General Instruction I.B.1 of Form S-3
under the Securities Act. The Registration Statement is a
shelf registration statement on Form S-3 for an offering made
pursuant to 415(a)(1)(x) of the Securities Act and the Public
Securities, the Preferred Conversion Shares, the
Representative’s Warrants and the shares of Common Stock
issuable upon exercise of the Representative’s Warrants have
been and remain eligible for registration by the Company on such
shelf registration statement.
2.71.2
At the time the Registration Statement was originally declared
effective, and at the time the Company’s most recent Annual
Report on Form 10-K was filed with the Commission, the Company met
the then applicable requirements for the use of Form S-3 under the
Securities Act, including, but not limited to, General Instruction
I.B.1 of Form S-3. The Company is not a shell company (as defined
in Rule 405 under the Securities Act) and has not been a shell
company for at least 12 calendar months previously and if it has
been a shell company at any time previously, has filed current Form
10 information (as defined in Instruction I.B.6 of Form S-3) with
the Commission at least 12 calendar months previously reflecting
its status as an entity that is not a shell company. The Company
meets the definition of the term “experienced issuer”
specified in FINRA Rule 5110(j)(6).
2.72
Ratings. The
Company has no debt securities or preferred stock that is rated by
any “nationally recognized statistical rating agency”
(as such term is defined by the Commission for purposes of Rule
436(g)(2) of the Securities Act).
22
2.73
Cybersecurity.
The Company and its subsidiaries’ information
technology assets and equipment, computers, systems, networks,
hardware, software, websites, applications, and databases
(collectively, “IT Systems”) are (a) in all material respects adequate
for, and operate and perform as required in connection with the
operation of the business of the Company as currently conducted,
and (b) to the knowledge of the Company, free and clear of all
material bugs, errors, defects, Trojan horses, time bombs, malware
and other corruptants. The Company and its subsidiaries have
implemented and maintained commercially reasonable physical,
technical and administrative controls, and safeguards designed to
maintain and protect the integrity and security of all IT Systems
and all “Personal
Data” (defined below) and
all confidential information and data material to their businesses
(“Confidential
Data”).
“Personal
Data” means the following
information in the possession or control of the Company and its
subsidiaries (i) a natural person’s name, street address,
telephone number, e-mail address, photograph, social security
number or tax identification number, driver’s license number,
passport number, credit card number, bank information, or customer
or account number; (ii) any information which would qualify as
“personally identifying information” under the Federal
Trade Commission Act, as amended, if applicable; (iii)
“personal data” as defined by GDPR, if applicable; (iv)
any information which would qualify as “protected health
information” under the Health Insurance Portability and
Accountability Act of 1996, as amended by the Health Information
Technology for Economic and Clinical Health Act (collectively,
“HIPAA”); (v) any “personal
information” as defined by the California Consumer Privacy
Act (“CCPA”), if applicable; and (vi) any other piece
of information that allows the identification of such natural
person or permits the collection or analysis of any data related to
an identified person’s health or sexual orientation. To the
knowledge of the Company, except as disclosed under Form 8-K
Current Report dated September 25, 2020 (the
“2020
Cyber Security Matter”)
there have been no breaches of the security of, or unauthorized
uses of or accesses to, IT Systems or Personal Data, except for
those that would not, in the aggregate, reasonably be expected
to have a Material Adverse Effect. The Company and its subsidiaries
are presently in material compliance with all applicable laws or
statutes and all judgments, orders, rules and regulations of any
court or arbitrator or governmental or regulatory authority, and
contractual obligations relating to the privacy and security of IT
Systems, Confidential Data, and Personal Data and to the protection
of such IT Systems, Confidential Data, and Personal Data from
unauthorized use, access, misappropriation or
modification.
2.74 Compliance with Data
Privacy Laws. Except for
remedial actions under state law relating to the 2020 Cyber
Security Matter, the Company certifies that neither the Company nor
any of its subsidiaries has received notice alleging any
actual or potential violation of any applicable state and federal
data privacy and security laws and regulations, including without
limitation, to the extent applicable, HIPAA, CCPA, and the European
Union General Data Protection Regulation
(“GDPR”)
(EU 2016/679) (collectively, the “Privacy Laws”). The Company has at all times
made all disclosures to users or customers required by Privacy
Laws, and none of such disclosures made have been inaccurate or in
violation of any Privacy Laws in any material respect. The Company
further certifies that neither it nor any of its subsidiaries (i)
has received written notice of any actual or potential liability
under or relating to, or actual or potential violation of, any of
the Privacy Laws; (ii) is currently conducting or paying for, in
whole or in part, any investigation, remediation, or other
corrective action required under any Privacy Law in connection with
a violation thereof; and (iii) is a party to any order or decree of
any court, regulator or other government authority that imposes any
obligation or liability under any Privacy Law.
3. Covenants
of the Company. The Company covenants and agrees as
follows:
3.1 Amendments
to Registration Statement. The Company shall deliver to the
Representative, prior to filing, any amendment or supplement to the
Registration Statement, Preliminary Prospectus, Disclosure Package
or Prospectus proposed to be filed after the Effective Date and not
file any such amendment or supplement to which the Representative
shall reasonably object in writing.
23
3.2 Federal
Securities Laws.
3.2.1 Compliance.
The Company, subject to Section 3.2.2, shall comply
with the requirements of Rule 424(b) and Rule 430B of the
Securities Act Regulations, and will notify the Representative
promptly, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement or any
amendment or supplement to any Preliminary Prospectus, the Pricing
Disclosure Package or the Prospectus shall have been filed and when
any post-effective amendment to the Registration Statement shall
become effective; (ii) of the receipt of any comments from the
Commission; (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or
supplement to any Preliminary Prospectus, the Pricing Disclosure
Package or the Prospectus or for additional information; (iv) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective
amendment or of any order preventing or suspending the use of any
Preliminary Prospectus, the Pricing Disclosure Package or the
Prospectus, or of the suspension of the qualification of the Public
Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such
purposes or of any examination pursuant to Section 8(d) or 8(e) of
the Securities Act concerning the Registration Statement; and (v)
if the Company becomes the subject of a proceeding under Section 8A
of the Securities Act in connection with the Offering of the Public
Securities. The Company shall effect all filings required under
Rule 424(b) of the Securities Act Regulations, in the manner and
within the time period required by Rule 424(b) (without reliance on
Rule 424(b)(8)), and shall take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for
filing under Rule 424(b) was received for filing by the Commission
and, in the event that it was not, it will promptly file such
prospectus. The Company shall use its best efforts to prevent the
issuance of any stop order, prevention or suspension and, if any
such order is issued, to obtain the lifting thereof at the earliest
possible moment.
3.2.2 Continued
Compliance. The Company shall comply with the Securities
Act, the Securities Act Regulations, the Exchange Act and the
Exchange Act Regulations so as to permit the completion of the
distribution of the Public Securities as contemplated in this
Agreement and in the Registration Statement, the Pricing Disclosure
Package and the Prospectus. If at any time when a prospectus
relating to the Public Securities is (or, but for the exception
afforded by Rule 172 of the Securities Act Regulations
(“Rule 172”),
would be) required by the Securities Act to be delivered in
connection with sales of the Public Securities, any event shall
occur or condition shall exist as a result of which it is
necessary, in the opinion of Representative Counsel or counsel for
the Company, to (i) amend the Registration Statement in order that
the Registration Statement will not include an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; (ii) amend or supplement the Pricing Disclosure Package
or the Prospectus in order that the Pricing Disclosure Package or
the Prospectus, as the case may be, will not include any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in
the light of the circumstances existing at the time it is delivered
to a purchaser or (iii) amend the Registration Statement or amend
or supplement the Pricing Disclosure Package or the Prospectus, as
the case may be, in order to comply with the requirements of the
Securities Act or the Securities Act Regulations, the Company will
promptly (A) give the Representative notice of such event; (B)
prepare any amendment or supplement as may be necessary to correct
such statement or omission or to make the Registration Statement,
the Pricing Disclosure Package or the Prospectus comply with such
requirements and, a reasonable amount of time prior to any proposed
filing or use, furnish the Representative with copies of any such
amendment or supplement and (C) file with the Commission any such
amendment or supplement; provided, however, that the Company shall not
file or use any such amendment or supplement to which the
Representative or Representative Counsel shall reasonably object.
The Company will furnish to the Underwriters such number of copies
of such amendment or supplement as the Underwriters may reasonably
request. The Company has given the Representative notice of any
filings made pursuant to the Exchange Act or the Exchange Act
Regulations within 48 hours prior to the Applicable Time. The
Company shall give the Representative notice of its intention to
make any such filing from the Applicable Time until the later of
the Closing Date and the exercise in full or expiration of the
Over-allotment Option specified in Section 1.2 hereof and will
furnish the Representative with copies of the related document(s) a
reasonable amount of time prior to such proposed filing, as the
case may be, and will not file or use any such document to which
the Representative or Representative Counsel shall reasonably
object.
3.2.3 Exchange
Act Registration. For a period of three (3) years after the
date of this Agreement, the Company shall use its best efforts to
maintain the registration of the shares of Common Stock and the
shares of Preferred Stock under the Exchange Act. The Company shall
not deregister the shares of Common Stock or the shares of
Preferred Stock under the Exchange Act without the prior written
consent of the Representative.
24
3.2.4 Free
Writing Prospectuses. The Company agrees that, unless it
obtains the prior written consent of the Representative, it shall
not make any offer relating to the Public Securities that would
constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a “free writing prospectus,” or a
portion thereof, required to be filed by the Company with the
Commission or retained by the Company under Rule 433; provided, however, that the Representative shall
be deemed to have consented to each Issuer General Use Free Writing
Prospectus hereto and any “road show that is a written
communication” within the meaning of Rule 433(d)(8)(i) that
has been reviewed by the Representative. The Company represents
that it has treated or agrees that it will treat each such free
writing prospectus consented to, or deemed consented to, by the
Underwriters as an “issuer free writing prospectus,” as
defined in Rule 433, and that it has complied and will comply with
the applicable requirements of Rule 433 with respect thereto,
including timely filing with the Commission where required,
legending and record keeping. If at any time following issuance of
an Issuer Free Writing Prospectus there occurred or occurs an event
or development as a result of which such Issuer Free Writing
Prospectus conflicted or would conflict with the information
contained in the Registration Statement or included or would
include an untrue statement of a material fact or omitted or would
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at
that subsequent time, not misleading, the Company will promptly
notify the Underwriters and will promptly amend or supplement, at
its own expense, such Issuer Free Writing Prospectus to eliminate
or correct such conflict, untrue statement or
omission.
3.3 Delivery
to the Underwriters of Registration Statements. The Company
has delivered or made available or shall deliver or make available
to the Representative and the Representative Counsel, without
charge, signed copies of the Registration Statement as originally
filed and each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents
incorporated or deemed to be incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will
also deliver to the Underwriters, without charge, a conformed copy
of the Registration Statement as originally filed and each
amendment thereto (without exhibits) for each of the Underwriters.
The copies of the Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
3.4 Delivery
to the Underwriters of Prospectuses. The Company has
delivered or made available or will deliver or make available to
each Underwriter, without charge, as many copies of each
Preliminary Prospectus as such Underwriter reasonably requested,
and the Company hereby consents to the use of such copies for
purposes permitted by the Securities Act. The Company will furnish
to each Underwriter, without charge, during the period when a
prospectus relating to the Public Securities is (or, but for the
exception afforded by Rule 172, would be) required to be delivered
under the Securities Act, such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
25
3.5 Events
Requiring Notice to the Representative. The Company shall
use its best efforts to cause the Registration Statement to remain
effective with a current prospectus for at least nine (9) months
after the Applicable Time, and shall notify the Representative
immediately and confirm the notice in writing: (i) of the issuance
by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose; (ii) of the
issuance by any state securities commission of any proceedings for
the suspension of the qualification of the Public Securities for
offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose; (iii) of the
mailing and delivery to the Commission for filing of any amendment
or supplement to the Registration Statement or Prospectus; (iv) of
the receipt of any comments or request for any additional
information from the Commission; and (v) of the happening of any
event during the period described in this Section 3.5 that, in the
judgment of the Company, makes any statement of a material fact
made in the Registration Statement, the Pricing Disclosure Package
or the Prospectus untrue or that requires the making of any changes
in (a) the Registration Statement in order to make the statements
therein not misleading, or (b) in the Pricing Disclosure Package or
the Prospectus in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If
the Commission or any state securities commission shall enter a
stop order or suspend such qualification at any time, the Company
shall make every reasonable effort to obtain promptly the lifting
of such order.
3.6 Review
of Financial Statements. For a period of five (5) years
after the date of this Agreement, the Company, at its expense,
shall cause its regularly engaged independent registered public
accounting firm to review (but not audit) the Company’s
financial statements for each of the three fiscal quarters
immediately preceding the announcement of any quarterly financial
information.
3.7 Listing.
The Company shall use its best efforts to maintain the listing of
the shares of Common Stock (including the Preferred Conversion
Shares and the shares of Common Stock underlying the
Representative’s Warrants) and the shares of Preferred Stock
(including the Public Securities) on the Exchange for at least
three years from the date of this Agreement.
3.8 Undertakings.
The Company will comply with any undertakings contained in the
Registration Statement.
3.9 Financial
Public Relations Firm. The Company has retained a financial
public relations firm reasonably acceptable to the Representative
and the Company, which firm is experienced in assisting issuers in
their relations with their security holders, and shall retain such
firm or another firm reasonably comparably experienced for a period
of not less than two (2) years after the Effective
Date.
3.10 Periodic
Reports, etc. For a period of three (3) years after the date
of this Agreement, the Company shall furnish or make available to
the Representative copies of such financial statements and other
periodic and special reports as the Company from time to time
furnishes generally to holders of any class of its securities and
also promptly furnish to the Representative: (i) a copy of each
periodic report the Company shall be required to file with the
Commission under the Exchange Act and the Exchange Act Regulations;
(ii) a copy of every material press release and every material news
item and article with respect to the Company or its affairs which
was released by the Company; (iii) a copy of each Form 8-K prepared
and filed by the Company; (iv) five copies of each registration
statement filed by the Company under the Securities Act; (v) a copy
of each report or other communication furnished to stockholders and
(vi) such additional documents and information with respect to the
Company and the affairs of any future subsidiaries of the Company
as the Representative may from time to time reasonably request;
provided, however, the Representative shall sign,
if requested by the Company, a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to the
Representative and Representative Counsel in connection with the
Representative’s receipt of such information. Documents filed
with the Commission pursuant to its ▇▇▇▇▇ system shall be deemed to
have been delivered to the Representative pursuant to this
Section
3.10.
3.11 Transfer
Agent; Transfer Sheets. For a period of three (3) years
after the date of this Agreement, the Company shall retain a
Transfer Agent and registrar acceptable to the Representative and
shall furnish to the Representative at the Company’s sole
cost and expense such transfer sheets of the Company’s
securities as the Representative may reasonably request, including
the daily and monthly consolidated transfer sheets of the Transfer
Agent and DTC. V Stock Transfer, LLC is acceptable to the
Representative to act as Transfer Agent for the shares of Common
Stock.
3.12 Trading
Reports. During such time as the Public Securities are
listed on the Exchange, the Company shall provide to the
Representative, at the Company’s expense, such reports
published by the Exchange relating to price trading of the Public
Securities, as the Representative shall reasonably
request.
26
3.13 Payment
of Expenses. The Company hereby agrees to pay on each of the
Closing Date and the Option Closing Date, if any, to the extent not
paid at the Closing Date, all expenses incident to the performance
of the obligations of the Company under this Agreement. Such
expenses include, but are not limited to: (i) all filing fees and
communication expenses relating to the registration of the Public
Securities with the Commission; (ii) all Public Filing System
filing fees associated with the review of the Offering by FINRA;
(iii) all fees and expenses relating to the listing of such Public
Securities on the Exchange, including any fees charged by the
Depositary Trust Company for new securities; (iv) all fees,
expenses and disbursements relating to the registration,
qualification or exemption of the Public Securities under the
“blue sky” securities laws of such states and other
jurisdictions as the Representative may reasonably designate,
including, without limitation, all filing and registration fees;
(v) all fees, expenses and disbursements relating to the
registration, qualification or exemption of the Public Securities
under the securities laws of such foreign jurisdictions as the
Representative may reasonably designate; (vi) the costs of all
mailing and printing of the underwriting documents (including,
without limitation, this Agreement, any Blue Sky Surveys and, if
appropriate, any Agreement Among Underwriters, Selected
Dealers’ Agreement, Underwriters’ Questionnaire and
Power of Attorney), Registration Statements, Prospectuses and all
amendments, supplements and exhibits thereto and as many
preliminary and final Prospectuses as the Representative may
reasonably deem necessary; (vii) the costs of preparing, printing
and delivering certificates representing the Public Securities;
(viii) fees and expenses of the Transfer Agent; (ix) stock transfer
and/or stamp taxes, if any, payable upon the transfer of securities
from the Company to the Underwriters; (x) the fees and expenses of
the Company’s accountants; (xi) the fees and expenses of the
Company’s legal counsel and other agents and representatives;
and (xii) the fees and expenses of Representative’s Counsel.
Notwithstanding anything to the contrary in this Agreement, the
expenses set forth herein to be paid by the Company to the
Representative for their actual and accountable out-of-pocket
expenses related to the transactions contemplated herein shall not
exceed $105,000. The Representative may deduct from the net
proceeds of the Offering payable to the Company on the Closing
Date, or the Option Closing Date, if any, the expenses set forth
herein to be paid by the Company to the Representative;
provided, however, that in
the event that the Offering is terminated, the Company agrees to
reimburse the Representative pursuant to Section 8.3 hereof, which
states, among other things, that in addition to the payments set
forth herein, any advance received by the Representative for
out-of-pocket accountable expenses will be reimbursed to the
Company to the extent not actually incurred in compliance with
FINRA Rule 5110(g)(4)(A).
3.14 Application
of Net Proceeds. The Company shall apply the net proceeds
from the Offering received by it in a manner consistent with the
application thereof described under the caption “Use of
Proceeds” in the Registration Statement, the Pricing
Disclosure Package and the Prospectus.
3.15 Delivery
of Earnings Statements to Security Holders. The Company
shall make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth
(15th) full calendar month following the date of this Agreement, an
earnings statement (which need not be certified by independent
registered public accounting firm unless required by the Securities
Act or the Securities Act Regulations, but which shall satisfy the
provisions of Rule 158(a) under Section 11(a) of the Securities
Act) covering a period of at least twelve (12) consecutive months
beginning after the date of this Agreement, subject to the
Company’s periodic filings with the Commission.
3.16 Stabilization.
Neither the Company nor, to its knowledge, any of its employees,
directors or shareholders (without the consent of the
Representative) has taken or shall take, directly or indirectly,
any action designed to or that has constituted or that might
reasonably be expected to cause or result in, under Regulation M of
the Exchange Act, or otherwise, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or
resale of the Public Securities.
27
3.17 Internal
Controls. Except as to the extent disclosed in the
Registration Statement, the Company shall maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance
with management’s general or specific authorization;
(ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with GAAP and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or
specific authorization; and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals
and appropriate action is taken with respect to any
differences.
3.18 Accountants.
The Company shall continue to retain a nationally recognized
independent registered public accounting firm reasonably acceptable
to the Representative for a period of at least three (3) years
after the date of this Agreement. The Representative acknowledges
that the Auditor is acceptable to the Representative.
3.19 FINRA.
For a period of 180 days from the later of the Closing Date or the
Option Closing Date, the Company shall advise the Representative
(who shall make an appropriate filing with FINRA (if required)) if
it is or becomes aware that (i) any officer or director of the
Company, (ii) any beneficial owner of 5% or more of any class of
the Company’s securities or (iii) any beneficial owner of the
Company’s unregistered equity securities which were acquired
during the 180 days immediately preceding the filing of the
Registration Statement is or becomes an affiliate or associated
person of a FINRA member participating in the Offering (as
determined in accordance with the rules and regulations of
FINRA).
3.20 No
Fiduciary Duties. The Company acknowledges and agrees that
the Underwriters’ responsibility to the Company is solely
contractual in nature and that none of the Underwriters or their
affiliates or any Underwriter shall be deemed to be acting in a
fiduciary capacity, or otherwise owes any fiduciary duty to the
Company or any of its affiliates in connection with the Offering
and the other transactions contemplated by this
Agreement.
3.21 Restriction
on Sales of Capital Stock. The Company, on behalf of itself
and any successor entity, agrees that, without the prior written
consent of the Representative, it will not, for a period of 60 days
after the Closing Date (the “Lock-Up Period”), (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer
or dispose of, directly or indirectly, any shares of capital stock
of the Company or any securities convertible into or exercisable or
exchangeable for shares of capital stock of the Company; (ii) file
or caused to be filed any registration statement with the
Commission relating to the offering of any shares of capital stock
of the Company or any securities convertible into or exercisable or
exchangeable for shares of capital stock of the Company, other than
a registration statement on Form S-8 related to its 2015 Equity
Compensation Plan, 2021 Equity Compensation Plan or subsequent plan
authorized by the Company’s Board of Directors; (iii)
complete any offering of debt securities of the Company, other than
entering into a line of credit with a traditional bank or (iv)
enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership
of capital stock of the Company, whether any such transaction
described in clause (i), (ii), (iii) or (iv) above is to be settled
by delivery of shares of capital stock of the Company or such other
securities, in cash or otherwise.
28
The
restrictions contained in this Section 3.21 shall not apply to
(i) the shares of Preferred Stock to be sold hereunder, (ii)
securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors
of the Company, provided that any such issuance shall only be to a
person or company or an owner of an asset in a business synergistic
with the business of the Company, (iii) the issuance by the Company
of stock options, grants of restricted stock awards or restricted
stock units or shares of Common Stock of the Company under any
equity compensation plan of the Company described as of the date of
this Agreement in the Registration Statement, Pricing Disclosure
Package and Prospectus or (iv) the issuance by the Company of
shares of Common Stock upon the exercise of any stock option,
restricted stock unit or warrant or the conversion or exchange of
other outstanding convertible or derivative security disclosed as
outstanding on the date of this Agreement in the Registration
Statement, Pricing Disclosure Package and Prospectus, provided that
any such stock options, restricted stock units, warrants, and
securities have not been amended since the date of this Agreement
to increase the number of such securities or to decrease the
exercise price, exchange price or conversion price of such
securities or to extend the term of such securities, provided that
in each of clause (iii) and (iv) above, the underlying shares of
Common Stock shall be restricted from sale during the entire
Lock-Up Period.
3.22 Conversion
Price. Between the date hereof and the Closing Date, the
Company will not do or authorize any act or thing that would result
in an adjustment of the conversion price of the Preferred
Stock.
3.23 Release
of D&O Lock-up Period. If the Representative, in its
sole discretion, agrees to release or waive the restrictions set
forth in the Lock-Up Agreements described in Section 2.40 hereof for an
officer or director of the Company and provide the Company with
notice of the impending release or waiver at least three (3)
Business Days before the effective date of the release or waiver,
the Company agrees to announce the impending release or waiver by a
press release substantially in the form of Exhibit C hereto through a
major news service at least two (2) Business Days before the
effective date of the release or waiver.
3.24 Blue
Sky Qualifications. The Company shall use its best efforts,
in cooperation with the Underwriters, if necessary, to qualify the
Public Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions (domestic or
foreign) as the Representative may designate and to maintain such
qualifications in effect so long as required to complete the
distribution of the Public Securities; provided, however, that the
Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so
subject.
3.25 Emerging
Growth Company Status. The Company shall promptly notify the
Underwriters if the Company ceases to be an Emerging Growth Company
at any time prior to the later of (i) completion of the
distribution of the Public Securities within the meaning of the
Securities Act and (ii) fifteen (15) days following the completion
of the Lock-Up Period.
3.26 Reporting
Requirements. The Company, during the period when a
prospectus relating to the Public Securities is (or, but for the
exception afforded by Rule 172, would be) required to be delivered
under the Securities Act, will file all documents required to be
filed with the Commission pursuant to the Exchange Act within the
time periods required by the Exchange Act and Exchange Act
Regulations. Additionally, the Company shall report the use of
proceeds from the issuance of the Public Securities as may be
required under Rule 463 under the Securities Act
Regulations.
29
3.27 Prohibition
on Press Releases and Public Announcements. The Company
shall not issue press releases or engage in any other publicity,
without the Representative’s prior written consent, for a
period ending at 5:00 p.m., Eastern time, on the first (1st)
Business Day following the fortieth (40th) day after the Closing
Date, other than normal and customary releases issued in the
ordinary course of the Company’s business.
3.28 ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
Except as disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, the Company shall at all
times comply with all applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act in effect from time to time.
3.29 Pursuant to the Exchange
Act—Preferred Stock. The Company has filed with the
Commission a Form 8-A providing for the registration pursuant to
Section 12(b) under the Exchange Act of the shares of Preferred
Stock (the “Form
8-A”); and such Form 8-A is currently effective under
the Exchange Act. The Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the
shares of Preferred Stock under the Exchange Act, nor has the
Company received any notification that the Commission is
contemplating terminating such registration.
3.30.
Certificate of
Designations. The Certificate of Designations will remain,
prior to the Closing Time, duly authorized, executed and filed by
the Company with the Secretary of State of the State of North
Carolina.
4. Conditions
of Underwriters’ Obligations. The obligations of the
Underwriters to purchase and pay for the Public Securities, as
provided herein, shall be subject to (i) the continuing accuracy of
the representations and warranties of the Company as of the date
hereof and as of each of the Closing Date and the Option Closing
Date, if any; (ii) the accuracy of the statements of officers of
the Company made pursuant to the provisions hereof; (iii) the
performance by the Company of its obligations hereunder; and (iv)
the following conditions:
4.1 Regulatory
Matters.
4.1.1 Commission
Actions; Required Filings. At each of the Closing Date and
any Option Closing Date, no stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment
thereto shall have been issued under the Securities Act, no order
preventing or suspending the use of any Preliminary Prospectus or
the Prospectus shall have been issued and no proceedings for any of
those purposes shall have been instituted or are pending or, to the
Company’s knowledge, contemplated by the Commission. The
Company has complied with each request (if any) from the Commission
for additional information. A prospectus containing the Rule 430B
Information shall have been filed with the Commission in the manner
and within the time frame required by Rule 424(b) under the
Securities Act Regulations (without reliance on Rule 424(b)(8)) or
a post-effective amendment providing such information shall have
been filed with, and declared effective by, the Commission in
accordance with the requirements of Rule 430B under the Securities
Act Regulations.
4.1.2 FINRA
Clearance. The Base Prospectus has been filed with FINRA and
the requisite FINRA fee has been paid.
4.1.3 Exchange Stock
Market Clearance. On or before the Closing Date, the
Company’s shares of Preferred Stock, including the Firm
Shares and the Option Shares and the shares of Common Stock
issuable upon conversion of the Firm Shares and the Options Shares
and the shares of Common Stock underlying the
Representative’s Warrants) shall have been approved for
listing on the Exchange, subject only to official notice of
issuance. The Company shall have filed a Supplemental Listing
Application with the Exchange and received approval for the listing
of the Public Securities and the shares of Common Stock underlying
the Representative’s Warrant.
30
4.2 Company
Counsel Matters.
4.2.1 Closing
Date Opinion of Counsel. On the Closing Date, the
Representative shall have received the favorable opinion of
▇▇▇▇▇▇▇▇ Law Group LLP, corporate and securities counsel to the
Company, and a written statement providing certain
“10b-5” negative assurances, dated the Closing Date and
addressed to the Representative, substantially in the form of
Exhibit D attached
hereto.
4.2.2 Closing Date
Opinion of Counsel. On the Closing Date, the Representative
shall have received the favorable opinion of ▇▇▇▇▇▇▇ Law, PLLC,
special North Carolina counsel to the Company, dated the Closing
Date and addressed to the Representative, substantially in the form
of Exhibit E
attached hereto.
4.2.3 [INTENTIONALLY
OMITTED]
4.2.4 Option
Closing Date Opinions of Counsel. On the Option Closing
Date, if any, the Representative shall have received the favorable
opinion and “10b-5” negative assurances of counsel
listed in Section
4.2.1 and the favorable opinion of counsel listed in
Section 4.2.2, each
dated as of the Option Closing Date, addressed to the
Representative and in form and substance reasonably satisfactory to
the Representative, confirming as of the Option Closing Date, the
statements made by such counsel in its opinion, and as to the
counsel listed in Section
4.2.1 the “10b-5” negative assurances, delivered
on the Closing Date.
4.2.5 Reliance.
In rendering such opinion, counsel may rely: (i) as to matters
involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and
substance reasonably satisfactory to the Representative) of other
counsel reasonably acceptable to the Representative, familiar with
the applicable laws; and (ii) as to matters of fact, to the extent
they deem proper, on certificates or other written statements of
officers of the Company and officers of departments of various
jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company; provided that copies of any such
statements or certificates shall be delivered to Representative
Counsel if requested. The opinion of ▇▇▇▇▇▇▇▇ Law Group LLP and any
opinion relied upon by ▇▇▇▇▇▇▇▇ Law Group LLP shall include a
statement to the effect that it may be relied upon by
Representative Counsel in its opinion delivered to the
Underwriters.
4.3 Comfort
Letters.
4.3.1 Cold
Comfort Letter. At the time this Agreement is executed the
Underwriters shall have received cold comfort letters from the
Auditor containing statements and information of the type
customarily included in accountants’ comfort letters with
respect to the financial statements and certain financial
information contained or incorporated or deemed incorporated by
reference in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, addressed to the Representative and in
form and substance satisfactory in all respects to you and to the
Auditor, dated as of
the date of this Agreement.
4.3.2 Bring-down
Comfort Letter. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received from
the Auditor letters, dated as of the Closing Date or the Option
Closing Date, as applicable, to the effect that the Auditor each
reaffirm the statements made in their letters furnished pursuant to
Section 4.3.1,
except that the specified date referred to shall be a date not more
than three (3) business days prior to the Closing Date or the
Option Closing Date, as applicable.
31
4.4 Officers’
Certificates.
4.4.1 Officers’
Certificate. The Company shall have furnished to the
Representative a certificate, dated the Closing Date and any Option
Closing Date (if such date is other than the Closing Date), of its
Chief Executive Officer and its Chief Financial Officer stating
that (i) such officers have carefully examined the Registration
Statement, the Pricing Disclosure Package, any Issuer Free Writing
Prospectus and the Prospectus and, in their opinion, the
Registration Statement and each amendment thereto, as of the
Applicable Time and as of the Closing Date (or any Option Closing
Date if such date is other than the Closing Date) did not include
any untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Pricing Disclosure
Package, as of the Applicable Time and as of the Closing Date (or
any Option Closing Date if such date is other than the Closing
Date), any Issuer Free Writing Prospectus as of its date and as of
the Closing Date (or any Option Closing Date if such date is other
than the Closing Date), and the Prospectus and each amendment or
supplement thereto, as of the respective date thereof and as of the
Closing Date, did not include any untrue statement of a material
fact and did not omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
in which they were made, not misleading, (ii) since the initial
effective date of the Registration Statement, no event has occurred
which should have been set forth in a supplement or amendment to
the Registration Statement, the Pricing Disclosure Package or the
Prospectus, (iii) to the best of their knowledge after reasonable
investigation, as of the Closing Date (or any Option Closing Date
if such date is other than the Closing Date), the representations
and warranties of the Company in this Agreement are true and
correct and the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date (or any Option Closing
Date if such date is other than the Closing Date), and (iv) there
has not been, subsequent to the date of the most recent audited
financial statements included or incorporated by reference in the
Pricing Disclosure Package, any material adverse change in the
financial position or results of operations of the Company, or any
change or development that, singularly or in the aggregate, would
involve a material adverse change or a prospective material adverse
change, in or affecting the condition (financial or otherwise),
results of operations, business, assets or prospects of the
Company, except as set forth in the Prospectus.
4.4.2 Secretary’s
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary of the Company,
dated the Closing Date or the Option Date, as the case may be,
respectively, certifying: (i) that each of the Charter and Bylaws is true and complete, has not been
modified and is in full force and effect; (ii) that the resolutions
of the Company’s Board of Directors relating to the Offering
are in full force and effect and have not been modified; (iii) as
to the accuracy and completeness of all correspondence between the
Company or its counsel and the Commission; and (iv) as to the
incumbency of the officers of the Company. The documents referred
to in such certificate shall be attached to such
certificate.
4.4.3 Chief
Financial Officer’s Certificate. At each of the
Closing Date and the Option Closing Date, if any, the
Representative shall have received a certificate of the Chief
Financial Officer of the Company, dated the Closing Date or the
Option Date, as the case may be, respectively, with respect to the
accuracy of certain information contained in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, in a
form reasonably acceptable to the Representative.
4.4.4
Regulatory Officer’s
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received a
certificate executed by the officer in charge of regulatory affairs
of the Company, dated as of such date, in form and substance
satisfactory to the Representative, related to regulatory
matters.
32
4.5 No
Material Changes. Prior to and on each of the Closing Date
and each Option Closing Date, if any: (i) there shall have been no
material adverse change or development involving a prospective
material adverse change in the condition or prospects or the
business activities, financial or otherwise, of the Company from
the latest dates as of which such condition is set forth in the
Registration Statement and no change in the capital stock or debt
of the Company, the Pricing Disclosure Package and the Prospectus;
(ii) no action, suit or proceeding, at law or in equity, shall have
been pending or threatened against the Company or any Insider
before or by any court or federal or state commission, board or
other administrative agency wherein an unfavorable decision, ruling
or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the
Company, except as set forth in the Registration Statement, the
Pricing Disclosure Package and the Prospectus; (iii) no stop order
shall have been issued under the Securities Act and no proceedings
therefor shall have been initiated or threatened by the Commission;
(iv) no action shall have been taken and no law, statute, rule,
regulation or order shall have been enacted, adopted or issued by
any Governmental Entity which would prevent the issuance or sale of
the Public Securities or materially and adversely affect or
potentially materially and adversely affect the business or
operations of the Company; (v) no injunction, restraining order or
order of any other nature by any federal or state court of
competent jurisdiction shall have been issued which would prevent
the issuance or sale of the Public Securities or materially and
adversely affect or potentially materially and adversely affect the
business or operations of the Company and (vi) the Registration
Statement, the Pricing Disclosure Package and the Prospectus and
any amendments or supplements thereto shall contain all material
statements which are required to be stated therein in accordance
with the Securities Act and the Securities Act Regulations and
shall conform in all material respects to the requirements of the
Securities Act and the Securities Act Regulations, and neither the
Registration Statement, the Pricing Disclosure Package, the
Prospectus nor any amendment or supplement thereto shall contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
4.6 No
Material Misstatement or Omission. The Underwriters shall
not have discovered and disclosed to the Company on or prior to the
Closing Date and any Option Closing Date that the Registration
Statement or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Representative
Counsel, is material or omits to state any fact which, in the
opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not
misleading, or that the Registration Statement, Pricing Disclosure
Package or the Prospectus or any amendment or supplement thereto
contains an untrue statement of fact which, in the opinion of such
counsel, is material or omits to state any fact which, in the
opinion of such counsel, is material and is necessary in order to
make the statements, in the light of the circumstances under which
they were made, not misleading.
4.7 Corporate
Proceedings. All corporate proceedings and other legal
matters incident to the authorization, form and validity of each of
this Agreement, the Public Securities, the Representative’s
Warrant Agreement, the Registration Statement, the Pricing
Disclosure Package and the Prospectus and all other legal matters
relating to this Agreement and the transactions contemplated hereby
and thereby shall be reasonably satisfactory in all material
respects to Representative Counsel, and the Company shall have
furnished to such counsel all documents and information that they
may reasonably request to enable them to pass upon such
matters.
4.8 Delivery
of Agreements.
4.8.1 Lock-Up
Agreements. On or before the date of this Agreement, the
Company shall have delivered to the Representative executed copies
of the Lock-Up Agreements from each of the persons listed in
Schedule 3
hereto.
4.8.2
Closing Date
Deliveries. On the Closing Date, the Company shall have
delivered to the Representative executed copies of the
Representative’s Warrant Agreement
4.9 [INTENTIONALLY
OMITTED].
4.10 Certificate
of Designations. Prior to the Closing Date, the Certificate
of Designations shall remain duly authorized, executed and filed by
the Company with the Secretary of State of the State of North
Carolina.
4.11. Additional
Documents. At the Closing Date and at each Option Closing
Date (if any) Representative Counsel shall have been furnished with
such documents and opinions as they may require for the purpose of
enabling Representative Counsel to deliver an opinion to the
Underwriters, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Public
Securities as herein contemplated shall be satisfactory in form and
substance to the Representative and Representative
Counsel.
5. Indemnification.
33
5.1 Indemnification
of the Underwriters.
5.1.1 General.
Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Underwriter, its affiliates and
each of its and their respective directors, officers, members,
employees, representatives, partners, shareholders, affiliates,
counsel and agents and each person, if any, who controls any such
Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (collectively the
“Underwriter Indemnified
Parties,” and each an “Underwriter Indemnified Party”),
against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any
claim whatsoever, whether arising out of any action between any of
the Underwriter Indemnified Parties and the Company or between any
of the Underwriter Indemnified Parties and any third party, or
otherwise) to which they or any of them may become subject under
the Securities Act, the Exchange Act or any other statute or at
common law or otherwise or under the laws of foreign countries (a
“Claim”),
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in (i) the Registration
Statement, the Pricing Disclosure Package, the Preliminary
Prospectus, the Prospectus, or any Issuer Free Writing Prospectus
(as from time to time each may be amended and supplemented) or this
Underwriting Agreement; (ii) any materials or information provided
to investors by, or with the approval of, the Company in connection
with the marketing of the Offering, including any “road
show” or investor presentations made to investors by the
Company (whether in person or electronically); (iii) any
application or other document or written communication (in this
Section 5,
collectively called “application”) executed by the
Company or based upon written information furnished by the Company
in any jurisdiction in order to qualify the Public Securities under
the securities laws thereof or filed with the Commission, any state
securities commission or agency, the Exchange or any other national
securities exchange; or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement
or omission was made in reliance upon, and in conformity with, the
Underwriters’ Information, or (iv) otherwise arising in
connection with or allegedly in connection with the Offering. With
respect to any untrue statement or omission or alleged untrue
statement or omission made in the Registration Statement, Pricing
Disclosure Package or Prospectus, the indemnity agreement contained
in this Section
5.1.1 shall not inure to the benefit of any Underwriter
Indemnified Party to the extent that any loss, liability, claim,
damage or expense of such Underwriter Indemnified Party results
from the fact that a copy of the Prospectus was not given or sent
to the person asserting any such loss, liability, claim or damage
at or prior to the written confirmation of sale of the Public
Securities to such person as required by the Securities Act and the
Securities Act Regulations, and if the untrue statement or omission
has been corrected in the Prospectus, unless such failure to
deliver the Prospectus was a result of non-compliance by the
Company with its obligations under Section 3.4 hereof. The Company
also agrees that it will reimburse each Underwriter Indemnified
Party for all fees and expenses (including but not limited to any
and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, whether arising
out of any action between any of the Underwriter Indemnified
Parties and the Company or between any of the Underwriter
Indemnified Parties and any third party, or otherwise)
(collectively, the “Expenses”), and further agrees
wherever and whenever possible to advance payment of Expenses as
they are incurred by an Underwriter Indemnified Party in
investigating, preparing, pursuing or defending any
Claim.
5.1.2 Procedure.
If any action is brought against an Underwriter Indemnified Party
in respect of which indemnity may be sought against the Company
pursuant to Section
5.1.1, such Underwriter Indemnified Party shall promptly
notify the Company in writing of the institution of such action and
the Company shall assume the defense of such action, including the
employment and fees of counsel (subject to the approval of such
Underwriter Indemnified Party) and payment of actual expenses if an
Underwriter Indemnified Party requests that the Company do so. Such
Underwriter Indemnified Party shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Company, and shall be
advanced by the Company, provided however, that the Company shall
not be obligated to bear the reasonable fees and expenses of more
than one firm of attorneys selected by the Underwriter Indemnified
Party (in addition to local counsel). The Company shall not be
liable for any settlement of any action effected without its
consent (which shall not be unreasonably withheld). In addition,
the Company shall not, without the prior written consent of the
Underwriters, settle, compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or
threatened action in respect of which advancement, reimbursement,
indemnification or contribution may be sought hereunder (whether or
not such Underwriter Indemnified Party is a party thereto) unless
such settlement, compromise, consent or termination (i) includes an
unconditional release of each Underwriter Indemnified Party,
acceptable to such Underwriter Indemnified Party, from all
liabilities, expenses and claims arising out of such action for
which indemnification or contribution may be sought and (ii) does
not include a statement as to or an admission of fault, culpability
or a failure to act, by or on behalf of any Underwriter Indemnified
Party.
5.2 Indemnification
of the Company. Each Underwriter, severally and not jointly,
agrees to indemnify and hold harmless the Company, its directors,
its officers who signed the Registration Statement and persons who
control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against any and
all loss, liability, claim, damage and expense described in the
foregoing indemnity from the Company to the several Underwriters,
as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Pricing
Disclosure Package or Prospectus or any amendment or supplement
thereto or in any application, in reliance upon, and in strict
conformity with, the Underwriters’ Information. In case any
action shall be brought against the Company or any other person so
indemnified based on any Preliminary Prospectus, the Registration
Statement, the Pricing Disclosure Package or Prospectus or any
amendment or supplement thereto or any application, and in respect
of which indemnity may be sought against any Underwriter, such
Underwriter shall have the rights and duties given to the Company,
and the Company and each other person so indemnified shall have the
rights and duties given to the several Underwriters by the
provisions of Section
5.1.2. The Company agrees promptly to notify the
Representative of the commencement of any litigation or proceedings
against the Company or any of its officers, directors or any
person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
in connection with the issuance and sale of the Public Securities
or in connection with the Registration Statement, the Pricing
Disclosure Package, the Prospectus or any Issuer Free Writing
Prospectus.
34
5.3 Contribution.
5.3.1 Contribution
Rights. If the indemnification provided for in this
Section 5 shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 5.1 or 5.2 in respect
of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall,
in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of
such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect
the relative benefits received by the Company, on the one hand, and
the Underwriters, on the other, from the Offering of the Public
Securities, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to
in clause (i) above but also the relative fault of the Company, on
the one hand, and the Underwriters, on the other, with respect to
the statements or omissions that resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the Underwriters, on
the other, with respect to such Offering shall be deemed to be in
the same proportion as the total net proceeds from the Offering of
the Public Securities purchased under this Agreement (before
deducting expenses) received by the Company, as set forth in the
table on the cover page of the Prospectus, on the one hand, and the
total underwriting discounts and commissions received by the
Underwriters with respect to the shares of the Common Stock
purchased under this Agreement, as set forth in the table on the
cover page of the Prospectus, on the other hand. The relative fault
shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by the
Company or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contributions pursuant to this Section 5.3.1 were to be
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this
Section 5.3.1 shall
be deemed to include, for purposes of this Section 5.3.1, any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 5.3.1 in no event shall
an Underwriter be required to contribute any amount in excess of
the amount by which the total underwriting discounts and
commissions received by such Underwriter with respect to the
Offering of the Public Securities exceeds the amount of any damages
that such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5.3.2 Contribution
Procedure. Within fifteen (15) days after receipt by any
party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if
a claim for contribution in respect thereof is to be made against
another party (“contributing party”), notify the
contributing party of the commencement thereof, but the failure to
so notify the contributing party will not relieve it from any
liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding
is brought against any party, and such party notifies a
contributing party or its representative of the commencement
thereof within the aforesaid 15 days, the contributing party will
be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing
party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding
affected by such party seeking contribution on account of any
settlement of any claim, action or proceeding affected by such
party seeking contribution without the written consent of such
contributing party. The contribution provisions contained in this
Section 5.3.2 are
intended to supersede, to the extent permitted by law, any right to
contribution under the Securities Act, the Exchange Act or
otherwise available. Each Underwriter’s obligations to
contribute pursuant to this Section 5.3 are several and not
joint.
35
6. Default
by an Underwriter.
6.1 Default
Not Exceeding 10% of Firm Shares or Option Shares. If any
Underwriter or Underwriters shall default in its or their
obligations to purchase the Firm Shares or the Option Shares, if
the Over-allotment Option is exercised hereunder, and if the number
of the Firm Shares or Option Shares with respect to which such
default relates does not exceed in the aggregate 10% of the number
of Firm Shares or Option Shares that all Underwriters have agreed
to purchase hereunder, then such Firm Shares or Option Shares to
which the default relates shall be purchased by the non-defaulting
Underwriters in proportion to their respective commitments
hereunder.
6.2 Default
Exceeding 10% of Firm Shares or Option Shares. In the event
that the default addressed in Section 6.1 relates to more
than 10% of the Firm Shares or Option Shares, the Representative
may in its discretion arrange for itself or for another party or
parties to purchase such Firm Shares or Option Shares to which such
default relates on the terms contained herein. If, within one (1)
Business Day after such default relating to more than 10% of the
Firm Shares or Option Shares, the Representative does not arrange
for the purchase of such Firm Shares or Option Shares, then the
Company shall be entitled to a further period of one (1) Business
Day within which to procure another party or parties satisfactory
to the Representative to purchase said Firm Shares or Option Shares
on such terms. In the event that neither the Representative nor the
Company arrange for the purchase of the Firm Shares or Option
Shares to which a default relates as provided in this Section 6, this Agreement will
automatically be terminated by the Representative or the Company
without liability on the part of the Company (except as provided
Section 5 hereof)
or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs
with respect to the Option Shares, this Agreement will not
terminate as to the Firm Shares; and provided, further, that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the
other Underwriters and to the Company for damages occasioned by its
default hereunder.
6.3 Postponement
of Closing Date. In the event that the Firm Shares or Option
Shares to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another
party or parties as aforesaid, you or the Company shall have the
right to postpone the Closing Date or Option Closing Date for a
reasonable period, but not in any event exceeding five (5) Business
Days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement, the Pricing Disclosure
Package or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment
to the Registration Statement, the Pricing Disclosure Package or
the Prospectus that in the opinion of counsel for the Underwriter
may thereby be made necessary. The term “Underwriter” as used in this
Agreement shall include any party substituted under this
Section 6 with like
effect as if it had originally been a party to this Agreement with
respect to such shares of Common Stock.
7. Additional
Covenants.
7.1 Board
Composition and Board Designations. The Company shall ensure
that: (i) the qualifications of the persons serving as members of
the Board of Directors and the overall composition of the Board
comply with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, with the Exchange Act and with
the listing rules of the Exchange or any other national securities
exchange, as the case may be, in the event the Company seeks to
have any of its securities listed on another exchange or quoted on
an automated quotation system, and (ii) if applicable, at least one
member of the Audit Committee of the Board of Directors qualifies
as an “audit committee financial expert,” as such term
is defined under Regulation S-K and the listing rules of the
Exchange.
36
7.2 Right
of First Refusal. Provided that the Firm Shares are sold in
accordance with the terms of this Agreement, the Representative
shall have an irrevocable right of first refusal (the
“Right of First
Refusal”), for a period of six (6) months following
the Closing Date, to act as sole investment banker, sole
book-runner, sole underwriter and/or sole placement agent, at the
Representative’s sole discretion, for each and every future
public equity offering (each, a “Subject Transaction”), during such
period, of the Company, or any successor to or subsidiary of the
Company, on terms and conditions customary to the Representative
for such Subject Transactions. For the avoidance of any doubt, the
Company shall not retain, engage or solicit any additional
investment banker, book-runner, financial advisor, underwriter
and/or placement agent in a Subject Transaction without the express
written consent of the Representative. The Representative shall
have the sole right to determine whether or not any other broker
dealer shall have the right to participate in any Subject
Transaction in which it exercises its right of first refusal and
the economic terms of any such participation.
The
Company shall notify the Representative of its intention to pursue
a Subject Transaction, including the material terms thereof, by
providing written notice thereof by registered mail or overnight
courier service addressed to the Representative. If the
Representative fails to exercise its Right of First Refusal with
respect to any Subject Transaction within ten (10) Business Days
after the mailing of such written notice, then the Representative
shall have no further claim or right with respect to the Subject
Transaction. The Representative may elect, in its sole and absolute
discretion, not to exercise its Right of First Refusal with respect
to any Subject Transaction; provided that any such election by the
Representative shall not adversely affect the
Representative’s Right of First Refusal with respect to any
other Subject Transaction during the period agreed to
above.
8. Effective
Date of this Agreement and Termination Thereof.
8.1 Effective
Date of this Agreement. This Agreement shall become
effective when both the Company and the Representative have
executed the same and delivered counterparts of such signatures to
the other party.
8.2 Termination.
The Representative shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted,
or in your opinion will in the immediate future materially disrupt,
general securities markets in the United States; or (ii) if trading
on the New York Stock Exchange or the Nasdaq Stock Market LLC shall
have been suspended or materially limited, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required by FINRA or by order
of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become
involved in a new war or an increase in major hostilities; or (iv)
if a banking moratorium has been declared by a New York State or
federal authority; or (v) if a moratorium on foreign exchange
trading has been declared which materially adversely impacts the
United States securities markets; or (vi) if the Company shall have
sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act
which, whether or not such loss shall have been insured, will, in
your opinion, make it inadvisable to proceed with the delivery of
the Firm Shares or Option Shares; or (vii) if the Company is in
material breach of any of its representations, warranties or
covenants hereunder; or (viii) if the Representative shall have
become aware after the date hereof of such a material adverse
change in the conditions or prospects of the Company, or such
adverse material change in general market conditions as in the
Representative’s judgment would make it impracticable to
proceed with the offering, sale and/or delivery of the Public
Securities or to enforce contracts made by the Underwriters for the
sale of the Public Securities.
37
8.3 Expenses.
Notwithstanding anything to the contrary in this Agreement, except
in the case of a default by the Underwriters, pursuant to
Section 6.2 above,
in the event that this Agreement shall not be carried out for any
reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms herein, the Company shall
be obligated to reimburse the Representative for its actual and
accountable out-of-pocket expenses related to the transactions
contemplated herein then due and payable up to a maximum of
$40,000, and upon demand the Company shall pay the full amount
thereof to the Representative on behalf of the Underwriters;
provided, however, that
such expense cap in no way limits or impairs the indemnification
and contribution provisions of this Agreement. Notwithstanding the
foregoing, any advance received by the Representative will be
reimbursed to the Company to the extent not actually incurred in
compliance with FINRA Rule 5110(g)(4)(A).
8.4 Survival
of Indemnification. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any
termination of this Agreement, and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 shall remain in full
force and effect and shall not be in any way affected by, such
election or termination or failure to carry out the terms of this
Agreement or any part hereof.
8.5 Representations,
Warranties, Agreements to Survive. All representations,
warranties and agreements contained in this Agreement or in
certificates of officers of the Company submitted pursuant hereto,
shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of any Underwriter or
its Affiliates or selling agents, any person controlling any
Underwriter, its officers or directors or any person controlling
the Company or (ii) delivery of and payment for the Public
Securities.
9. Miscellaneous.
9.1 Notices.
All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed
(registered or certified mail, return receipt requested),
personally delivered or sent by e-mail or facsimile transmission
and confirmed and shall be deemed given when so delivered, e-mailed
or faxed and confirmed or if mailed, two (2) days after such
mailing.
If to
the Representative:
ThinkEquity, a
division of Fordham Financial Management, Inc.
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇
▇▇▇▇, Head of Investment Banking
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
e-mail:
▇▇@▇▇▇▇▇-▇▇▇▇▇▇.▇▇▇
with a
copy (which shall not constitute notice) to:
Gracin
& ▇▇▇▇▇▇, LLP
The
Chrysler Building
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇
▇▇▇▇▇▇, Esq. or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax No:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
lmarlow@▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇ or
▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
38
If to
the Company:
▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇, Co-Chief Executive Officer or
T.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer
Telephone No: (▇▇▇)
▇▇▇-▇▇▇▇
E-mail
address: ▇▇▇▇▇@▇▇▇▇▇.▇▇▇ or
▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
with a
copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ Law Group
LLP
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq.
Fax No:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail
address: ▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
9.2 Research
Analyst Independence. The Company acknowledges that each
Underwriter’s research analysts and research departments, if
any, are required to be independent from its investment banking
division and are subject to certain regulations and internal
policies, and that such Underwriter’s research analysts may
hold views and make statements or investment recommendations and/or
publish research reports with respect to the Company and/or the
Offering that differ from the views of their investment banking
division. The Company acknowledges that each Underwriter is a full
service securities firm and as such from time to time, subject to
applicable securities laws, rules and regulations, may effect
transactions for its own account or the account of its customers
and hold long or short positions in debt or equity securities of
the Company; provided,
however, that nothing in
this Section 9.2
shall relieve the Underwriter of any responsibility or liability it
may otherwise bear in connection with activities in violation of
applicable securities laws, rules or regulations.
9.3 Headings.
The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of
this Agreement.
9.4 Amendment.
This Agreement may only be amended by a written instrument executed
by each of the parties hereto.
9.5 Entire
Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in
connection with this Agreement) constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and
thereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter
hereof.
9.6 Binding
Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon the Representative, the Underwriters, the
Company and the controlling persons, directors and officers
referred to in Section
5 hereof, and their respective successors, legal
representatives, heirs and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or
claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. The term “successors and
assigns” shall not include a purchaser, in its capacity as
such, of securities from any of the Underwriters.
39
9.7 Governing
Law; Consent to Jurisdiction; Trial by Jury. This Agreement
shall be governed by and construed and enforced in accordance with
the laws of the State of New York, without giving effect to
conflict of laws principles thereof. The Company hereby agrees that
any action, proceeding or claim against it arising out of, or
relating in any way to this Agreement shall be brought and enforced
in the New York Supreme Court, County of New York, or in the United
States District Court for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall
be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an
inconvenient forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such
mailing shall be deemed personal service and shall be legal and
binding upon the Company in any action, proceeding or claim. The
Company agrees that the prevailing party(ies) in any such action
shall be entitled to recover from the other party(ies) all of its
reasonable attorneys’ fees and expenses relating to such
action or proceeding and/or incurred in connection with the
preparation therefor. The Company (on its behalf and, to the extent
permitted by applicable law, on behalf of its stockholders and
affiliates) and each of the Underwriters hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby.
9.8 Execution
in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but
all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts
has been signed by each of the parties hereto and delivered to each
of the other parties hereto. Delivery of a signed counterpart of
this Agreement by facsimile or email/pdf transmission shall
constitute valid and sufficient delivery thereof.
9.9 Waiver,
etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed
or construed to be a waiver of any such provision, nor to in any
way effect the validity of this Agreement or any provision hereof
or the right of any of the parties hereto to thereafter enforce
each and every provision of this Agreement. No waiver of any
breach, non-compliance or non-fulfillment of any of the provisions
of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such
breach, non-compliance or non-fulfillment shall be construed or
deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
[Signature Page
Follows]
40
If the
foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
Very
truly yours,
|
By:
|
/S/
▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇
|
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title:
Co-Chief Executive Officer
Confirmed
as of the date first written above
mentioned,
on behalf of itself and as
Representative
of the several Underwriters
named
on Schedule 1
hereto:
THINKEQUITY,
A Division of Fordham Financial Management, Inc.
|
By:
▇▇▇▇ ▇▇▇▇
|
|
Name: ▇▇▇▇ ▇▇▇▇
Title: Head of Investment Banking
[Signature
Page]
41
SCHEDULE 1
|
Underwriter
|
|
Total
Number of Firm
Shares to be Purchased
|
|
Number
of Option Shares
to be Purchased if the
Over-Allotment Option is
Fully Exercised
|
|
|||
|
ThinkEquity,
a division of Fordham Financial Management, Inc.
|
|
|
1,913,100
|
|
|
|
286,900
|
|
|
TOTAL
|
|
|
1,913,000
|
|
|
|
286,900
|
|
42
SCHEDULE 2-A
Pricing Information
Number
of Firm Shares: 1,913,100
Number
of Option Shares: 286,900
Public
Offering Price per Share: $7.50
Underwriting
Discount per Share: $0.54375
Proceeds
to Company per Share (before expenses): $6.95625
43
SCHEDULE 2-B
Issuer General Use Free Writing Prospectuses
Free
Writing Prospectus filed with the SEC on June 24, 2021
44
SCHEDULE 3
List of Lock-Up Parties
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇ (Chairman of the Board of Directors and Co-Chief
Executive Officer)
R.
▇▇▇▇▇ ▇▇▇▇▇▇▇ (Director, President and Co-Chief Executive
Officer)
T.
▇▇▇▇▇ ▇▇▇▇▇▇▇ (Chief Financial Officer)
▇▇▇▇▇▇
▇▇▇▇▇▇▇ (Director)
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, III (Director)
▇▇▇▇▇ ▇▇▇▇▇▇▇ (Director)
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ (Director)
Sim
▇▇▇▇▇ (Director)
45
Exhibit A
FORM OF REPRESENTATIVE’S WARRANT
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE
HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEGDE OR
HYPOTHECATE, OR BE THE SUBJECT OF ANY HEDGING, SHORT SALE,
DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE
EFFECTIVE ECONOMIC DISPOSITION OF THIS PURCHASE WARRANT OR THE
UNDERLYING SECURITIES FOR A PERIOD OF ONE HUNDRED EIGHTY (180) DAYS
IMMEDIATELY FOLLOWING THE COMMENCMENT DATE (DEFINED BELOW) EXCEPT
AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE
WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR
HYPOTHECATE OR BE THE SUBJECT OF ANY HEDGING, SHORT SALE,
DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE
EFFECTIVE ECONOMIC DISPOSITION OF, THIS PURCHASE WARRANT OR THE
UNDERLYING SECURITIES FOR A PERIOD OF ONE HUNDRED EIGHTY (180) DAYS
IMMEDIATELY FOLLOWING THE COMMENCMENT DATE (DEFINED BELOW) TO
ANYONE OTHER THAN (I) THINKEQUITY, A DIVISION OF FORDHAM FINANCIAL
MANAGEMENT, INC. (“THINKEQUITY”), OR AN UNDERWRITER OR
A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA
FIDE OFFICER OR PARTNER OF THINKEQUITY OR OF ANY SUCH UNDERWRITER
OR SELECTED DEALER.
THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO DECEMBER 25, 2021
[DATE THAT IS ONE HUNDRED EIGHTY (180) DAYS FROM THE COMMENCEMENT
DATE]. VOID AFTER 5:00 P.M., EASTERN TIME, JUNE 28, 2026 [DATE THAT
IS FIVE YEARS FROM THE COMMENCEMENT
DATE].
WARRANT TO PURCHASE COMMON STOCK
Warrant Shares:143,4821 Initial Exercise Date: December 25,
2021
THIS
WARRANT TO PURCHASE COMMON STOCK (the “Warrant”) certifies that,
for value received, _____________ or his, her or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after, December
25, 2021 (one hundred and eighty (180) days following the
Commencement Date (as defined below), the “Initial Exercise Date”)
and, in accordance with FINRA Rule 5110(g)(8)(A), prior to or at
5:00 p.m. (New York time) on June 28, 2026 (the date that is five
(5) years following the Commencement Date (the “Termination Date”)), but
not thereafter, to subscribe for and purchase from cbdMD, Inc., a
North Carolina corporation (the “Company”), up to
143,4821
shares of common stock, par value $0.001 per share
(“Common
Stock”), of the Company (the “Warrant Shares”), as
subject to adjustment hereunder. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b).
Section 1. Definitions. In addition to the
terms defined elsewhere in this Agreement, the following terms have
the meanings indicated in this Section 1:
1 143,482 shares,
which is 3.0% of the quotient of the gross proceeds from the
Offering (excluding any exercise of the over-allotment option)
divided by $3.00 (the last closing price per share of the Common
Stock on the NYSE American prior to the execution of the
Underwriting Agreement).
46
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Business Day” means any
day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to
remain closed; provided that banks shall not be deemed to be
authorized or obligated to be closed due to a “shelter in
place,” “non-essential employee” or similar
closure of physical branch locations at the direction of any
governmental authority if such banks’ electronic funds
transfer systems (including for wire transfers) are open for use by
customers on such day.
“Commencement
Date” means June 28,
2021, the date on which sales of the securities issued in the
Offering commenced.
“Commission” means the
United States Securities and Exchange Commission.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Offering” has the meaning
set forth in the Underwriting Agreement.
|
|
“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
|
“Registration Statement”
means the registration statement, and an amendment or amendments
thereto, on Form S-3 (File No. 333-228773), filed by the Company
with the Commission in connection with the Offering.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“ThinkEquity” means
ThinkEquity, a division of Fordham Financial Management Inc., as
representative of the underwriters set forth in the Underwriting
Agreement.
“Trading Day” means a day
on which the New York Stock Exchange is open for
trading.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American LLC, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, or the New York Stock Exchange (or
any successors to any of the foregoing).
“Underwriting Agreement”
means that certain Underwriting Agreement, dated June 28, 2021, by
and between the Company and ThinkEquity.
47
“VWAP” means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of a share of Common
Stock for such date (or the nearest preceding date) on the OTCQB or
OTCQX as applicable, (c) if Common Stock is not then listed or
quoted for trading on the OTCQB or OTCQX and if prices for Common
Stock are then reported in on the OTC Pink Open Market published by
OTC Markets Group, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent
bid price per share of Common Stock so reported, or (d) in all
other cases, the fair market value of the Common Stock as
determined by an independent appraiser selected in good faith by
the Holder and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
Section 2. Exercise.
a)
Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by
delivery to the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the
Company) of a duly executed facsimile copy (or e-mail attachment)
of the Notice of Exercise Form annexed hereto. Within two (2)
Trading Days following the date of exercise as aforesaid, the
Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or
cashier’s check drawn on a United States bank unless the
cashless exercise procedure specified in Section 2(c) below is specified
in the applicable Notice of Exercise. No ink-original Notice of
Exercise shall be required, nor shall any medallion guarantee (or
other type of guarantee or notarization) of any Notice of Exercise
form be required. Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this
Warrant to the Company for cancellation within five (5) Trading
Days of the date the final Notice of Exercise is delivered to the
Company. Partial exercises of this Warrant resulting in purchases
of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. The Holder and the
Company shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise Form within two (2)
Business Days of receipt of such notice. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares
available for purchase hereunder at any given time may be less than
the amount stated on the face hereof.
b)
Exercise Price. The
exercise price per share of the Common Stock under this Warrant
shall be $3.752,
subject to adjustment hereunder (the “Exercise
Price”).
c)
Cashless Exercise.
In lieu of exercising this Warrant by delivering the aggregate
Exercise Price by wire transfer or cashier’s check, at the
election of the Holder, this Warrant may also be exercised, in
whole or in part, at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive
the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:
2
125% of the last closing price of the Common Stock prior to the
execution of the Underwriting Agreement.
48
(A) =
the VWAP on the Trading Day
immediately preceding the date on which Holder elects to exercise
this Warrant by means of a “cashless exercise,” as set
forth in the applicable Notice of Exercise;
(B) =
the Exercise Price of this Warrant, as adjusted hereunder;
and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
If
Warrant Shares are issued in such a “cashless
exercise,” the parties acknowledge and agree that in
accordance with Section 3(a)(9) of the Securities Act, the Warrant
Shares shall take on the registered characteristics of the Warrants
being exercised, and the holding period of the Warrants being
exercised may be tacked on to the holding period of the Warrant
Shares. The Company agrees not to take any position
contrary to this Section
2(c).
Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section
2(c).
d)
Mechanics of
Exercise.
(i)
Delivery of Warrant Shares
Upon Exercise. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by its transfer agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder, or (B)
the Warrant Shares are eligible for resale by the Holder without
volume or manner-of-sale limitations pursuant to Rule 144 and, in
either case, the Warrant Shares have been sold by the Holder prior
to the Warrant Share Delivery Date (as defined below), and
otherwise by physical delivery of a certificate, registered in the
Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is two
(2) Trading Days after the delivery to the Company of the
Notice of Exercise (such date, the “Warrant Share Delivery
Date”). If the Warrant Shares can be delivered via
DWAC, the transfer agent shall have received from the Company, at
the expense of the Company, any legal opinions or other
documentation required by it to deliver such Warrant Shares without
legend (subject to receipt by the Company of reasonable back up
documentation from the Holder, including with respect to affiliate
status) and, if applicable and requested by the Company prior to
the Warrant Share Delivery Date, the transfer agent shall have
received from the Holder a confirmation of sale of the Warrant
Shares (provided the requirement of the Holder to provide a
confirmation as to the sale of Warrant Shares shall not be
applicable to the issuance of unlegended Warrant Shares upon a
cashless exercise of this Warrant if the Warrant Shares are then
eligible for resale pursuant to Rule 144(b)(1)). The Warrant Shares
shall be deemed to have been issued, and Holder or any other person
so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date
the Warrant has been exercised, with payment to the Company of the
Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to
Section 2(d)(vi) prior to
the issuance of such shares, having been paid. If the Company fails
for any reason to deliver to the Holder the Warrant Shares subject
to a Notice of Exercise by the second Trading Day following the
Warrant Share Delivery Date, the Company shall pay to the Holder,
in cash, as liquidated damages and not as a penalty, for each
$1,000 of Warrant Shares subject to such exercise (based on the
VWAP of the Common Stock on the date of the applicable Notice of
Exercise), $10 per Trading Day (increasing to $20 per Trading Day
on the fifth Trading Day after such liquidated damages begin to
accrue) for each Trading Day after the second Trading Day following
such Warrant Share Delivery Date until such Warrant Shares are
delivered or Holder rescinds such exercise.
49
(ii)
Delivery of New Warrants
Upon Exercise. If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of
the Warrant Shares, deliver to the Holder a new Warrant evidencing
the rights of the Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
(iii)
Rescission Rights.
If the Company fails to cause its transfer agent to deliver to the
Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant
Share Delivery Date, then the Holder will have the right to rescind
such exercise; provided, however, that the Holder shall
be required to return any Warrant Shares or Common Stock subject to
any such rescinded exercise notice concurrently with the return to
Holder of the aggregate Exercise Price paid to the Company for such
Warrant Shares and the restoration of Holder’s right to
acquire such Warrant Shares pursuant to this Warrant (including,
issuance of a replacement warrant certificate evidencing such
restored right).
(iv)
Compensation for Buy-In on
Failure to Timely Deliver Warrant Shares Upon Exercise. In
addition to any other rights available to the Holder, if the
Company fails to cause its transfer agent to transmit to the Holder
the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or
otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (2)
the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
50
(v)
No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such exercise, the Company shall, at its election,
either pay a cash adjustment in respect of such final fraction in
an amount equal to such fraction multiplied by the Exercise Price
or round up to the next whole share.
(vi)
Charges, Taxes and
Expenses. Issuance of Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such Warrant
Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder;
provided,
however, that in
the event that Warrant Shares are to be issued in a name other than
the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto. The Company shall pay all transfer
agent fees required for same-day processing of any Notice of
Exercise and all fees to the Depository Trust Company (or another
established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant
Shares.
(vii)
Closing of Books.
The Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.
(viii)
Signature. This
Section 2 and the
exercise form attached hereto set forth the totality of the
procedures required of the Holder in order to exercise this
Purchase Warrant. Without limiting the preceding sentences,
no ink-original exercise form shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any exercise form be required in order to exercise this Purchase
Warrant. No additional legal opinion, other information or
instructions shall be required of the Holder to exercise this
Purchase Warrant. The Company shall honor exercises of this
Purchase Warrant and shall deliver Shares underlying this Purchase
Warrant in accordance with the terms, conditions and time periods
set forth herein.
51
e)
Holder’s Exercise
Limitations. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, the Holder
(together with the Holder’s Affiliates, and any other Persons
acting as a group together with the Holder or any of the
Holder’s Affiliates), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates and (ii) exercise or conversion of the unexercised
or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any
of its Affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(e), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is
not representing to the Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and the Holder is
solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained
in this Section
2(e) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant
is exercisable shall be in the sole discretion of the Holder, and
the submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership
Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of
this Section 2(e),
in determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock
as reflected in (A) the Company’s most recent periodic or
annual report filed with the Commission, as the case may be, (B) a
more recent public announcement by the Company or (C) a more recent
written notice by the Company or the Company’s transfer agent
setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder,
the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section
2(e), provided that the Beneficial Ownership Limitation in
no event exceeds 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(e) shall continue to
apply. Any increase in the Beneficial Ownership Limitation will not
be effective until the 61st day after such notice is delivered to
the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity
with the terms of this Section 2(e) to correct this
paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor
holder of this Warrant.
Section 3. Certain
Adjustments.
a)
Stock Dividends and
Splits. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the
Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event, and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification. For
the purposes of clarification, the Exercise Price of this Warrant
will not be adjusted in the event that the Company or any
Subsidiary thereof, as applicable, sells or grants any option to
purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any
option to purchase or other disposition) any Common Stock or Common
Stock Equivalents, at an effective price per share less than the
Exercise Price then in effect.
52
b)
[RESERVED]
c)
Subsequent Rights
Offerings. In addition to any adjustments pursuant to
Section 3(a) above,
if at any time the Company grants, issues or sells any Common Stock
Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on exercise hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
d)
Pro Rata
Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend
(other than cash dividends) or other distribution of its assets (or
rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without
limitation, any distribution of shares or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “Distribution”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder’s right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation). To the extent that this Warrant
has not been partially or completely exercised at the time of such
Distribution, such portion of the Distribution shall be held in
abeyance for the benefit of the Holder until the Holder has
exercised this Warrant.
53
e) Fundamental
Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of
the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii)
any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property, or (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section
2(e) on the exercise of this Warrant), the number of shares
of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”)
receivable by holders of Common Stock as a result of such
Fundamental Transaction for each share of Common Stock for which
this Warrant is exercisable immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 2(e) on the exercise of
this Warrant). For purposes of any such exercise, the determination
of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one share of Common Stock in
such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction.
The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the
“Successor
Entity”) to assume in writing all of the obligations
of the Company under this Warrant in accordance with the provisions
of this Section
3(e) pursuant to written agreements prior to such
Fundamental Transaction and shall, at the option of the Holder,
deliver to the Holder in exchange for this Warrant a security of
the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant which
is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to
the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise
of this Warrant) prior to such Fundamental Transaction, and with an
exercise price which applies the exercise price hereunder to such
shares of capital stock (but taking into account the relative value
of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such exercise price being for
the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and
substance to the Holder. Upon the occurrence of any such
Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant referring
to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been
named as the Company herein.
54
f)
Calculations. All
calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 3, the number of shares
of Common Stock deemed to be issued and outstanding as of a given
date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) issued and
outstanding.
g)
Notice to
Holder.
(i)
Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to
any provision of this Section 3, the Company shall
promptly mail to the Holder a notice setting forth the Exercise
Price after such adjustment and any resulting adjustment to the
number of Warrant Shares and setting forth a brief statement of the
facts requiring such adjustment.
(ii)
Notice to Allow Exercise
by Holder. If (A) the Company shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock, (C) the Company shall
authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (D) the approval of any stockholders
of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize
the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company, then, in each case, the Company
shall cause to be mailed a notice to the Holder at its last address
as it shall appear upon the Warrant Register of the Company, at
least fifteen (15) calendar days prior to the applicable record or
effective date hereinafter specified, stating (x) the date on which
a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to
provide such notice or any defect therein shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to
exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such
notice except as may otherwise be expressly set forth
herein.
Section 4. Transfer of
Warrant.
a)
Transferability.
Pursuant to FINRA Rule 5110(e)(1), neither this Warrant nor any
Warrant Shares issued upon exercise of this Warrant shall be sold,
transferred, assigned, pledged, or hypothecated, or be the subject
of any hedging, short sale, derivative, put, or call transaction
that would result in the effective economic disposition of the
securities by any person for a period of one hundred and eighty
(180) days immediately following the Commencement Date pursuant to
which this Warrant is being issued, except for the transfer of any
security as provided in FINRA Rule 5110(e)(2).
55
Subject
to the foregoing restriction, any applicable securities laws and
the conditions set forth in Section 4(d), this Warrant and
all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon
surrender of this Warrant at the principal office of the Company or
its designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by
the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading
Days of the date the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if
properly assigned in accordance herewith, may be exercised by a new
holder for the purchase of Warrant Shares without having a new
Warrant issued.
b)
New Warrants. This
Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with
Section 4(a), as to
any transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. All Warrants issued on transfers or
exchanges shall be dated the initial issuance date of this Warrant
and shall be identical with this Warrant except as to the number of
Warrant Shares issuable pursuant thereto.
c)
Warrant Register.
The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d)
Representation by the
Holder. The Holder, by the acceptance hereof, represents and
warrants that it is acquiring this Warrant and, upon any exercise
hereof, will acquire the Warrant Shares issuable upon such
exercise, for its own account and not with a view to or for
distributing or reselling such Warrant Shares or any part thereof
in violation of the Securities Act or any applicable state
securities law, except pursuant to sales registered or exempted
under the Securities Act.
Section 5. Registration
Rights.
a)
Demand
Registration–Grant of Right. The Company, upon written
demand (a “Demand
Notice”) of the Holder(s) of at least 51% of the
Warrants and/or the underlying Shares (“Majority Holders”),
agrees to register, on one occasion, all or any portion of the
Warrants and the underlying Shares (the “Registrable Securities”).
On such occasion, the Company will file a registration statement
with the Commission covering the Registrable Securities within
sixty (60) days after receipt of a Demand Notice and use its
commercially reasonable efforts to have the registration statement
declared effective promptly thereafter, subject to compliance with
review by the Commission; provided, however, that the Company shall
not be required to comply with a Demand Notice if the Company has
filed a registration statement with respect to which the Holder is
entitled to piggyback registration rights pursuant to Section 5(c) hereof and either:
(i) the Holder has elected to participate in the offering covered
by such registration statement or (ii) if such registration
statement relates to an underwritten primary offering of securities
of the Company, until the offering covered by such registration
statement has been withdrawn or until thirty (30) days after such
offering is consummated. The demand for registration may be made at
any time beginning one hundred and eighty (180) days after the
Commencement Date and expiring on the fifth anniversary of the
Commencement Date. The Company covenants and agrees to give written
notice of its receipt of any Demand Notice by any Holder(s) to all
other registered Holders of the Warrants and/or the Registrable
Securities within ten (10) days after the date of the receipt of
any such Demand Notice.
56
b)
Demand
Registration–Terms. The Company shall bear all fees
and expenses attendant to the registration of the Registrable
Securities pursuant to Section 5(a), but the Holders
shall pay any and all underwriting commissions and the expenses of
any legal counsel selected by the Holders to represent them in
connection with the sale of the Registrable Securities. The Company
agrees to use its commercially reasonable efforts to cause the
filing required herein to become effective promptly and to qualify
or register the Registrable Securities in such States as are
reasonably requested by the Holder(s); provided, however, that in no event shall
the Company be required to register the Registrable Securities in a
State in which such registration would cause: (i) the Company to be
obligated to register or license to do business in such State or
submit to general service of process in such State, or (ii) the
principal shareholders of the Company to be obligated to escrow
their shares of capital stock of the Company. The Company shall
cause any registration statement filed pursuant to the demand right
granted under Section
5(a) to remain effective for a period of at least twelve
(12) consecutive months after the date that the Holders of the
Registrable Securities covered by such registration statement are
first given the opportunity to sell all of such securities. The
Holders shall only use the prospectuses provided by the Company to
sell the shares covered by such registration statement, and will
immediately cease to use any prospectus furnished by the Company if
the Company advises the Holder that such prospectus may no longer
be used due to a material misstatement or omission. Notwithstanding
the provisions of this Section 5(b), the Holder shall
be entitled to a demand registration under this Section 5(b) on only one (1)
occasion and such demand registration right shall terminate on the
fifth anniversary of the Commencement Date in accordance with FINRA
Rule 5110(g)(8)(C).
c)
“Piggy-Back”
Registration–Grant of Right. In addition to the demand
right of registration described in Section 5(a) hereof, the Holder
shall have the right, for a period of six (6) years commencing one
year after the Commencement Date, to include the Registrable
Securities as part of any other registration of securities filed by
the Company (other than in connection with a transaction
contemplated by Rule 145 promulgated under the Securities Act or
pursuant to Form ▇-▇, ▇-▇ or any equivalent forms); provided, however, that if, solely in
connection with any primary underwritten public offering for the
account of the Company, the managing underwriter(s) thereof shall,
in its reasonable discretion, impose a limitation on the number of
shares of common stock which may be included in the registration
statement because, in such underwriter(s)’ judgment,
marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated
to include in such registration statement only such limited portion
of the Registrable Securities with respect to which the Holder
requested inclusion hereunder as the underwriter shall reasonably
permit. Any exclusion of Registrable Securities shall be made pro
rata among the Holders seeking to include Registrable Securities in
proportion to the number of Registrable Securities sought to be
included by such Holders; provided, however, that the Company shall
not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities, the holders of which are not
entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the
Registrable Securities.
d)
“Piggy-Back”
Registration–Terms. The Company shall bear all fees
and expenses attendant to registering the Registrable Securities
pursuant to Section
5(c) hereof, but the Holders shall pay any and all
underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the
sale of the Registrable Securities. In the event of such a proposed
registration, the Company shall furnish the then Holders of
outstanding Registrable Securities with not less than thirty (30)
days written notice prior to the proposed date of filing of such
registration statement. Such notice to the Holders shall continue
to be given for each registration statement filed by the Company
until such time as all of the Registrable Securities have been sold
by the Holder. The holders of the Registrable Securities shall
exercise the “piggy-back” rights provided for herein by
giving written notice, within ten (10) days of the receipt of the
Company’s notice of its intention to file a registration
statement. Except as otherwise provided in this Warrant, there
shall be no limit on the number of times the Holder may request
registration under this Section 5(d); provided,
however, that such registration rights shall terminate on the
seventh anniversary of the Commencement Date in accordance with
FINRA Rule 5110(g)(8)(D).
57
Section 6.
Miscellaneous.
a)
No Rights as Stockholder
Until Exercise. This Warrant does not entitle the Holder to
any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in
Section
2(d)(i).
b)
Loss, Theft, Destruction
or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c)
Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking
of any action or the expiration of any right required or granted
herein shall not be a Business Day, then, such action may be taken
or such right may be exercised on the next succeeding Business
Day.
d)
Authorized
Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock
certificates to execute and issue the necessary Warrant Shares upon
the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may
be listed. The Company covenants that all Warrant Shares which may
be issued upon the exercise of the purchase rights represented by
this Warrant will, upon exercise of the purchase rights represented
by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such
issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
58
Before taking
any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e)
Jurisdiction. All
questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Underwriting Agreement.
f)
Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.
g)
Nonwaiver and
Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s
rights, powers or remedies. Without limiting any other provision of
this Warrant or the Underwriting Agreement, if the Company
willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the
Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to,
reasonable attorneys’ fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
h)
Notices. Any
notice, request or other document required or permitted to be given
or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Underwriting
Agreement.
i)
Limitation of
Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the
Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
j)
Remedies. The
Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law
would be adequate.
k)
Successors and
Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns
of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit
of any Holder from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.
l)
Amendment. This
Warrant may be modified or amended or the provisions hereof waived
with the written consent of the Company and the
Holder.
m)
Severability.
Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.
n)
Headings. The
headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature
Page Follows)
59
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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By:
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Name:
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Title:
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[Signature
Page to cbdMD, Inc. Representative’s
Warrant]
60
NOTICE OF EXERCISE
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TO:
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cbdMD,
INC.
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(1) The
undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if
any.
(2)
Payment shall take the form of (check applicable box):
☐ in lawful money of the United States;
or
☐ if permitted the cancellation of such number of
Warrant Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant with respect to
the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).
(3)
Please register and issue said Warrant Shares in the name of the
undersigned or in such other name as is specified
below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number or by physical delivery of a certificate to:
_______________________________
_______________________________
(4)
Accredited
Investor. If the Warrant is being exercised via cash
exercise, the undersigned is an “accredited investor”
as defined in Regulation D promulgated under the Securities Act of
1933, as amended.
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
_______________________________________________________________
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ASSIGNMENT FORM
(To
assign the foregoing warrant, execute
this
form and supply required information.
Do not
use this form to exercise the warrant.)
FOR
VALUE RECEIVED, [____] all of or [_______] shares of the foregoing
Warrant and all rights evidenced thereby are hereby assigned
to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated:
______________, _______
Holder’s
Signature: ___________________________
Holder’s
Address: ____________________________
_____________________________
NOTE:
The signature to this Assignment Form must correspond with the name
as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever. Officers of corporations and
those acting in a fiduciary or other representative capacity should
file proper evidence of authority to assign the foregoing
Warrant.
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