●] Shares (1) Yuma Energy, Inc. Common Stock, par value $0.001 per share UNDERWRITING AGREEMENT
Exhibit 1.1
[●] Shares (1)
Common Stock, par value $0.001
per share
[●],
2017
NORTHLAND
SECURITIES, INC.
As
Representative of the several
Underwriters named
in Schedule I hereto
c/o
Northland Securities, Inc.
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
Yuma
Energy, Inc., a Delaware corporation (the “Company”),
proposes to sell to the several underwriters named in Schedule I
hereto (the “Underwriters”)
an aggregate of [●] shares (the “Firm Shares”)
of common stock, par value $0.001 per share (the
“Common
Stock”), of the Company. The Firm Shares consist of
authorized but unissued shares of Common Stock to be issued and
sold by the Company. The Company also has granted to the several
Underwriters an option to purchase up to [●] additional
shares of Common Stock on the terms and for the purposes set forth
in Section 3(b) hereof (the “Option
Shares”). The Firm Shares and any Option Shares
purchased pursuant to this Underwriting Agreement (this
“Agreement”)
are herein collectively called the “Securities.”
The
Company and the several Underwriters hereby confirm their agreement
with respect to the sale of the Securities by the Company to the
several Underwriters, for whom Northland Securities, Inc. is acting
as the representative (“you” or the
“Representative”),
as follows:
1. Registration Statement and
Prospectus. A registration statement on Form S-1 (File No.
333-220449) with respect to the Securities, including a preliminary
form of prospectus, has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended
(the “Securities
Act” or the “Act”), and the
rules and regulations (“Rules and
Regulations”) of the Securities and Exchange
Commission (the “Commission”)
thereunder and has been filed with the Commission. Such
registration statement, including the amendments, exhibits and
schedules thereto, as of the time it became effective, including
the Rule 430A Information (as defined below), is referred to herein
as the “Registration
Statement.” The Company will prepare and file a
prospectus pursuant to Rule 424(b) of the Rules and Regulations
that discloses the information previously omitted from the
prospectus in the Registration Statement in reliance upon Rule 430A
of the Rules and Regulations, which information will be deemed
retroactively to be a part of the Registration Statement in
accordance with Rule 430A of the Rules and Regulations
(“Rule
430A Information”). If the Company has elected to rely
upon Rule 462(b) of the Rules and Regulations to increase the size
of the offering registered under the Act, the Company will prepare
and file with the Commission a registration statement with respect
to such increase pursuant to Rule 462(b) of the Rules and
Regulations (such registration statement, including the contents of
the Registration Statement incorporated by reference therein is the
“Rule
462(b) Registration Statement”). References herein to
the “Registration Statement” will be deemed to include
the Rule 462(b) Registration Statement at and after the time of
filing of the Rule 462(b) Registration Statement.
“Preliminary
Prospectus” means any prospectus included in the
Registration Statement prior to the effective time of the
Registration Statement, any prospectus filed with the Commission
pursuant to Rule 424(a) under the Rules and Regulations and each
prospectus that omits Rule 430A Information used after the
effective time of the Registration Statement. “Prospectus”
means the prospectus that discloses the public offering price and
other final terms of the Securities and the offering and otherwise
satisfies Section 10(a) of the Act. All references in this
Agreement to the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement to any of
the foregoing, is deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval System or any successor system thereto. All references in
this Agreement to financial statements and schedules and other
information which is “described,”
“contained,” “included” or
“stated” in the Registration Statement, the Preliminary
Prospectus or the Prospectus (or other references of like import)
shall be deemed to mean and include all such financial statements
and schedules and other information which is incorporated by
reference in or otherwise deemed by the Rules and Regulations to be
a part of or included in the Registration Statement, the
Preliminary Prospectus or the Prospectus, as the case may be, and
all references in this Agreement to amendments or supplements to
the Registration Statement, the Preliminary Prospectus or the
Prospectus shall be deemed to mean and include the subsequent
filing of any document under the Securities Exchange Act of 1934,
as amended (the “Exchange
Act”), and which is deemed to be incorporated by
reference therein or otherwise deemed by the Rules and Regulations
to be a part thereof.
(1)
Plus an option to purchase up to [●] additional shares to
cover over-allotments.
1
2. Representations and
Warranties of the Company.
(a) Representations
and Warranties of the Company. The Company represents and
warrants to, and agrees with, the several Underwriters as
follows:
(i) Registration
Statement and Prospectuses. No order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus
(or any supplement thereto) has been issued by the Commission and
no proceeding for that purpose has been initiated or is pending or,
to the knowledge of the Company, threatened by the Commission. As
of the time each part of the Registration Statement (or any
post-effective amendment thereto) became or becomes effective, such
part conformed or will conform in all material respects to the
requirements of the Act and the Rules and Regulations. Upon the
filing or first use within the meaning of the Rules and
Regulations, each Preliminary Prospectus and the Prospectus (or any
supplement to either) conformed or will conform in all material
respects to the requirements of the Act and the Rules and
Regulations. The Registration Statement and any post-effective
amendment thereto has become effective under the Securities Act. To
the Company’s knowledge, the Company has complied to the
Commission’s satisfaction with all requests of the Commission
for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement, any
post-effective amendment or any part thereof is in effect and no
proceedings for such purpose have been instituted or are pending
or, to the knowledge of the Company, are threatened by the
Commission.
(ii) Accurate
Disclosure. Each Preliminary Prospectus, at the time of
filing thereof or the time of first use within the meaning of the
Rules and Regulations, did not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. Neither the Registration Statement nor any amendment
thereto, at the effective time of each part thereof, at the First
Closing Date (as defined below) or at the Second Closing Date (as
defined below), 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. As of the Time of Sale
(as defined below), neither (A) the Time of Sale Disclosure Package
(as defined below) nor (B) any issuer free writing prospectus (as
defined below), when considered together with the Time of Sale
Disclosure Package, included an untrue statement of a material fact
or omitted 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. Neither the Prospectus nor any
supplement thereto, as of its issue date, at the time of any filing
with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, at the First Closing Date or at the Second Closing,
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 light of
the circumstances under which they were made, not misleading. The
representations and warranties in this Section 2(a)(ii) shall
not apply to statements in or omissions from any Preliminary
Prospectus, the Registration Statement (or any amendment thereto),
the Time of Sale Disclosure Package or the Prospectus (or any
supplement thereto) made in reliance upon, and in conformity with,
written information furnished to the Company by you, or by any
Underwriter through you, specifically for use in the preparation of
such document, it being understood and agreed that the only such
information furnished by any Underwriter consists of the
information described as such in Section 6(e).
Each
reference to an “issuer free writing
prospectus” herein means an issuer free writing
prospectus as defined in Rule 433 of the Rules and
Regulations.
“Time of Sale Disclosure
Package” means the Preliminary Prospectus dated
[●], 2017, any free writing prospectus set forth on
Schedule II and the information on Schedule III, all considered
together.
Each
reference to a “free writing
prospectus” herein means a free writing prospectus as
defined in Rule 405 of the Rules and Regulations.
2
“Time of Sale”
means [●] [a.m.][p.m.] (Eastern time) on the date of this
Agreement.
(iii) Issuer
Free Writing Prospectuses.
(A) Each issuer free
writing prospectus, as of its issue date and at all subsequent
times through the completion of the public offer and sale of the
Securities, did not, does not and will not include any information
that conflicted, conflicts or will conflict with the information
contained in the Registration Statement, any Preliminary Prospectus
or the Prospectus. The foregoing sentence does not apply to
statements in or omissions from any issuer free writing prospectus
based upon and in conformity with written information furnished to
the Company by you or by any Underwriter through you specifically
for use therein, it being understood and agreed that the only such
information furnished by any Underwriter consists of the
information described as such in Section 6(e).
(B) (1) At the earliest
time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer (within the meaning of
Rule 164(h)(2) under the Securities Act) of the Securities and (2)
at the date hereof, the Company was not and is not an
“ineligible issuer,” as defined in Rule 405 under the
Securities Act, including the Company or any subsidiary in the
preceding three years not having been convicted of a felony or
misdemeanor or having been made the subject of a judicial or
administrative decree or order as described in Rule 405 of the
Rules and Regulations (without taking account of any determination
by the Commission pursuant to Rule 405 of the Rules and Regulations
that it is not necessary that the Company be considered an
ineligible issuer), nor an “excluded issuer” as defined
in Rule 164 under the Securities Act.
(C) Each issuer free
writing prospectus satisfied, as of its issue date and at all
subsequent times to the Time of Sale, all other conditions to use
thereof as set forth in Rules 164 and 433 under the Securities
Act.
(iv) No
Other Offering Materials. The Company has not distributed
and will not distribute any prospectus or other offering material
in connection with the offering and sale of the Securities other
than any Preliminary Prospectus, the Time of Sale Disclosure
Package or the Prospectus or other materials permitted by the Act
to be distributed by the Company; provided, however, that, except as set
forth on Schedule II, the Company has not made and will not make
any offer relating to the Securities that would constitute a free
writing prospectus, except in accordance with the provisions of
Section 4(a)(xv) of this Agreement.
(v) Financial
Statements. The historical financial statements of the
Company, together with the related notes, set forth or incorporated
by reference in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus comply in all material
respects with the requirements of the Securities Act and the
Exchange Act and fairly present, in all material respects, the
financial condition of the Company and its consolidated
subsidiaries as of the dates indicated and the results of
operations, cash flows and changes in stockholder equity for the
periods therein specified are in conformity with generally accepted
accounting principles in the United States (“GAAP”)
consistently applied throughout the periods involved; the
supporting schedules included in the Registration Statement present
fairly, in all material respects, the information required to be
stated therein; all non-GAAP financial information included in the
Registration Statement, the Time of Sale Disclosure Package and the
Prospectus complies in all material respects with the requirements
of Regulation G and Item 10 of Regulation S-K under the Act; and,
except as disclosed in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus, there are no material
off-balance sheet arrangements (as defined in Regulation S-K under
the Act, Item 303(a)(4)(ii)) or any other relationships with
unconsolidated entities or other persons, that may have a material
current or, to the Company’s knowledge, are reasonably likely
to have a material future effect on the Company’s financial
condition, results of operations, liquidity, capital expenditures,
capital resources or significant components of revenue or expenses.
No other financial statements or schedules are required to be
included in the Registration Statement, the Time of Sale Disclosure
Package or the Prospectus. To the Company’s knowledge, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP and PricewaterhouseCoopers LLP, which have certified
the audited financial statements and schedules filed as a part of
the Registration Statement and included in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus,
are each (A) an independent public
accounting firm within the meaning of the Act and the Rules and Regulations, (B) a registered public accounting firm (as
defined in Section 2(a)(12) of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002 (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act”)) and (C) not in
violation of the auditor independence requirements of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
3
(vi) Organization
and Good Standing. Each of the Company and its
subsidiaries has been duly organized and is validly existing as a
corporation or limited liability company, as applicable, in good
standing under the laws of its jurisdiction of incorporation or
formation. Each of the Company and its subsidiaries has full
corporate or limited liability company power and authority to own
its properties and conduct its business as currently being carried
on and as described in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus, and is duly qualified to do
business as a foreign corporation or limited liability company in
good standing in each jurisdiction in which it owns or leases real
property or in which the conduct of its business makes such
qualification necessary and in which the failure to so qualify
would have a material adverse effect upon the business, prospects,
management, properties, operations, condition (financial or
otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole (“Material Adverse
Effect”).
(vii) Absence
of Certain
Events. Except as contemplated in the Registration
Statement, the Time of Sale Disclosure Package and in the
Prospectus, subsequent to the respective dates as of which
information is given in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus, neither the Company nor
any of its subsidiaries has incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions, or declared or paid any dividends or made any
distribution of any kind with respect to its capital stock, except
for dividends paid in-kind for the Series D preferred stock, $0.001
par value per share of the Company (the “Series D Preferred
Stock”); and there has not been any change in the
capital stock (other than a change in the number of outstanding
shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options or warrants, the vesting of
restricted stock awards or conversion of convertible securities),
or any material change in the short-term or long-term debt (other
than as a result of the conversion of convertible securities), or
any issuance of options, warrants, restricted stock, convertible
securities or other rights to purchase the capital stock of the
Company or any of its subsidiaries, or any material adverse change
in the condition (financial or otherwise), business, prospects,
management, properties, operations or results of operations of the
Company and its subsidiaries, taken as a whole (“Material Adverse
Change”) or any development which could reasonably be
expected to result in any Material Adverse Change.
(viii) Absence
of Proceedings.
Except as set forth in the Registration Statement, the Time of Sale
Disclosure Package and in the Prospectus, there is not pending or,
to the knowledge of the Company, threatened or contemplated, any
action, suit or proceeding (a) to which the Company or any of its
subsidiaries is a party or (b) which has as the subject thereof any
officer or director of the Company or any subsidiary, any employee
benefit plan sponsored by the Company or any subsidiary or any
property or assets owned or leased by the Company or any subsidiary
before or by any court or Governmental Authority (as defined
below), or any arbitrator, which, individually or in the aggregate,
would reasonably be expected to result in a Material Adverse
Change, or would materially and adversely affect the ability of the
Company to perform its obligations under this Agreement or which
are otherwise material in the context of the sale of the
Securities. There are no current or, to the knowledge of the
Company, pending, legal, governmental or regulatory actions, suits
or proceedings (x) to which the Company or any of its subsidiaries
is subject or (y) which has as the subject thereof any officer or
director of the Company or any subsidiary, any employee plan
sponsored by the Company or any subsidiary or any property or
assets owned or leased by the Company or any subsidiary, that are
required to be described in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus by the Act or by the
Rules and Regulations and that have not been so
described.
(ix) Disclosure
of Legal Matters. There are no statutes, regulations,
contracts or documents that are required to be described in the
Registration Statement, in the Time of Sale Disclosure Package and
in the Prospectus or required to be filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations that have not been so described or filed.
(x) Authorization; No
Conflicts; Authority. This Agreement has been duly
authorized, executed and delivered by the Company, and constitutes
a valid, legal and binding obligation of the Company, enforceable
in accordance with its terms, except as rights to indemnity
hereunder may be limited by federal or state securities laws and
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.
The execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated will not (A)
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of its subsidiaries
pursuant to any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, (B) result in
any violation of the provisions of the Company’s charter or
by-laws or (C) result in the violation of any law or statute or any
judgment, order, rule, regulation or decree of any court or
arbitrator or federal, state, local or foreign governmental agency
or regulatory authority having jurisdiction over the Company or any
of its subsidiaries or any of their properties or assets (each, a
“Governmental
Authority”), except in the case of clauses (A) and (C)
as would not result in a Material Adverse Effect. No consent,
approval, authorization or order of, or registration or filing with
any Governmental Authority is required for the execution, delivery
and performance of this Agreement or for the consummation of the
transactions contemplated hereby, including the issuance or sale of
the Securities by the Company, except such as may be required under
the Act, the rules of the Financial Industry Regulatory Authority
(“FINRA”), the
NYSE American Rules (as defined below) or state securities or blue
sky laws; and the Company has full power and authority to enter
into this Agreement and to consummate the transactions contemplated
hereby, including the authorization, issuance and sale of the
Securities as contemplated by this Agreement.
4
(xi) Capitalization;
the Securities; Registration Rights. All of the issued and
outstanding shares of capital stock of the Company, including the
outstanding shares of Common Stock, are duly authorized and validly
issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, were not
issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities that have not been
waived in writing (a copy of which has been delivered to counsel to
the Representative), and the holders thereof are not subject to
personal liability by reason of being such holders; the Securities
which may be sold hereunder by the Company have been duly
authorized and, when issued, delivered and paid for in accordance
with the terms of this Agreement, will have been validly issued and
will be fully paid and nonassessable, and the holders thereof will
not be subject to personal liability by reason of being such
holders; and the capital stock of the Company, including the
Securities to be purchased pursuant to this Agreement, conforms in
all material respects to the description thereof in the
Registration Statement, in the Time of Sale Disclosure Package and
in the Prospectus. Except as otherwise stated in the Registration
Statement, in the Time of Sale Disclosure Package and in the
Prospectus, (A) there are no preemptive rights or other rights to
subscribe for or to purchase, or any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to the
Company’s charter, by-laws or any agreement or other
instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound,
(B) neither the filing of the Registration Statement nor the
offering or sale of the Securities as contemplated by this
Agreement gives rise to any rights for or relating to the
registration of any shares of Common Stock or other securities of
the Company (collectively “Registration
Rights”) and (C) any person to whom the Company
has granted Registration Rights has agreed not to exercise such
rights until after expiration of the Lock-Up Period (as defined
below). All of the issued and outstanding shares of capital stock
of each of the Company’s subsidiaries have been duly and
validly authorized and issued and are fully paid and nonassessable,
and, except as otherwise described in the Registration Statement,
in the Time of Sale Disclosure Package and in the Prospectus, the
Company directly or indirectly owns of record and beneficially,
free and clear of any security interests, claims, liens, proxies,
equities or other encumbrances, all of the issued and outstanding
shares of such stock. The Company has an authorized and outstanding
capitalization as set forth in the Registration Statement, in the
Time of Sale Disclosure Package and in the Prospectus. The Common
Stock (including the Securities) conforms in all material respects
to the description thereof contained in the Registration Statement,
the Time of Sale Disclosure Package and the
Prospectus.
(xii) Stock
Options. Except as described in the Registration Statement,
in the Time of Sale Disclosure Package and in the Prospectus, there
are no options, warrants, agreements, contracts or other rights in
existence to purchase or acquire from the Company or any subsidiary
of the Company any shares of the capital stock of the Company or
any subsidiary of the Company. The description of the
Company’s stock option, stock bonus and other stock plans or
arrangements (the “Company Stock
Plans”), and the options or other rights granted
thereunder (each, an “Award” and,
collectively, the “Awards”), set
forth in the Registration Statement, the Time of Sale Disclosure
Package and the Prospectus accurately and fairly presents in all
material respects the information required to be shown with respect
to such plans, arrangements and Awards. Each grant of an Award (A)
was duly authorized no later than the date on which the grant of
such Award was by its terms to be effective by all necessary
corporate action, including, as applicable, approval by the board
of directors of the Company (or a duly constituted and authorized
committee thereof) and any required stockholder approval by the
necessary number of votes or written consents, and the award
agreement governing such grant (if any) was duly executed and
delivered by each party thereto and (B) was made in accordance
with the terms of the applicable Company Stock Plan, and all
applicable laws and regulatory rules or requirements, including all
applicable federal securities laws.
(xiii) Compliance
with Laws. Except as set forth in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus,
the Company and each of its subsidiaries holds, and is operating in
compliance in all material respects with, all franchises, grants,
authorizations, licenses, permits, easements, consents,
certificates and orders of any Governmental Authority or
self-regulatory body required for the conduct of its business and
all such franchises, grants, authorizations, licenses, permits,
easements, consents, certifications and orders are valid and in
full force and effect, except where non-compliance would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received notice of any revocation or modification
of any material franchise, grant, authorization, license, permit,
easement, consent, certification or order or has reason to believe
that any such material franchise, grant, authorization, license,
permit, easement, consent, certification or order will not be
renewed in the ordinary course; and the Company and each of its
subsidiaries is in compliance in all material respects with all
applicable federal, state, local and foreign laws, regulations,
orders and decrees.
5
(xiv) Ownership
of Assets. The Company and each of
its subsidiaries has (i) good and defensible title to all of its
oil and gas properties (including oil and gas ▇▇▇▇▇, oil, gas and
mineral leases or mineral interests, licenses, leasehold interests
and appurtenant personal property and facilities), with such
exceptions as would not reasonably be expected to have a Material
Adverse Effect, and (ii) good and defensible title to all other
real and personal property owned by the Company and each of its
subsidiaries, in each case free and clear of all liens, claims,
security interests, other encumbrances or defects, except for the
permitted encumbrances and such as are described in the
Registration Statement, the Time of Sale Disclosure Package and the
Prospectus or such as do not materially affect the value of the
properties of the Company and its subsidiaries, considered as one
enterprise, and do not interfere in any material respect with the
use made and proposed to be made of such oil, gas and mineral
leases or mineral interests, licenses, leasehold interests and
properties by the Company and its subsidiaries, considered as one
enterprise; and all of the leases and subleases and licenses under
which the Company or any of its subsidiaries holds or uses
properties described in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus are, to the knowledge of
the Company, in full force and effect, with such exceptions as
would not reasonably be expected to have a Material Adverse Effect,
and neither the Company nor any of its subsidiaries has any written
notice of any claim of any sort that has been asserted by anyone
adverse to the rights of the Company or its subsidiaries under any
of the leases or subleases or licenses or with respect to the
properties mentioned above, or affecting or questioning the rights
of the Company or any subsidiary thereof to the continued
possession or use of the leased or subleased or licensed premises
or the properties mentioned above, other than such claims which
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect, and (iii) the net revenue
interest of the Company and its subsidiaries in the oil, gas and
mineral leases or mineral interests, licenses and leasehold
interests or other properties mentioned above and described in the
Registration Statement, the Time of Sale Disclosure Package and the
Prospectus are, to the knowledge of the Company, as stated in such
Registration Statement, Time of Sale Disclosure Package and
Prospectus, with such exceptions as would not reasonably be
expected to have a Material Adverse Effect. The working interests
in oil, gas and mineral leases, licenses or mineral interests which
constitute a portion of the real property and interests in real
property held by the Company or its subsidiaries reflect in all
material respects the right of the Company and each of its
subsidiaries to explore, develop or receive and market production
from such real property and interests in real property, and the
care taken by the Company and each of its subsidiaries with respect
to acquiring or otherwise procuring such leases, licenses or
mineral interests was generally consistent with standard industry
practices in the areas in which the Company and its subsidiaries
operate for acquiring or procuring leases, licenses, mineral
interests and interests in the foregoing to explore, develop,
produce and market hydrocarbons. To the knowledge of the
Company, the Company and each of its subsidiaries have such
consents, easements, rights-of-way or licenses and other rights
from any person (“rights-of-way”)
as are necessary to enable the Company and each of its subsidiaries
to conduct its business in the manner described in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus,
subject to such qualifications as may be set forth in the
Registration Statement, the Time of Sale Disclosure Package and the
Prospectus, and except for such rights-of-way the lack of which
would not have, individually or in the aggregate, a Material
Adverse Effect.
(xv) Intellectual
Property.
(A) The Company and
each of its subsidiaries owns or has the right to use pursuant to a
valid and enforceable written license or other legally enforceable
right, all Intellectual Property (as defined below) necessary for
the conduct of the Company’s and its subsidiaries’
businesses as now conducted or as described in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus
to be conducted (the “Company IP”),
except as would not have a Material Adverse Effect.
“Intellectual
Property” means all patents, patent applications,
trade and service marks, trade and service ▇▇▇▇ registrations,
trade names, copyrights, licenses, inventions, trade secrets,
domain names, technology, know-how and other intellectual
property.
(B) To the knowledge of
the Company, there is no infringement, misappropriation or
violation by third parties of any Company IP. There is no pending
or, to the knowledge of the Company, threatened, action, suit,
proceeding or claim by others challenging the Company’s or
its subsidiaries’ rights in or to any Company IP, and the
Company is unaware of any facts which would form a reasonable basis
for any such claim. The Intellectual Property owned by the Company
and its subsidiaries, and to the knowledge of the Company, the
Intellectual Property licensed to the Company and its subsidiaries,
has not been adjudged invalid or unenforceable, in whole or in
part, and there is no pending or, to the knowledge of the Company,
threatened action, suit, proceeding or claim by others challenging
the validity or scope of any Company IP, and the Company is unaware
of any facts which would form a reasonable basis for any such
claim. There is no pending or, to the knowledge of the Company,
threatened action, suit, proceeding or claim by others that the
Company or its subsidiaries infringe, misappropriate or otherwise
violate any Intellectual Property or other proprietary rights of
others, and neither the Company nor any of its subsidiaries has
received any written notice of such claim and the Company is
unaware of any other fact which would form a reasonable basis for
any such claim.
6
(C) To the
Company’s knowledge, no employee of the Company or any of its
subsidiaries is in or has ever been in material violation of any
material term of any employment contract, 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 any of its subsidiaries or actions undertaken
by the employee while employed with the Company or any of its
subsidiaries.
(D) The Company and its
subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their material
Intellectual Property.
(xvi) No
Violations or Defaults. Neither the Company nor any of its
subsidiaries is in violation of its respective charter, by-laws or
other organizational documents, or in breach of or otherwise in
default, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default in the performance of
any obligation, agreement or condition contained in any bond,
debenture, note, indenture, loan agreement or any other material
contract, lease or other instrument to which it is subject or by
which any of them may be bound, or to which any of the property or
assets of the Company or any of its subsidiaries is subject, except
in each case as would not have a Material Adverse
Effect.
(xvii) Taxes.
The Company and its subsidiaries have timely filed all federal,
state, local and foreign income and franchise tax returns required
to be filed (taking into account valid extensions of time to file)
and are not in default in the payment of any taxes which were
payable pursuant to said returns or any assessments with respect
thereto, other than any which the Company or any of its
subsidiaries is contesting in good faith. There is no pending
dispute with any taxing authority relating to any of such returns,
and the Company has no knowledge of any proposed liability for any
tax to be imposed upon the properties or assets of the Company or
any of its subsidiaries for which there is not an adequate reserve
reflected in the Company’s financial statements included in
the Registration Statement, the Time of Sale Disclosure Package and
the Prospectus.
(xviii) Exchange
Listing and Exchange Act Registration. The Common Stock is
registered pursuant to Section 12(b) of the Exchange Act and
is included or approved for listing on the NYSE American LLC (the
“NYSE
American”) and the Company has not taken any action
designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the NYSE American, and the Company
has not received any notification that the Commission or the NYSE
American is contemplating terminating such registration or listing.
The Company has complied in all material respects with the
applicable requirements of the NYSE American for maintenance of
inclusion of the Common Stock thereon. The Company has filed an
additional listing application to include the Securities on the
NYSE American. Except as previously disclosed to counsel for the
Underwriters or as set forth in the Registration Statement, the
Time of Sale Disclosure Package and the Prospectus, to the
knowledge of the Company, no beneficial owners of the
Company’s capital stock who, together with their associated
persons and affiliates, hold in the aggregate 10% or more of such
capital stock, have any direct or indirect association or affiliate
with a FINRA member.
(xix) Ownership
of Other Entities. Except as set forth in the Registration
Statement, the Time of Sale Disclosure Package and in the
Prospectus and other than the subsidiaries of the Company listed in
Exhibit 21.1 to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2016, the Company, directly
or indirectly, owns no capital stock or other equity or ownership
or proprietary interest in any corporation, partnership,
association, trust or other entity.
(xx) Internal
Controls. The Company and its subsidiaries maintain a system
of internal accounting controls designed to provide reasonable
assurances that (A) transactions are executed in accordance
with management’s general or specific authorization;
(B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to
maintain accountability for assets; (C) access to assets is
permitted only in accordance with management’s general or
specific authorization; and (D) the recorded accountability
for assets is compared with existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
Except as disclosed in the Registration Statement, in the Time of
Sale Disclosure Package and in the Prospectus, the Company’s
internal control over financial reporting is effective and none of
the Company, its board of directors and audit committee is aware of
any “material weaknesses” (as defined by the Public
Company Accounting Oversight Board) in its internal control over
financial reporting, or any fraud, whether or not material, that
involves management or other employees of the Company and its
subsidiaries who have a significant role in the Company’s
internal controls; and since the end of the latest audited fiscal
year, there has been no change in the Company’s internal
control over financial reporting (whether or not remediated) that
has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial
reporting. The Company’s board of directors has, subject to
the exceptions, cure periods and the phase-in periods specified in
the applicable stock exchange rules (“Exchange
Rules”), validly appointed an audit committee to
oversee internal accounting controls whose composition satisfies
the applicable requirements of the Exchange Rules and the
Company’s board of directors and/or the audit committee has
adopted a charter that satisfies the requirements of the Exchange
Rules.
7
(xxi) No
Brokers or Finders. Other than as contemplated by this
Agreement, the Company has not incurred and will not incur any
liability for any finder’s or broker’s fee or
agent’s commission in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xxii) Insurance.
The Company and each of its subsidiaries carries, or is covered by,
insurance from reputable insurers in such amounts and covering such
risks as in its reasonable judgment is adequate for the conduct of
its business and as is customary for companies engaged in similar
businesses in similar industries; all policies of insurance and any
fidelity or surety bonds insuring the Company or any of its
subsidiaries or its business, assets, employees, officers and
directors are in full force and effect; the Company and its
subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; there are no claims by the
Company or any of its subsidiaries under any such policy or
instrument as to which any insurance company is denying liability
or defending under a reservation of rights clause; neither the
Company nor any of its subsidiaries has been refused any insurance
coverage sought or applied for; and neither the Company nor any of
its subsidiaries has reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have
a Material Adverse Effect.
(xxiii) Investment
Company Act. The Company is not and, after giving effect to
the offering and sale of the Securities, will not be an
“investment company,” as such term is defined in the
Investment Company Act of 1940, as amended.
(xxiv) Incorporated
Documents. The documents incorporated by reference in the
Registration Statement, the Time of Sale Disclosure Package and in
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 were filed on a timely basis with the Commission
and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading; any further documents so
filed and incorporated by reference in the Registration Statement,
the Time of Sale Disclosure Package or in the Prospectus, when such
documents are filed with the Commission, will conform in all
material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and will not contain an untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not
misleading.
(xxv) ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act. The Company is in compliance in all material respects
with all applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the
rules and regulations of the Commission thereunder.
(xxvi) Disclosure
Controls. The Company has established and maintains
disclosure controls and procedures (as defined in Rules 13a-15 and
15d-15 under the Exchange Act) and such controls and procedures are
effective in ensuring that material information relating to the
Company, including its subsidiaries, is made known to the principal
executive officer and the principal financial officer. The Company
has utilized such controls and procedures in preparing and
evaluating the disclosures in the Registration Statement, in the
Time of Sale Disclosure Package and in the Prospectus.
(xxvii) Anti-Bribery
and Anti-Money Laundering Laws. Each of the Company, its
subsidiaries, and their respective directors and officers and to
the Company’s knowledge, its affiliates and any of the
Company’s or its subsidiaries’ respective supervisors,
managers, agents or employees, has not violated, its participation
in the offering will not violate, and the Company and each of its
subsidiaries has instituted and maintains policies and procedures
designed to ensure continued compliance with, each of the following
laws: (A) anti-bribery laws, including but not limited to, any
applicable law, rule, or regulation of any locality, including but
not limited to any law, rule, or regulation promulgated to
implement the OECD Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions, signed
December 17, 1997, including the U.S. Foreign Corrupt
Practices Act of 1977, as amended, the U.K. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇; or
(B) anti-money laundering laws, including but not limited to,
applicable federal, state, international, foreign or other laws,
regulations or government guidance regarding anti-money laundering,
including, without limitation, Title 18 U.S. Code Section 1956 and
1957, the Patriot Act, the Bank Secrecy Act, and international
anti-money laundering principles or procedures by an
intergovernmental group or organization, such as the Financial
Action Task Force on Money Laundering, of which the United States
is a member and with which designation the United States
representative to the group or organization continues to concur,
all as amended, and any Executive order, directive, or regulation
pursuant to the authority of any of the foregoing, or any orders or
licenses issued thereunder. The Company and its subsidiaries have
instituted, maintain and enforce policies and procedures designed
to ensure compliance with anti-bribery laws.
8
(xxviii) OFAC.
(A) Neither
the Company nor any of its subsidiaries, nor any of their
respective directors or officers nor, to the Company’s
knowledge, any employee, agent, affiliate or representative of the
Company or its subsidiaries is an individual or entity that is, or
is owned or controlled by an individual or entity that
is:
(1) the
subject of any sanctions administered or enforced by the U.S.
Department of Treasury’s Office of Foreign Assets Control,
the United Nations Security Council, the European Union, Her
Majesty’s Treasury, or other relevant sanctions authority
(collectively, “Sanctions”),
nor
(2) located,
organized or resident in a country or territory that is the subject
of Sanctions (including, without limitation, the Crimea Region of
the Ukraine, Cuba, Iran, Libya, North Korea, Sudan and
Syria).
(B) Neither
the Company nor any of its subsidiaries will, directly or
indirectly, use the proceeds of the offering, or lend, contribute
or otherwise make available such proceeds to any subsidiary, joint
venture partner or other individual or entity:
(1) to
fund or facilitate any activities or business of or with any
individual or entity or in any country or territory that, at the
time of such funding or facilitation, is the subject of Sanctions;
or
(2) in
any other manner that will result in a violation of Sanctions by
any individual or entity (including any individual or entity
participating in the offering, whether as underwriter, advisor,
investor or otherwise).
(C) For
the past five years, neither the Company nor any of its
subsidiaries, whether or not currently existing, has knowingly
engaged in, and is not now knowingly engaged in, any dealings or
transactions with any individual or entity, or in any country or
territory, that at the time of the dealing or transaction is or was
the subject of Sanctions.
(xxix) Compliance
with Environmental Laws. Except as disclosed in the
Registration Statement, the Time of Disclosure Package and the
Prospectus, neither the Company nor any of its subsidiaries is in
material violation of any statute, any rule, regulation, decision
or order of any Governmental Authority or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
applicable to its business (collectively, “Environmental
Laws”), owns or operates any real property
contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or
contamination pursuant to any Environmental Laws, or is subject to
any claim relating to any Environmental Laws, which violation,
contamination, liability or claim would, individually or in the
aggregate, have a Material Adverse Effect; and the Company is not
aware of any pending investigation which might lead to such a claim
nor is the Company or any of its subsidiaries anticipating
incurring any material capital expenditures relating to compliance
with Environmental Laws.
(xxx) Compliance
with Occupational Laws. The Company and each of its
subsidiaries (A) is in compliance, in all material respects, with
applicable foreign, federal, state and local laws, rules,
regulations, treaties, statutes and codes promulgated by
Governmental Authorities (including pursuant to the Occupational
Health and Safety Act) relating to the protection of human health
and safety in the workplace (“Occupational
Laws”); (B) has received all material permits,
licenses or other approvals required of it under applicable
Occupational Laws to conduct its business as currently conducted;
and (C) is in compliance, in all material respects, with all terms
and conditions of such permit, license or approval. No action,
proceeding, revocation proceeding, writ, injunction or claim is
pending or, to the Company’s knowledge, threatened against
the Company or any of its subsidiaries relating to Occupational
Laws, and the Company does not have knowledge of any facts,
circumstances or developments relating to its operations or cost
accounting practices that could reasonably be expected to form the
basis for or give rise to such actions, suits, investigations or
proceedings.
9
(xxxi) ERISA
and Employee Benefits Matters. (A) To the knowledge of the
Company, no “prohibited transaction” as defined under
Section 406 of ERISA or Section 4975 of the Code and not exempt
under ERISA Section 408 and the regulations and published
interpretations thereunder has occurred in the past six years with
respect to any Employee Benefit Plan. At no time in the past six
years has the Company or any ERISA Affiliate maintained, sponsored,
participated in, contributed to or has or had any liability or
obligation in respect of any Employee Benefit Plan subject to Part
3 of Subtitle B of Title I of ERISA, Title IV of ERISA, or Section
412 of the Code or any “multiemployer plan” as defined
in Section 3(37) of ERISA or any multiple employer plan for which
the Company or any ERISA Affiliate has incurred or could incur
material liability under Section 4063 or 4064 of ERISA. No Employee
Benefit Plan provides or promises, or at any time provided or
promised, retiree health, retiree life insurance, or other retiree
welfare benefits except as may be required by the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, or similar
state law. Each Employee Benefit Plan is and has been in the past
six years operated in material compliance with its terms and all
applicable laws, including but not limited to ERISA and the Code
and, to the knowledge of the Company, no event has occurred in the
past six years (including a “reportable event” as such
term is defined in Section 4043 of ERISA) and no condition exists
that would subject the Company or any ERISA Affiliate to any
material tax, fine, lien, penalty or liability imposed by ERISA,
the Code or other applicable law.
Each Employee
Benefit Plan intended to be qualified under Code Section 401(a) is
so qualified and has a favorable determination or opinion letter
from the IRS upon which it can rely, and any such determination or
opinion letter remains in effect and has not been revoked; to the
knowledge of the Company,
nothing has occurred since the date of any such determination or
opinion letter that is reasonably likely to adversely affect such
qualification; and (B) neither the Company nor any of its
subsidiaries has any obligations under any collective bargaining
agreement with any union and to the Company’s knowledge no
organization efforts are underway with respect to employees of the
Company or any of its subsidiaries. As used in this Agreement,
“Code” means
the Internal Revenue Code of 1986, as amended; “Employee Benefit
Plan” means any “employee benefit plan”
within the meaning of Section 3(3) of ERISA, including, without
limitation, all stock purchase, stock option, stock-based
severance, employment, change-in-control, medical, disability,
fringe benefit, bonus, incentive, deferred compensation, employee
loan and all other employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA,
under which (1) any current or former employee, director or
independent contractor of the Company or its subsidiaries has any
present or future right to benefits and which are contributed to,
sponsored by or maintained by the Company or any of its
subsidiaries or (2) the Company or any of its subsidiaries has
had or has any present or future obligation or liability;
“ERISA” means
the Employee Retirement Income Security Act of 1974, as amended;
and “ERISA
Affiliate” means any member of the Company’s
controlled group as defined in Code Section 414(b), (c), (m) or
(o).
(xxxii) Reserved.
(xxxiii) Labor
Matters. No labor dispute with the employees of the Company
or any of its subsidiaries exists or to the Company’s
knowledge is threatened or imminent, and the Company is not aware
of any existing or imminent labor disturbance by the employees of
any of its or its subsidiaries’ principal suppliers,
contractors or customers, that would reasonably be expected to have
a Material Adverse Effect.
(xxxiv) Restrictions
on Subsidiary Payments to the Company. No subsidiary of the
Company is currently prohibited, directly or indirectly, from
paying any dividends to the Company, from making any other
distribution on such subsidiary’s capital stock, from
repaying to the Company any loans or advances to such subsidiary
from the Company or from transferring any of such
subsidiary’s property or assets to the Company or any other
subsidiary of the Company, except as provided by applicable state
law or described in or contemplated by the Time of Sale Disclosure
Package and the Prospectus.
(xxxv) Statistical
Information. Any third-party statistical and market-related
data included in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus are based on or derived from
sources that the Company believes to be reasonably current and
reliable and accurate in all material respects.
10
(xxxvi) Forward-looking
Statements. No forward-looking statement (within the meaning
of Section 27A of the Act and Section 21E of the Exchange
Act) contained in the Registration Statement, the Time of Sale
Disclosure Package or the Prospectus has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good
faith.
(xxxvii) Permits. Except
as set forth in the Registration Statement, the Time of Sale
Disclosure Package and in the Prospectus, the Company and each of
its subsidiaries have made all filings, applications and
submissions required by, and own or possess all approvals,
licenses, certificates, certifications, clearances, consents,
exemptions, marks, notifications, orders, permits and other
authorizations issued by, the appropriate federal, state or foreign
regulatory authorities necessary to conduct its business as
described in the Registration Statement, the Time of Sale
Disclosure Package or the Prospectus (collectively,
“Permits”),
and is in compliance in all material respects with the terms and
conditions of all such Permits, except where failure to comply
would not, singly or in the aggregate, cause a Material Adverse
Effect. Except as would not result in a Material Adverse
Effect, all such Permits are valid and in full force and
effect. Neither the Company nor any of its subsidiaries
has received any written notice of any proceedings relating to
revocation or modification of, any such Permit, which, individually
or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse
Effect.
(xxxviii) Independent
Engineer. Netherland, ▇▇▇▇▇▇
& Associates, Inc. (“NSAI”)
is a petroleum engineering consulting firm from whose reserve
report information is contained or incorporated by reference in the
Registration Statement, the Time of Sale Disclosure Package and the
Prospectus, and acts as an independent petroleum engineer with
respect to the Company. Other than (i) the production of reserves
in the ordinary course of business, (ii) intervening price
fluctuations or (iii) as described in the Registration Statement,
the Time of Sale Disclosure Package and the Prospectus, the Company
is not aware of any facts or circumstances that would result in a
material adverse change in its proved net reserves in the
aggregate, or the present value of estimated future net revenues
therefrom as described in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus, and reflected in the
reserve reports. The information underlying the estimates of the
proved net reserves of the Company and each of its subsidiaries
that was supplied by the Company and/or its subsidiaries to NSAI
for the purposes of preparing the reports of NSAI referenced in the
Registration Statement, the Time of Sale Disclosure Package and the
Prospectus, and estimates of proved reserves of the Company and its
subsidiaries disclosed in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus, including, production,
costs of operation, and future operations and sales of production,
was true and correct in all material respects on the dates such
information was provided, and such information was supplied and was
prepared in accordance with customary industry practices. The
estimates of proved reserves of the Company and its subsidiaries
that were prepared by or on behalf of the Company that are
disclosed in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus are true and correct in all
material respects. Except as described in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus,
including the oil and natural gas production and reserve
information and estimates of future net revenues included or
incorporated by reference therein comply in all material respects
with the applicable requirements of the Securities Act and Item
1200 of Regulation S-K.
(b) Effect of
Certificates. Any certificate signed by any officer of the
Company and delivered to you or to counsel for the Underwriters
shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
3. Purchase, Sale and Delivery
of Securities.
(a) Firm
Shares. On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell
the Firm Shares to the several Underwriters, and each Underwriter
agrees, severally and not jointly, to purchase from the Company the
number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto. The purchase price for each Firm
Share shall be $[●] per share. In making this Agreement, each
Underwriter is contracting severally and not jointly; except as
provided in paragraph (b) of this Section 3, the agreement of each
Underwriter is to purchase only the respective number of Firm
Shares specified in Schedule I.
11
The
Firm Shares will be delivered by the Company to you for the
accounts of the several Underwriters against payment of the
purchase price therefor by wire transfer of same day funds payable
to the order of the Company at the offices of Northland Securities,
Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, or such other location as may be mutually acceptable, at
9:00 a.m. Central time on the third (or if the Securities are
priced, as contemplated by Rule 15c6-1(c) under the Exchange Act,
after 4:30 p.m. Eastern time, the fourth) full business day
following the date hereof, or at such other time and date as you
and the Company determine pursuant to Rule 15c6-1(a) under the
Exchange Act, such time and date of delivery being herein referred
to as the “First Closing
Date.”
(b) Option
Shares. On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants to the
several Underwriters an option to purchase all or any portion of
the Option Shares at the same purchase price as the Firm Shares,
for use solely in covering any over-allotments made by the
Underwriters in the sale and distribution of the Firm Shares. The
option granted hereunder may be exercised in whole or in part at
any time (but not more than once) within 30 days after the
effective date of this Agreement upon notice (confirmed in writing)
by the Representative to the Company setting forth the aggregate
number of Option Shares as to which the several Underwriters are
exercising the option and the date and time, as determined by you,
when the Option Shares are to be delivered, such time and date
being herein referred to as the “Second
Closing” and “Second Closing
Date” (and with the First Closing Date, each a
“Closing
Date”), respectively; provided, however, that the Second Closing Date
shall not be earlier than the First Closing Date nor earlier than
the second business day after the date on which the option shall
have been exercised. Each Underwriter agrees, severally and not
jointly, to purchase the number of Option Shares (subject to such
adjustments to eliminate fractional shares as you may determine)
that bears the same proportion of the total number of Option Shares
to be purchased on such Second Closing Date as the number of Firm
Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares. No Option
Shares shall be sold and delivered unless the Firm Shares
previously have been, or simultaneously are, sold and
delivered.
The
Option Shares will be delivered by the Company to you for the
accounts of the several Underwriters against payment of the
purchase price therefor by wire transfer of same day funds payable
to the order of the Company at the offices of Northland Securities,
Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, or such other location as may be mutually acceptable at
9:00 a.m., Central time, on the Second Closing
Date.
(c) Delivery.
If the Underwriters so elect, delivery of the Firm Shares or the
Option Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the
Representative. Certificates representing the Firm Shares and the
Option Shares in definitive form and in such denominations and
registered in such names as you have set forth in your notice of
option exercise, or evidence of their issuance, will be made
available for checking at a reasonable time preceding the First
Closing Date or the Second Closing Date, as applicable, at the
office of Northland Securities, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other location as
may be mutually acceptable.
(d) Purchases
by Representative on Behalf of Underwriters. It is
understood that you, individually and not as Representative of the
several Underwriters, may (but shall not be obligated to) make
payment to the Company on behalf of any Underwriter for the
Securities to be purchased by such Underwriter. Any such payment by
you shall not relieve any such Underwriter of any of its
obligations hereunder. Nothing contained herein shall constitute
any of the Underwriters an unincorporated association or partner
with the Company.
4. Covenants.
(a) Covenants of the
Company. The Company covenants and agrees with the several
Underwriters as follows:
(i) Required
Filings. During the period beginning on the date hereof and
ending on the later of the Second Closing Date or such date, as in
the opinion of counsel for the Underwriters, the Prospectus is no
longer required by law to be delivered (assuming the absence of
Rule 172 under the Securities Act), in connection with sales by an
Underwriter or a dealer (the “Prospectus Delivery
Period”), prior to amending or supplementing the
Registration Statement (including any Rule 462(b) Registration
Statement), the Time of Sale Disclosure Package or the Prospectus,
the Company shall furnish to the Underwriters for review a copy of
each such proposed amendment or supplement, and the Company shall
not file any such proposed amendment or supplement to which the
Underwriters or counsel to the Underwriters reasonably object.
Subject to this Section 4(a)(i), immediately following execution of
this Agreement, the Company will prepare the Prospectus containing
the Rule 430A Information and other selling terms of the
Securities, the plan of distribution thereof and such other
information as may be required by the Securities Act or the Rules
and Regulations or as the Underwriters and the Company may deem
appropriate, and if requested by the Underwriters, an issuer free
writing prospectus containing the selling terms of the Securities
and such other information as the Company and the Underwriters may
deem appropriate, and will file or transmit for filing with the
Commission, in accordance with Rule 424(b) or Rule 433, as the case
may be, copies of the Prospectus and each issuer free writing
prospectus.
12
(ii) Notification
of Certain Commission Actions. After the date of this
Agreement and through the Second Closing Date, the Company shall
promptly advise the Underwriters in writing (A) of the receipt of
any comments of, or requests for additional or supplemental
information from, the Commission, (B) of the time and date of any
filing of any post-effective amendment to the Registration
Statement or any amendment or supplement to any Preliminary
Prospectus, the Time of Sale Disclosure Package or the Prospectus,
(C) of the time and date that any post-effective amendment to the
Registration Statement becomes effective, (D) of the issuance by
the Commission of any stop order suspending the effectiveness of
the Registration Statement or any post-effective amendment thereto
or of any order preventing or suspending its use or the use of any
Preliminary Prospectus, the Time of Sale Disclosure Package, the
Prospectus or any issuer free writing prospectus, or (E) of any
proceedings to remove, suspend or terminate from listing or
quotation the Common Stock from any securities exchange upon which
it is listed for trading or included or designated for quotation,
or of the threatening or initiation of any proceedings for any of
such purposes. If the Commission shall enter any such stop order at
any time, the Company will promptly use its best efforts to obtain
the lifting of such order at the earliest possible moment.
Additionally, the Company agrees that it shall comply with the
provisions of Rules 424(b) and 430A, as applicable, under the
Securities Act and will use its reasonable efforts to confirm that
any filings made by the Company under Rule 424(b), Rule 433 or Rule
462 were received in a timely manner by the Commission (without
reliance on Rule 424(b)(8) or Rule 164(b)).
(iii) Continued
Compliance with Securities Laws.
(A) During the
Prospectus Delivery Period, the Company will comply with all
requirements imposed upon it by the Securities Act, as now and
hereafter amended, and by the Rules and Regulations, as from time
to time in force, and by the Exchange Act so far as necessary to
permit the continuance of sales of or dealings in the Securities as
contemplated by the provisions hereof, the Time of Sale Disclosure
Package and the Prospectus. If during such period any event occurs
as a result of which the Prospectus (or if the Prospectus is not
yet available to prospective purchasers, the Time of Sale
Disclosure Package) would include an untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary
or appropriate in the opinion of the Company or its counsel or the
Underwriters or counsel to the Underwriters to amend the
Registration Statement or supplement the Prospectus (or, if the
Prospectus is not yet available to prospective purchasers, the Time
of Sale Disclosure Package) to comply with the Securities Act or to
file under the Exchange Act any document which would be deemed to
be incorporated by reference in the Prospectus (or if the
Prospectus is not yet available to prospective purchasers, the Time
of Sale Disclosure Package) in order to comply with the Securities
Act or the Exchange Act, the Company promptly will (1) notify
you of such untrue statement or omission, (2) amend the
Registration Statement or supplement the Prospectus (or, if the
Prospectus is not yet available to prospective purchasers, the Time
of Sale Disclosure Package) or file such document (at the expense
of the Company) so as to correct such statement or omission or
effect such compliance, and (3) notify you when any amendment to
the Registration Statement is filed or becomes effective or when
any supplement to the Prospectus (or, if the Prospectus is not yet
available to prospective purchasers, the Time of Sale Disclosure
Package) is filed.
(B) 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, the
Preliminary Prospectus or the Prospectus 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 prevailing at
that subsequent time, not misleading, the Company (1) has
promptly notified or promptly will notify the Underwriters of such
conflict, untrue statement or omission, (2) has promptly
amended or will promptly amend or supplement, at its own expense,
such issuer free writing prospectus to eliminate or correct such
conflict, untrue statement or omission, and (3) has notified
or promptly will notify you when such amendment or supplement was
or is filed with the Commission where so required to be
filed.
13
(iv) Blue
Sky Qualifications. The Company shall take or cause to be
taken all reasonable action required by law to qualify the
Securities for sale under the securities laws of such jurisdictions
as you reasonably designate and to continue such qualifications in
effect so long as required for the distribution of the Securities,
except that the Company shall not be required in connection
therewith to qualify as a foreign corporation or to execute a
general consent to service of process in any state.
(v) Provision of
Documents. The Company will furnish, at its own expense, to
the Underwriters and counsel for the Underwriters copies of the
Registration Statement, and to the Underwriters and any dealer each
Preliminary Prospectus, the Time of Sale Disclosure Package, the
Prospectus, any issuer free writing prospectus, and all amendments
and supplements to such documents, in each case as soon as
available and in such quantities as you may from time to time
reasonably request.
(vi) Rule
158. The Company will make generally available to its
security holders as soon as practicable, but in no event later than
15 months after the end of the Company’s current fiscal
quarter, an earnings statement (which need not be audited) covering
a 12-month period that shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 of the
Rules and Regulations.
(vii) Payment
and Reimbursement of Expenses. The Company, whether or not
the transactions contemplated hereunder are consummated or this
Agreement is terminated, will pay or cause to be paid (A) all
expenses (including transfer taxes allocated to the respective
transferees) incurred in connection with the delivery to the
Underwriters of the Securities, (B) all expenses and fees
(including, without limitation, fees and expenses of the
Company’s accountants and counsel) in connection with the
preparation, printing, filing, delivery, and shipping of the
Registration Statement (including the financial statements therein
and all amendments, schedules, and exhibits thereto), the
Securities, each Preliminary Prospectus, the Time of Sale
Disclosure Package, the Prospectus, any issuer free writing
prospectus and any amendment thereof or supplement thereto, and the
printing, delivery, and shipping of this Agreement and other
underwriting documents, including Blue Sky Memoranda (covering the
states and other applicable jurisdictions), (C) all filing fees and
other fees incurred in connection with the qualification of the
Securities for offering and sale by the Underwriters or by dealers
under the securities or blue sky laws of the states and other
jurisdictions which you shall designate, (D) the fees and expenses
of the transfer agent or registrar, (E) the filing fees incident to
any required review and approval by FINRA of the terms of the sale
of the Securities, (F) listing fees, if any, (G) the cost and
expenses of the Company relating to investor presentations or any
“roadshow” undertaken in connection with marketing of
the Securities, (H) all reasonable, out-of-pocket expenses of the
Underwriters (including, but not limited to, reasonable fees and
disbursements of the Underwriters’ counsel and the
Underwriters’ reasonable travel, database, printing, postage,
facsimile and telephone expenses) incurred in connection with the
Underwriters’ investigation of the Company, preparing to
market and marketing the Securities, sale of the Securities or in
contemplation of performing their obligations hereunder, and (I)
all other costs and expenses of the Company incident to the
performance of its obligations hereunder that are not otherwise
specifically provided for herein; provided, however, that no such individual
expense (other than legal expenses) incurred by an Underwriter or
the Underwriters referenced in this Section shall exceed $7,000 and
the aggregate of all such expenses shall not exceed (X) $145,000
for legal expenses and (Y) $35,000 for all other expenses, without
the prior written consent of the Company having been
obtained.
(viii) Use
of Proceeds. The Company will apply the net proceeds from
the sale of the Securities to be sold by it hereunder for the
purposes set forth in the Registration Statement, the Time of Sale
Disclosure Package and in the Prospectus and will file such reports
with the Commission with respect to the sale of the Securities and
the application of the proceeds therefrom as may be required in
accordance with Rule 463 of the Rules and Regulations.
(ix) Company
Lock Up. The Company will not, without the prior written
consent of the Representative, from the date of execution of this
Agreement and continuing to and including the date 90 days after
the date of the Prospectus (the “Lock-Up
Period”), (A) offer, pledge, announce the intention to
sell, 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 or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for
Common Stock or (B) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction
described in clause (A) or (B) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise,
except, in each case, for (x) the sale of the Securities as
contemplated by this Agreement, (y) issuances of shares of Common
Stock upon the exercise, vesting or conversion of options,
restricted stock, warrants or convertible securities disclosed as
outstanding in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus, and (z) the issuance of
employee stock options not exercisable during the Lock-Up Period
pursuant to the Company’s stock option, stock bonus and other
stock plans or arrangements, as in effect on the date hereof in the
ordinary course of business consistent with past practices. The
Company agrees not to accelerate the vesting of any option or
warrant or the lapse of any repurchase right prior to the
expiration of the Lock-Up Period.
14
(x) Stockholder
Lock-Ups. The Company has caused to be delivered to you
prior to the date of this Agreement a letter, in the form of
Exhibit A hereto
(the “Lock-Up
Agreement”), from each individual or entity listed on
Schedule IV. The Company will enforce the terms of each Lock-Up
Agreement and issue stop-transfer instructions to the transfer
agent for the Common Stock with respect to any transaction or
contemplated transaction that would constitute a breach of or
default under the applicable Lock-Up Agreement.
(xi) No
Market Stabilization or Manipulation. The Company has not
taken and will not take, directly or indirectly, any action
designed to or which might reasonably be expected to cause or
result in, or which has constituted, the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities, and has not
effected any sales of Common Stock which are required to be
disclosed in response to Item 701 of Regulation S-K under the Act
which have not been so disclosed in the Registration
Statement.
(xii) SEC
Reports. During the Prospectus Delivery Period, the Company
will file on a timely basis with the Commission such periodic and
other reports as required by the Rules and
Regulations.
(xiii) Internal
Controls. During the Prospectus Delivery Period, the Company
and its subsidiaries will maintain such controls and other
procedures, including without limitation those required by Sections
302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the applicable
regulations thereunder, that are designed to ensure that
information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the Commission’s rules and forms, including
without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is accumulated and
communicated to the Company’s management, including its
principal executive officer and its principal financial officer, or
persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure, to ensure that
material information relating to Company, including its subsidiary,
is made known to them by others within those entities.
(xiv) ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
During the Prospectus Delivery Period, the Company and its
subsidiaries will comply with all applicable provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(xv) Free
Writing Prospectuses. The Company represents and agrees
that, unless it obtains the prior written consent of the
Representative, it has not made and will not make any offer
relating to the Securities that would constitute an issuer free
writing prospectus or that would otherwise constitute a free
writing prospectus required to be filed with the Commission;
provided that the prior written consent of the Representative shall
be deemed to have been given in respect of the free writing
prospectuses included in Schedule II. Any such free writing
prospectus consented to by the Representative is hereinafter
referred to as a “Permitted Free Writing
Prospectus.” The Company represents that it has
treated or agrees that it will treat each Permitted Free Writing
Prospectus as an issuer free writing prospectus and has complied
and will comply with the requirements of Rule 164 and Rule 433
applicable to any Permitted Free Writing Prospectus.
5. Conditions of
Underwriters’ Obligations. The obligations of the
several Underwriters hereunder are subject to the accuracy, as of
the date hereof and at each of the First Closing Date and the
Second Closing Date (as if made at such Closing Date), of and
compliance with all representations, warranties and agreements of
the Company contained herein, to the performance by the Company of
its obligations hereunder and to the following additional
conditions:
(a) Required Filings;
Absence of Certain Commission Actions. If filing of the
Prospectus, or any amendment or supplement thereto, or any issuer
free writing prospectus, is required under the Securities Act or
the Rules and Regulations, the Company shall have filed the
Prospectus (or such amendment or supplement) or such issuer free
writing prospectus with the Commission in the manner and within the
time period so required (without reliance on Rule 424(b)(8) or Rule
164(b)); the Registration Statement shall remain effective; no stop
order suspending the effectiveness of the Registration Statement or
any part thereof, any Rule 462(b) Registration Statement, or any
amendment thereof, nor suspending or preventing the use of the Time
of Sale Disclosure Package, the Prospectus or any issuer free
writing prospectus shall have been issued; no proceedings for the
issuance of such an order shall have been initiated or to the
Company’s knowledge threatened by the Commission; and any
request of the Commission for additional information (to be
included in the Registration Statement, the Time of Sale Disclosure
Package, the Prospectus, any issuer free writing prospectus or
otherwise) shall have been complied with to your
satisfaction.
15
(b) Continued
Compliance with Securities Laws. No Underwriter shall have
advised the Company that (i) the Registration Statement or any
amendment thereof or supplement thereto contains an untrue
statement of a material fact which, in your reasonable opinion, is
material or omits to state a material fact which, in your
reasonable opinion, is required to be stated therein or necessary
to make the statements therein not misleading, or (ii) the Time of
Sale Disclosure Package or the Prospectus, or any amendment thereof
or supplement thereto, or any issuer free writing prospectus
contains an untrue statement of fact which, in your opinion, is
material, or omits to state a fact which, in your opinion, is
material and is required to be stated therein, or necessary to make
the statements therein, in light of the circumstances under which
they are made, not misleading.
(c) Absence of Certain
Events. Except as contemplated in the Time of Sale
Disclosure Package and in the Prospectus, subsequent to the
respective dates as of which information is given in the Time of
Sale Disclosure Package and the Prospectus, neither the Company nor
any of its subsidiaries shall have incurred any material
liabilities or obligations, direct or contingent, or entered into
any material transactions, or declared or paid any dividends or
made any distribution of any kind with respect to its capital
stock; and there shall not have been any change in the capital
stock (other than a change in the number of outstanding shares of
Common Stock due to the issuance of shares upon the exercise of
outstanding options or warrants, vesting of restricted stock or
conversion of convertible securities), or any material change in
the short-term or long-term debt of the Company (other than as a
result of the conversion of convertible securities), or any
issuance of options, restricted stock, warrants, convertible
securities or other rights to purchase the capital stock of the
Company or any of its subsidiaries, or any Material Adverse Change
or any development involving a prospective Material Adverse Change
(whether or not arising in the ordinary course of business), or any
loss by strike, fire, flood, earthquake, accident or other
calamity, whether or not covered by insurance, incurred by the
Company or any subsidiary, the effect of which, in any such case
described above, in your judgment, makes it impractical or
inadvisable to offer or deliver the Securities on the terms and in
the manner contemplated in the Time of Sale Disclosure Package and
in the Prospectus.
(d) Opinion and 10b-5
Statement of Company Counsel. On each Closing Date, there
shall have been furnished to you, as Representative of the several
Underwriters, the opinion and 10b-5 statement, dated as of the
applicable Closing Date, of ▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel for
the Company, in substantially the form attached hereto as
Exhibit
B.
(e) Opinion of
Underwriters’ Counsel. On each Closing Date, there
shall have been furnished to you, as Representative of the several
Underwriters, such opinion or opinions from Faegre ▇▇▇▇▇ ▇▇▇▇▇▇▇
LLP, counsel for the several Underwriters, dated such Closing Date
and addressed to you, with respect to such matters as you
reasonably may request, and such counsel shall have received such
papers and information as they request to enable them to pass upon
such matters.
(f) Comfort
Letter. On the date hereof and on each Closing Date you, as
Representative of the several Underwriters, shall have received
accountant’s “comfort” letters from each of ▇▇▇▇
& Associates LLP, PricewaterhouseCoopers LLP and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, dated such date and addressed to you, in form and substance
satisfactory to you.
(g) Engineer Comfort
Letter. On
the date hereof and on each Closing Date you, as Representative of
the several Underwriters, shall have received an engineer comfort
letter from NSAI, dated such date and addressed to you, in form and
substance satisfactory to you.
(h) Officers’
Certificate. On each Closing Date, there shall have been
furnished to you, as Representative of the several Underwriters, a
certificate, dated such Closing Date and addressed to you, signed
by the chief executive officer and by the chief financial officer
of the Company, to the effect that:
(i) The representations
and warranties of the Company in this Agreement are true and
correct as if made at and as of such Closing Date, and the Company
has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to
such Closing Date;
(ii) No
stop order or other order suspending the effectiveness of the
Registration Statement or any part thereof or any amendment thereof
or the qualification of the Securities for offering or sale nor
suspending or preventing the use of the Time of Sale Disclosure
Package, the Prospectus or any issuer free writing prospectus, has
been issued, and no proceeding for that purpose has been instituted
or, to the best of their knowledge, is contemplated by the
Commission or any state or regulatory body; and
16
(iii) Affirms
the accuracy of the matters set forth in subsection (c) of this
Section 5.
(i) Lock-Up
Agreement. The Representative shall have received all of the
Lock-Up Agreements referenced in Section 4 and the Lock-Up
Agreements shall remain in full force and effect.
(j) FINRA No
Objections. FINRA shall have raised no objection to the
fairness and reasonableness of the underwriting terms and
arrangements.
(k) Other
Documents. The Company shall have furnished to you, as
Representative of the several Underwriters, and counsel for the
Underwriters such additional documents, certificates and evidence
as you or they may have reasonably requested.
(l) Exchange
Listing. The Securities to be delivered on such Closing Date
will have been approved for listing on the NYSE American, subject
to official notice of issuance.
All
such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory
in form and substance to you, as Representative of the several
Underwriters, and counsel for the Underwriters. The Company will
furnish you with such conformed copies of such opinions,
certificates, letters and other documents as you shall reasonably
request.
6. Indemnification and
Contribution.
(a) Indemnification by
the Company. The Company agrees to indemnify and hold
harmless each Underwriter, its affiliates, directors and officers
and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent
of the Company), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (i) arise out of or are
based upon an untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, including
the Rule 430A Information and any other information deemed to be a
part of the Registration Statement at the time of effectiveness and
at any subsequent time pursuant to the Rules and Regulations, if
applicable, any Preliminary Prospectus, the Time of Sale Disclosure
Package, the Prospectus, or any amendment or supplement thereto,
any issuer free writing prospectus, or any issuer information that
the Company has filed or is required to file pursuant to Rule
433(d) of the Rules and Regulations, or any road show as defined in
Rule 433(h) under the Securities Act (the “road show”),
or (ii) arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by it in connection with investigating or
defending against such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company
will not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with
written information furnished to the Company by you, or by any
Underwriter through you, specifically for use in the preparation
thereof; it being understood and agreed that the only information
furnished by an Underwriter consists of the information described
as such in Section 6(e).
(b) Indemnification by
the Underwriters. Each Underwriter will, severally and not
jointly, indemnify and hold harmless the Company, its affiliates,
directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the Act and
Section 20 of the Exchange Act, from and against any losses,
claims, damages or liabilities, joint or several, to which the
Company may become subject, under the Act or otherwise (including
in settlement of any litigation, if such settlement is effected
with the written consent of such Underwriter), insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) (i) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, including the Rule 430A Information and any
other information deemed to be a part of the Registration Statement
at the time of effectiveness and at any subsequent time pursuant to
the Rules and Regulations, if applicable, any Preliminary
Prospectus, the Time of Sale Disclosure Package, the Prospectus, or
any amendment or supplement thereto, or any issuer free writing
prospectus, or any issuer information that the Company has filed or
is required to file pursuant to Rule 433(d) of the Rules and
Regulations, or any road show, or (ii) arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company
by you, or by such Underwriter through you, specifically for use in
the preparation thereof (it being understood and agreed that the
only information furnished by an Underwriter consists of the
information described as such in Section 6(e)), and will reimburse
the Company for any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending against
any such loss, claim, damage, liability or action as such expenses
are incurred.
17
(c) Notice and
Procedures. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of notice of the commencement of
any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the
indemnifying party shall not relieve the indemnifying party from
any liability that it may have to any indemnified party except to
the extent such indemnifying party has been materially prejudiced
by such failure (through the forfeiture of substantive rights or
defenses). In case any such action shall be brought against any
indemnified party, and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled
to participate in, and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified
party, and after notice from the indemnifying party to such
indemnified party of the indemnifying party’s election so to
assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any
legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that if, in your reasonable
business judgment, it is advisable for the Underwriters to be
represented as a group by separate counsel, the Representative
shall have the right to employ a single counsel (in addition to
local counsel) to represent the Representative and all Underwriters
who may be subject to liability arising from any claim in respect
of which indemnity may be sought by the Underwriters under
subsection (a) of this Section 6, in which event the reasonable
fees and expenses of such separate counsel shall be borne by the
indemnifying party or parties and reimbursed to the Underwriters as
incurred. An indemnifying party shall not be obligated under any
settlement agreement, consent to judgment or other compromise
relating to any action under this Section 6 to which it has not
agreed in writing. In addition, no indemnifying party shall,
without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld or delayed), effect any
settlement of any pending or threatened proceeding unless such
settlement includes an unconditional release of such indemnified
party for all liability on claims that are the subject matter of
such proceeding and does not include a statement as to, or an
admission of, fault, culpability or a failure to act by or on
behalf of an indemnified party. Notwithstanding the foregoing, if
at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel pursuant to this Section 6(c), such
indemnifying party agrees that it shall be liable for any
settlement effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such
settlement.
(d) Contribution;
Limitations on Liability; Non-Exclusive Remedy. If the
indemnification provided for in this Section 6 is unavailable
or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities
referred to in subsection (a) or (b) above, (i) in such
proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the
other from the offering of the Securities 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 in connection with the statements or
omissions that resulted in such losses, claims, damages or
liabilities, 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 shall be deemed to
be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear
to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by the Company or the Underwriters and the parties’ relevant
intent, knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were to be
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the first sentence of this
subsection (d). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending
against any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall 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 Securities purchased by it hereunder 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
Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The
Underwriters’ obligations in this subsection (d) to
contribute are several in proportion to their respective
underwriting obligations and not joint. The remedies provided for
in this Section 6 are not exclusive and shall not limit any rights
or remedies that might otherwise be available to any indemnified
party at law or in equity.
18
(e) Information
Provided by the Underwriters. The Underwriters severally
confirm and the Company acknowledges that the statements with
respect to the public offering of the Securities by the
Underwriters set forth in the [●] paragraph under the caption
“Underwriting” in the Time of Sale Disclosure Package
and in the Prospectus are correct and constitute the only
information concerning the Underwriters furnished in writing to the
Company by or on behalf of the Underwriters specifically for
inclusion in the Registration Statement, any Preliminary
Prospectus, the Time of Sale Disclosure Package, the Prospectus or
any issuer free writing prospectus.
7. Representations and
Agreements to Survive Delivery. All representations,
warranties, and agreements of the Company and the several
Underwriters herein or in certificates delivered pursuant hereto,
including but not limited to the agreement of the Company and the
several Underwriters contained in Section 6 hereof, shall
remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any
controlling person thereof, or the Company or any of its officers,
directors, or controlling persons, and shall survive delivery of,
and payment for, the Securities to and by the Underwriters
hereunder and any termination of this Agreement.
8. Termination
of this Agreement.
(a) Right to
Terminate. You, as Representative of the several
Underwriters, shall have the right to terminate this Agreement by
giving notice to the Company as hereinafter specified at any time
at or prior to the First Closing Date, and the option referred to
in Section 3(b), if exercised, may be cancelled at any time
prior to the Second Closing Date, if (i) the Company shall
have failed, refused or been unable, at or prior to such Closing
Date, to perform any agreement on its part to be performed
hereunder (other than agreements that are intended to be performed
on such date), (ii) any condition of the Underwriters’
obligations hereunder is not fulfilled (other than conditions that
are intended to be satisfied on such date), (iii) trading in
the Company’s Common Stock shall have been suspended by the
Commission or the NYSE American or trading in securities
generally on the NYSE American, NASDAQ Stock Market or New York
Stock Exchange shall have been suspended, (iv) minimum or
maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required, on the NYSE
American, NASDAQ Stock Market or New York Stock Exchange, by such
exchange or by order of the Commission or any other Governmental
Authority having jurisdiction, (v) a banking moratorium shall
have been declared by federal or New York state authorities or a
material disruption in commercial banking or securities settlement
or clearance services in the United States, or (vi) there
shall have occurred any attack on, outbreak or escalation of
hostilities or act of terrorism involving the United States, any
declaration by the United States of a national emergency or war,
any material adverse change in financial markets, any substantial
change or development involving a prospective substantial change in
United States or international political, financial or economic
conditions, or any other calamity or crisis that, in your judgment,
is material and adverse and makes it impractical or inadvisable to
proceed with the completion of the sale of and payment for the
Securities.
(b) Notice of
Termination. If you elect to terminate this Agreement as
provided in this Section, the Company shall be notified promptly by
you by telephone, confirmed by letter.
(c) Effect of
Termination. No party shall be relieved of any liability
under this Agreement arising from any breach of its obligations
hereunder occurring prior to termination of this Agreement as a
result of the termination of this Agreement.
9. Default of
Underwriters. If any Underwriter or Underwriters default in
their obligations to purchase Firm Shares hereunder on either the
First Closing Date or the Second Closing Date and the aggregate
number of the Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of
the total number of shares of the Securities that the Underwriters
are obligated to purchase on such Closing Date, the Representative
may make arrangements satisfactory to the Company for the purchase
of such Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing
Date, the non-defaulting Underwriters shall be obligated severally,
in proportion to their respective commitments hereunder, to
purchase the Securities that such defaulting Underwriters agreed
but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of
Securities with respect to which such default or defaults occur
exceeds 10% of the total number of shares of Firm Shares that the
Underwriters are obligated to purchase on such Closing Date and
arrangements satisfactory to the Representative and the Company for
the purchase of such Securities by other persons are not made
within 36 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriters or
the Company, except as provided in Section 7 (provided that if such default occurs
with respect to Option Shares after the First Closing Date, this
Agreement will not terminate as to the Firm Shares or any Option
Shares purchased prior to such termination). As used in this
Agreement, the term “Underwriter” includes any person
substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its
default.
19
10. Notices.
Except as otherwise provided herein, all communications hereunder
shall be in writing and, if to the Underwriters, shall be mailed
via overnight delivery service or hand delivered via courier to the
Representative, c/o Northland Securities, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
[●] and; and if to the Company, shall be mailed via overnight
delivery service or hand delivered via courier to it at ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief
Financial Officer. Any party to this Agreement may change such
address for notices by sending to the parties to this Agreement
written notice of a new address for such purpose.
11. Persons Entitled to Benefit
of Agreement. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective
successors and assigns and the controlling persons, officers and
directors referred to in Section 6. Nothing in this Agreement is
intended or shall be construed to give to any other person, firm or
corporation any legal or equitable remedy or claim under or in
respect of this Agreement or any provision herein contained. The
term “successors and assigns” as herein used shall not
include any purchaser, as such purchaser, of any of the Securities
from any of the several Underwriters.
12. Absence of Fiduciary
Relationship. The Company acknowledges and agrees that: (a)
the Underwriters have been retained solely to act as underwriters
in connection with the sale of the Securities and that no
fiduciary, advisory or agency relationship between the Company and
the Underwriters has been created in respect of any of the
transactions contemplated by this Agreement, irrespective of
whether the Underwriters have advised or are advising the Company
on other matters; (b) the price and other terms of the Securities
set forth in this Agreement were established by the Company
following discussions and arms-length negotiations with the
Underwriters and the Company is capable of evaluating and
understanding and understands and accepts the terms, risks and
conditions of the transactions contemplated by this Agreement; (c)
it has been advised that the Underwriters and their affiliates are
engaged in a broad range of transactions which may involve
interests that differ from those of the Company and that the
Underwriters have no obligation to disclose such interest and
transactions to the Company by virtue of any fiduciary, advisory or
agency relationship; (d) it has been advised that the Underwriters
are acting, in respect of the transactions contemplated by this
Agreement, solely for the benefit of the Underwriters, and not on
behalf of the Company; (e) it waives to the fullest extent
permitted by law, any claims it may have against the Underwriters
for breach of fiduciary duty or alleged breach of fiduciary duty in
respect of any of the transactions contemplated by this Agreement
and agrees that the Underwriters shall have no liability (whether
direct or indirect) to the Company in respect of such a fiduciary
duty claim on behalf of or in right of the Company, including
stockholders, employees or creditors of the Company.
13. Governing Law; Waiver of
Jury Trial. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. 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.
14. Counterparts. This
Agreement may be executed in one or more counterparts and, if
executed in more than one counterpart, the executed counterparts
shall each be deemed to be an original and all such counterparts
shall together constitute one and the same instrument.
15. General
Provisions. This Agreement constitutes the entire agreement
of the parties to this Agreement and supersedes all prior written
or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof, including
that certain engagement letter, dated August 9, 2017, by and among
the Company, the Representative and Euro Pacific Capital, Inc.,
except for the provisions contained in Sections [●] and
[●] that remain in full force and effect. This Agreement may
not be amended or modified unless in writing by all of the parties
hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant
to benefit. The Section headings herein are for the convenience of
the parties only and shall not affect the construction or
interpretation of this Agreement. The invalidity or
unenforceability of any Section, paragraph or provision of this
Agreement shall not affect the validity or enforceability of any
other Section, paragraph or provision hereof. If any Section,
paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to
be made such minor changes (and only such minor changes) as are
necessary to make it valid and enforceable.
[Signature
Page Follows]
20
Please
sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement
between the Company and the several Underwriters in accordance with
its terms.
Very
truly yours,
By
Name
Its
Confirmed
as of the date first
above
mentioned, on behalf of
itself
and the several other Underwriters
named
in Schedule I hereto.
Northland Securities, Inc.
By
Name
Its
21
SCHEDULE I
Underwriters
|
Underwriter
|
|
Number of Firm
Shares
|
|
|
|
|
|
Northland
Securities, Inc.
|
|
[●]
|
|
Euro Pacific
Capital, Inc.
|
|
[●]
|
|
[●]
|
|
[●]
|
|
Total
|
|
[●]
|
22
SCHEDULE II
Certain Permitted Free Writing Prospectuses
[None.]
23
SCHEDULE III
Pricing Information
Firm
Shares: [●] shares
Option
Shares: [●] shares
Price
to the public: $[●] per share
Price
to the Underwriters: $[●] per share
24
SCHEDULE IV
List of Individuals and Entities Executing Lock-Up
Agreements
▇▇▇ ▇.
▇▇▇▇▇
▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇. ▇▇▇▇▇▇
▇▇▇▇▇
▇. Christmas
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇
J.
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
25
EXHIBIT A
Form of Lock-Up Agreement
Date:
_____________________
NORTHLAND
SECURITIES, INC.
As
Representative of the several
Underwriters named
in Schedule I to the Underwriting Agreement
c/o
Northland Securities, Inc.
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
As an
inducement to Northland Securities, Inc. to execute an underwriting
agreement (the “Underwriting
Agreement”) in
the capacity as representative (the “Representative”)
for the several underwriters named in Schedule I thereto for a
public offering (the “Offering”) of certain securities (the
“Securities”)
of Yuma Energy, Inc., a Delaware corporation, and any successor (by
merger or otherwise) thereto (the “Company”), the undersigned hereby agrees
that without, in each case, the prior written consent of the
Representative during the period specified in the second succeeding
paragraph (the “Lock-Up
Period”), the
undersigned will not: (1) offer, pledge, announce the intention to
sell, 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, make any short sale or
otherwise transfer or dispose of, directly or indirectly, any
shares of the Company’s common stock, par value $0.001 per
share (the “Common
Stock”), or any securities convertible into,
exercisable or exchangeable for or that represent the right to
receive Common Stock (including without limitation, Common Stock
which may be deemed to be beneficially owned by the undersigned in
accordance with the rules and regulations of the U.S. Securities
and Exchange Commission (the “SEC”) and
securities which may be issued upon exercise of a stock option or
warrant) whether now owned or hereafter acquired (the “Undersigned’s
Securities”);
(2) enter into any swap or other agreement that transfers, in whole
or in part, any of the economic consequences of ownership of the
Undersigned’s Securities, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise; (3)
make any demand for or exercise any right with respect to, the
registration of any Common Stock or any security convertible into
or exercisable or exchangeable for Common Stock; or (4) publicly
disclose the intention to do any of the foregoing.
The
undersigned agrees that the foregoing restrictions preclude the
undersigned from engaging in any hedging or other transaction which
is designed to or which reasonably could be expected to lead to or
result in a sale or disposition of the Undersigned’s
Securities even if such securities would be disposed of by someone
other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale or any
purchase, sale or grant of any right (including without limitation
any put or call option) with respect to any of the
Undersigned’s Securities or with respect to any security that
includes, relates to or derives any significant part of its value
from such securities.
The
Lock-Up Period will commence on the date of this Lock-Up Agreement
and continue and include the date ninety (90) days after the date
of the final prospectus used to sell the Securities in the Offering
pursuant to the Underwriting Agreement.
Notwithstanding the
foregoing, the undersigned may transfer the Undersigned’s
Securities (i) as a bona
fide gift or gifts, (ii) to any trust for the direct or
indirect benefit of the undersigned or the immediate family of the
undersigned, (iii) if the undersigned is a corporation,
partnership, limited liability company, trust or other business
entity (1) transfers to another corporation, partnership, limited
liability company, trust or other business entity that is a direct
or indirect affiliate (as defined in Rule 405 promulgated under the
Securities Act of 1933, as amended) of the undersigned or (2)
distributions of shares of Common Stock or any security convertible
into or exercisable for Common Stock to limited partners, limited
liability company members or stockholders of the undersigned, (iv)
if the undersigned is a trust, transfers to the beneficiary of such
trust, (v) transfers by testate succession or intestate succession
or (vi) pursuant to the Underwriting Agreement; provided, in the case of clauses (i)
through (v), that (x) such transfer shall not involve a disposition
for value, (y) the transferee agrees in writing with the
Representative to be bound by the terms of this Lock-Up Agreement
and (z) no filing by any party under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), shall
be required or shall be made voluntarily in connection with such
transfer. For purposes of this Lock-Up Agreement, “immediate
family” shall mean any relationship by blood, marriage or
adoption, nor more remote than first cousin.
26
In
addition, the foregoing restrictions shall not apply to
(i) the exercise of stock options granted pursuant to the
Company’s equity incentive plans; provided that such restrictions shall
apply to any of the Undersigned’s Securities issued upon such
exercise, or (ii) the establishment of any contract,
instruction or plan (a “Plan”) that satisfies all of the
requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act;
provided that no sales of
the Undersigned’s Securities shall be made pursuant to such a
Plan prior to the expiration of the Lock-Up Period, and such a Plan
may only be established if no public announcement of the
establishment or existence thereof and no filing with the SEC or
other regulatory authority in respect thereof or transactions
thereunder or contemplated thereby, by the undersigned, the Company
or any other person, shall be required, and no such announcement or
filing is made voluntarily, by the undersigned, the Company or any
other person, prior to the expiration of the Lock-Up
Period.
In
furtherance of the foregoing, the Company and its transfer agent
and registrar are hereby authorized to decline to make any transfer
of shares of Common Stock if such transfer would constitute a
violation or breach of this Lock-Up Agreement.
The
undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Lock-Up Agreement and
that upon request, the undersigned will execute any additional
documents necessary to ensure the validity or enforcement of this
Lock-Up Agreement. All authority herein conferred or agreed to be
conferred and any obligations of the undersigned shall be binding
upon the successors, assigns, heirs or personal representatives of
the undersigned.
The
undersigned understands that the undersigned shall be released from
all obligations under this Lock-Up Agreement if (i) the
Company notifies the Representative that it does not intend to
proceed with the Offering, (ii) the Underwriting Agreement
does not become effective, or if the Underwriting Agreement (other
than the provisions thereof which survive termination) shall
terminate or be terminated prior to payment for and delivery of the
Securities to be sold thereunder or (iii) the Offering is not
completed by December 31, 2017.
The
undersigned understands that the Representative is entering into
the Underwriting Agreement and proceeding with the Offering in
reliance upon this Lock-Up Agreement.
This
Lock-Up Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York.
[The
remainder of this page has intentionally been left
blank.]
27
Very
truly yours,
__________________________________
Printed
Name of Holder
__________________________________
Signature
__________________________________
Printed
Name and Title of Person Signing
(if signing as custodian, trustee or on behalf
of an entity)
28