Attached files
| file | filename |
|---|---|
| S-1/A - SMG Industries Inc. | v187047_s1a.htm |
| EX-4.2 - SMG Industries Inc. | v187047_ex4-2.htm |
| EX-4.4 - SMG Industries Inc. | v187047_ex4-4.htm |
| EX-4.1 - SMG Industries Inc. | v187047_ex4-1.htm |
| EX-4.3 - SMG Industries Inc. | v187047_ex4-3.htm |
| EX-3.4 - SMG Industries Inc. | v187047_ex3-4.htm |
| EX-4.5 - SMG Industries Inc. | v187047_ex4-5.htm |
| EX-5.1 - SMG Industries Inc. | v187047_ex5-1.htm |
| EX-23.1 - SMG Industries Inc. | v187047_ex23-1.htm |
| EX-10.1 - SMG Industries Inc. | v187047_ex10-1.htm |
5,000,000
Units
SMG
Indium Resources Ltd.
UNDERWRITING
AGREEMENT
New York,
New York
●,
2010
Sunrise
Securities Corp.
641
Lexington Avenue, 25th
Floor
New York,
NY 10022
Rodman
& Renshaw, LLC
1251
Avenue of the Americas, 20th
Floor
New York,
New York 10020
Ladies
and Gentlemen:
The
undersigned, SMG Indium Resources Ltd., a corporation formed under the laws of
the State of Delaware (collectively, with any of its subsidiaries and
affiliates, the “Company”), hereby confirms its
agreement with each of Sunrise Securities Corp. and Rodman & Renshaw, LLC
(hereinafter referred to as “you,” “Sunrise,” “Rodman,” or, collectively, as
the “Representatives”)
and with the other underwriters named on Schedule 1 hereto for
which you are acting as Representatives (the Representatives and the other
underwriters being collectively referred to herein as the “Underwriters” or,
individually, an “Underwriter”) as
follows:
1.
Purchase and Sale of
Securities.
1.1 Firm
Securities.
1.1.1 Purchase of Firm
Units. On the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to issue and sell, severally and not jointly, to the several
Underwriters, an aggregate of 5,000,000 units (the “Firm Units”) of the Company at
a purchase price of $● (net of discounts and commissions) per Firm
Unit. The Underwriters, severally and not jointly, agree to purchase
from the Company the number of Firm Units set forth opposite their respective
names on Schedule
1 attached hereto and made a part hereof at a purchase price of $● (net
of discounts and commissions) per Firm Unit. The Firm Units are to be
offered initially to the public (the “Offering”) at the offering
price set forth on the cover page of the Prospectus (as defined in Section 2.1.1
hereof). Each Firm Unit consists of one share of the Company’s common
stock, par value $.001 per share (the “Common Stock”), and one
warrant to purchase one share of Common Stock (the “Warrant” or “Warrants”). As used
herein, the term “Business
Day” shall mean any day other than a Saturday, Sunday or any day on which
national banks in New York, New York, are not open for
business.
1.1.2 Payment and
Delivery. Delivery and payment for the Firm Units shall be
made at 10:00 A.M., New York time, on the third (3rd) Business Day following the
effective date (the “Effective
Date”) of the Registration Statement (as defined in Section 2.1.1 below)
(or the fourth (4th) Business Day following the Effective Date, if the
Registration Statement is declared effective after 4:30 p.m.) or at such earlier
time as shall be agreed upon by the Representatives and the Company at the
offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to the
Underwriter (“Mintz
Levin”) or at such other place (or remotely by facsimile or other
electronic transmission) as shall be agreed upon by the Representatives and the
Company. The closing of the public offering contemplated by this
Agreement is referred to herein as the “Closing” and the hour and
date of delivery and payment for the Firm Units is referred to herein as the
“Closing
Date.” Payment for the Firm Units shall be made on the Closing
Date by wire transfer in federal (same day) funds. The proceeds of
the Offering (less commissions, expense allowance and actual expense payments or
other fees payable pursuant to this Agreement) shall be paid to the order of the
Company upon delivery to the Representatives of certificates (in form and
substance satisfactory to the Underwriters) representing the Firm Units (or
through the facilities of the Depository Trust Company (the “DTC”)) for the account of the
Underwriters. The Firm Units shall be registered in such name or
names and in such authorized denominations as the Representatives may request in
writing at least two (2) Business Days prior to the Closing Date. The
Company shall not be obligated to sell or deliver the Firm Units except upon
tender of payment by the Representatives for all the Firm Units.
1.2 Over-Allotment
Option.
1.2.1 Option
Units. For the purpose of covering any over-allotments in
connection with the distribution and sale of the Firm Units, the Underwriters
are hereby granted, severally and not jointly, an option to purchase up to an
additional 750,000 units from the Company (the “Over-allotment
Option”). Such additional 750,000 units shall be identical in
all respects to the Firm Units and are hereinafter referred to as “Option Units.” The
Firm Units and the Option Units are hereinafter collectively referred to as the
“Units,” and the Units,
the shares of Common Stock and the Warrants included in the Units and the shares
of Common Stock issuable upon exercise of the Warrants are hereinafter referred
to collectively as the “Public
Securities.” The purchase price to be paid for the Option
Units (net of discounts and commissions) will be $● per Option
Unit. The Option Units are to be offered initially to the public at
the offering price of $● per Option Unit.
1.2.2 Exercise of
Option. The Over-allotment Option granted pursuant to Section
1.2.1 hereof may be exercised by the Representatives as to all (at any time) or
any part (from time to time) of the Option Units within forty-five (45) days
after the Effective Date. The Underwriters will not be under any
obligation to purchase any Option Units prior to the exercise of the
Over-allotment Option. The Over-allotment Option granted hereby may
be exercised by the giving of written notice to the Company from the
Representatives, which must be confirmed in writing by overnight mail or
facsimile or other electronic transmission setting forth the number of Option
Units to be purchased and the date and time for delivery of and payment for the
Option Units, which will not be later than five (5) Business Days after
the date of the notice or such other time as shall be agreed upon by the Company
and the Representatives, at the offices of Mintz Levin or at such other place
(or remotely by facsimile or other electronic transmission) as shall be agreed
upon by the Company and the Representatives. If such delivery and
payment for the Option Units does not occur on the Closing Date, the date and
time of the closing for such Option Units will be as set forth in the notice
(hereinafter the “Option
Closing Date”). Upon exercise of the Over-allotment Option,
the Company will become obligated to convey to the Underwriters, and, subject to
the terms and conditions set forth herein, the Underwriters will become
obligated to purchase, the number of Option Units specified in such
notice.
1.2.3 Payment and
Delivery. Payment for the Option Units will be made on the
Option Closing Date by wire transfer in federal (same day) funds as follows: $●
per Option Unit shall be deposited in the Company’s account and the remaining
proceeds shall be paid to the order of the Company upon delivery to you of
certificates (in form and substance satisfactory to the Underwriters)
representing the Option Units (or through the facilities of DTC) for the account
of the Underwriters. The Option Units shall be registered in such name or names
and in such authorized denominations as the Underwriters may request in writing
at least two (2) full Business Days prior to the Option Closing Date. The
Company shall not be obligated to sell or deliver the Option Units except upon
tender of payment by the Underwriters for the applicable Option
Units.
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1.3 Representatives’ Purchase
Option.
1.3.1 Purchase
Option. As additional consideration, the Company hereby agrees
to issue and sell to the Representatives (and/or their designees) on the
Effective Date an option (“Representatives’ Purchase
Option”) for the purchase of an aggregate of 250,000 units (the “Representatives’ Units”) for
an aggregate purchase price of $100.00. The Representatives’ Purchase
Option shall be exercisable, in whole or in part, commencing on the first-year
anniversary date of the Effective Date and expiring on the four (4) year
anniversary date of the Effective Date, for cash or on a cashless basis, at an
initial exercise price per Representatives’ Unit of $●, which is equal to one
hundred and ten percent (110%) of the initial public offering price of a
Unit. The Representatives’ Purchase Option, the Representatives’
Units, the shares of Common Stock and the Warrants included in the
Representatives’ Units (the “Representatives’ Warrants”)
and the shares of Common Stock issuable upon exercise of the Representatives’
Warrants are hereinafter referred to collectively as the “Representatives’
Securities.” The Public Securities and the Representatives’
Securities are hereinafter referred to collectively as the “Securities.” The
Representatives understand and agree that there are significant restrictions
against transferring the Representatives’ Purchase Option during the first six
(6) months after the Effective Date, as set forth in Section 3 of the
Representatives’ Purchase Option.
1.3.2 Delivery and
Payment. Delivery and payment for the Representatives’
Purchase Option shall be made on the Closing Date. The Company shall
deliver to the Representatives and their designees upon payment therefor,
certificates for the Representatives’ Purchase Option in the name or names and
in such authorized denominations as the Representatives may
request.
1.4 Representatives’ Warrant
Solicitation Fee. The Company hereby agrees to engage the
Representatives as its exclusive advisors with respect to the solicitation of
the exercise of the Warrants and pay the Representatives a warrant
solicitation fee equal to five percent (5%) of the gross proceeds from such
Warrant exercises during the period commencing on the date that is twelve (12)
months from the Effective Date in accordance with the guidelines of the
Financial Industry Regulatory Authority (“FINRA”).
2. Representations and
Warranties of the Company. The Company represents and warrants
to the Underwriters as of the Effective Time, the Closing Date and, if
applicable, the Option Closing Date, as follows:
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2.1 Filing of Registration
Statement.
2.1.1 Pursuant to the
Act. The Company has filed with the Securities and Exchange
Commission (the “Commission”) a registration
statement and an amendment or amendments thereto, on Form S-1 (File No.
333-165930), including any related preliminary prospectus (the “Preliminary Prospectus,”
including any prospectus that is included in the Registration Statement
immediately prior to the effectiveness of the Registration Statement), for the
registration of the Public Securities under the Securities Act of 1933, as
amended (the “Act”)
which registration statement and amendment or amendments have been prepared by
the Company in conformity with the requirements of the Act, and the rules and
regulations of the Commission under the Act (the “Regulations”). The
conditions for use of Form S-1 to register the Offering under the Act, as set
forth in the General Instructions to such form, have been satisfied in all
material respects. Except as the context may otherwise require, such
registration statement on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
schedules, exhibits and all other documents filed as a part thereof or
incorporated therein and all information deemed to be a part thereof as of the
Effective Date pursuant to paragraph (b) of Rule 430A of the Regulations), is
referred to herein as the “Registration Statement.” As
used herein, the term “Preliminary Prospectus” means
each prospectus included in such Registration Statement (and any amendments
thereto) before it becomes effective, any prospectus filed with the Commission
pursuant to Rule 424(a) under the Act, and the prospectus included in the
Registration Statement at the time of its effectiveness that omits information
pursuant to Rule 430 under the Act, and the term “Prospectus” means the
prospectus in the form first filed pursuant to Rule 424(b) under the
Act. If the Company has filed an abbreviated registration statement
pursuant to Rule 462(b) under the Act (the “Rule 462 Registration
Statement”), then any reference herein to the term “Registration Statement” shall
be deemed to include such Rule 462 Registration Statement. For
purposes of this Agreement, “free writing prospectus” has
the meaning set forth in Rule 405 under the Act, “Time of Sale Prospectus” means
the Preliminary Prospectus together with the free writing prospectuses, and
“broadly available road
show” means a “bona fide electronic road show” as defined in Rule
433(h)(5) under the Act that has been made available without restriction to any
person. As used herein, the terms “Registration Statement,”
“Preliminary Prospectus,” “Time of Sale Prospectus” and “Prospectus” shall
include the documents, if any, incorporated by reference therein.
2.1.2 The
Registration Statement has been declared effective by the Commission on the date
hereof. “Applicable
Time” means ● am/pm on ●, 2010, on the Effective Date or such other time
as agreed to by the Company and the Representatives.
2.1.3 Pursuant to the Exchange
Act. The Company has filed with the Commission a Form 8-A
(File Number 000-●) providing for the registration under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), of the Units,
the Common Stock and the Warrants. The registration of the Units,
Common Stock and Warrants under the Exchange Act has been declared effective by
the Commission on the date hereof.
2.1.4 No Stop Orders,
etc. Neither the Commission nor, to the best of the Company’s
knowledge, any state regulatory authority has issued any order or threatened to
issue any order preventing or suspending the use of the Prospectus or the
Registration Statement or has instituted or, to the best of the Company’s
knowledge, threatened to institute any proceedings with respect to such an
order.
2.2 Disclosures in Registration
Statement.
2.2.1 10b-5
Representation. At the respective times the Preliminary
Prospectus, the Time of Sale Prospectus, the Registration Statement, the
Prospectus and any post-effective amendments thereto become effective (and at
the Closing Date and the Option Closing Date, if any):
(i) The
Preliminary Prospectus, the Time of Sale Prospectus, the Registration Statement,
the Prospectus and any post-effective amendments thereto did and will contain
all material statements that are required to be stated therein in accordance
with the Act and the Regulations, and will in all material respects conform to
the requirements of the Act and the Regulations;
(ii) Neither
the Preliminary Prospectus, the Time of Sale Prospectus, the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, on such
dates, do or will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The representation and warranty made in this Section 2.3.1(ii)
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
expressly for use in the Preliminary Prospectus, the Time of Sale Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto. The parties acknowledge and agree that such information provided by or
on behalf of any Underwriter consists solely the following disclosure contained
in the “Underwriting” section of the Prospectus: (i) [the first paragraph under
the heading “Pricing of Securities].”
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2.2.2 Disclosure of
Agreements. The agreements and documents described in the
Prospectus and the Registration Statement conform to the descriptions thereof
contained therein. There is no franchise, contract or other document of a
character required to be described in the Preliminary Prospectus, the Time of
Sale Prospectus, the Registration Statement or the Prospectus, or to be filed
with the Commission as an exhibit to the Registration Statement, which has not
been so described or filed; and the information in the Prospectus under the
headings “Prospectus Summary,” “Risk Factors,” “Business,” “Principal
Shareholders,” “Certain Relationships and Related Transactions,” “Taxation,” and
“Description of Share Capital,” insofar as such statements summarize legal
matters, agreements, documents or proceedings discussed therein, are accurate
and fair summaries of such legal matters, agreements, documents or proceedings.
Each agreement or other instrument (however characterized or described) to which
the Company is a party or by which it is or may be bound or affected and
(i) that is referred to in the Prospectus, or (ii) is material to the
Company’s business, has been duly authorized and validly executed by the
Company, is in full force and effect in all material respects and is enforceable
against the Company and, to the Company’s knowledge, the other parties thereto,
in accordance with its terms, except (x) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors’ rights generally, (y) as enforceability of any indemnification
or contribution provision may be limited under the federal and state securities
laws, and (z) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
None of such agreements or instruments has been assigned by the Company, and
neither the Company nor, to the best of the Company’s knowledge, any other party
is in default thereunder and, to the best of the Company’s knowledge, no event
has occurred that, with the lapse of time or the giving of notice, or both,
would constitute a default thereunder. To the Company’s knowledge, performance
by the Company of the material provisions of such agreements or instruments will
not result in a violation of any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its assets or
businesses, including, without limitation, those relating to environmental laws
and regulations.
2.2.3 Prior Securities
Transactions. No securities of the Company have been sold by
the Company or by or on behalf of, or for the benefit of, any person or persons
controlling, controlled by, or under common control with the Company, except as
disclosed in the Registration Statement.
2.2.4 Regulations. The
disclosures in the Preliminary Prospectus, the Time of Sale Prospectus, the
Registration Statement and the Prospectus, concerning the effects of Federal,
State and local regulation on the Company’s business as currently contemplated
fairly summarize, to the best of the Company’s knowledge, such effects and do
not omit to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
2.3 Changes After Dates in
Registration Statement.
2.3.1 No Material Adverse
Change. Since the respective dates as of which information is
given in the Preliminary Prospectus, the Time of Sale Prospectus, the
Registration Statement and the Prospectus,, except as otherwise specifically
stated therein: (i) there has been no material adverse change in the condition,
financial or otherwise, or business prospects of the Company; (ii) there have
been no material transactions entered into by the Company, other than as
contemplated pursuant to this Agreement; (iii) no member of the Company’s board
of directors or management has resigned from any position with the Company and
(iv) no event or occurrence has taken place which materially impairs, or would
likely materially impair, with the passage of time, the ability of the members
of the Company’s board of directors or management to act in their capacities
with the Company as described in the Registration Statement and the
Prospectus.
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2.3.2 Recent Securities
Transactions, etc. Subsequent to the respective dates as of
which information is given in the Preliminary Prospectus, the Time of Sale
Prospectus, the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not:
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money; or (ii) declared or paid any dividend or made
any other distribution on or in respect to its capital stock.
2.4 Independent
Accountants. To the Company’s knowledge, Marcum LLP (“Marcum”), whose report is
filed with the Commission as part of the Registration Statement and included in
the Registration Statement, the Preliminary Prospectus and the Prospectus, are
independent accountants as required by the Act and the Regulations and the
Public Company Accounting Oversight Board (including the rules and regulations
promulgated by such entity, the “PCAOB”). To the
best of the Company’s knowledge, Marcum is duly registered and in good standing
with the PCAOB. Marcum has not, during the periods covered by the
financial statements included in the Preliminary Prospectus, the Time of Sale
Prospectus, the Registration Statement and the Prospectus, provided to the
Company any non-audit services, as such term is used in Section 10A(g) of the
Exchange Act.
2.5 Financial Statements,
etc. The financial statements, including the notes thereto and
supporting schedules included in the Preliminary Prospectus, the Time of Sale
Prospectus, the Registration Statement and Prospectus fairly present the
financial position and the results of operations of the Company at the dates and
for the periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles (“GAAP”), consistently applied
throughout the periods involved; and the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein. The Registration Statement discloses all material off-balance sheet
transactions, arrangements, obligations (including contingent obligations), and
other relationships of the Company with unconsolidated entities or other persons
that may have a material current or future effect on the Company’s financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses. Except as disclosed in the Preliminary Prospectus, the
Time of Sale Prospectus, the Registration Statement and the Prospectus, (a) the
Company has not incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions other than in the ordinary
course of business, (b) the Company has not declared or paid any dividends or
made any distribution of any kind with respect to its capital stock, (c) there
has not been any change in the capital stock of the Company any grants under any
stock compensation plan and, (d) there has not been any material adverse change
in the Company’s long-term or short-term debt.
2.6 Off-Balance Sheet
Arrangements. The Company is not party to any off-balance sheet
transactions, arrangements, obligations (including contingent obligations) or
other relationships with unconsolidated entities or other persons that may have
a material current or future effect on the Company’s financial condition,
changes in financial condition, results of operations, liquidity, capital
expenditures, capital resources or significant components of revenues or
expenses.
2.7 Statistical,
Industry-Related and Market-Related Data. The statistical,
industry-related and market-related data included in the Preliminary Prospectus,
the Time of Sale Prospectus, the Registration Statement and the Prospectus are
based on or derived from sources that the Company reasonably and in good faith
believes are reliable and accurate, and such data agree with the sources from
which they are derived. The Company has obtained the written consent to the use
of such data from such sources, to the extent any such consent is
required.
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2.8 Authorized Capital; Options,
etc. The Company had at the date or dates indicated in the
Prospectus, the duly authorized, issued and outstanding capitalization as set
forth in the Preliminary Prospectus, the Time of Sale Prospectus, the
Registration Statement and the Prospectus. Based on the assumptions
stated in the Preliminary Prospectus, the Time of Sale Prospectus, the
Registration Statement and the Prospectus, the Company will have on the Closing
Date the adjusted stock capitalization set forth therein. Except as
set forth in, or contemplated by, the Registration Statement and the Prospectus,
on the Effective Date and on the Closing Date, there will be no options,
warrants, or other rights to purchase or otherwise acquire any authorized, but
unissued shares of Common Stock of the Company or any security convertible into
shares of Common Stock of the Company, or any contracts or commitments to issue
or sell shares of Common Stock or any such options, warrants, rights or
convertible securities.
2.9 Valid Issuance of
Securities, etc.
2.9.1 Outstanding
Securities. All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company. The Public Securities conform to all
statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales of the outstanding Common Stock were
at all relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or, based in part on the representations and
warranties of the purchasers of such shares of Common Stock, exempt from such
registration requirements.
2.9.2 Securities Sold Pursuant to
this Agreement. The Securities have been duly authorized and
reserved for issuance and sale and, when issued and paid for, will be validly
issued, fully paid and non-assessable; the holders thereof are not and will not
be subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. The
Securities conform in all material respects to all statements with respect
thereto contained in the Registration Statement and the
Prospectus. When issued, the Representatives’ Purchase Option, the
Representatives’ Warrants and the Warrants will constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and payment
of the respective exercise prices therefor, the number and type of securities of
the Company called for thereby in accordance with the terms thereof and such
Representatives’ Purchase Option, the Representatives’ Warrants and the Warrants
are enforceable against the Company in accordance with their respective terms,
except: (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally; (ii) as
enforceability of any indemnification or contribution provision may be limited
under federal and state securities laws; and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The shares of Common Stock
issuable upon exercise of the Representatives’ Purchase Option, the
Representatives’ Warrants and the Warrants have been reserved for issuance upon
the exercise of the Representatives’ Purchase Option, the Representatives’
Warrants and the Warrants, respectively, and, when issued in accordance with the
terms of such securities, will be duly and validly authorized, validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders.
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2.9.3 No
Integration. Neither the Company nor any of its affiliates
has, prior to the date hereof, made any offer or sale of any securities which
are required to be “integrated” pursuant to the Act or the Regulations with the
offer and sale of the Public Securities pursuant to the Registration
Statement.
2.10 Registration Rights of Third
Parties. Except as set forth in the Preliminary Prospectus,
the Time of Sale Prospectus, the Registration Statement and the Prospectus, no
holders of any securities of the Company or any rights exercisable for or
convertible or exchangeable into securities of the Company have the right to
require the Company to register any such securities of the Company under the Act
or to include any such securities in a registration statement to be filed by the
Company.
2.11 Validity and Binding Effect
of Agreements. Each of this Agreement, the Warrant Agreement (as defined
in Section 2.21) and the Representatives’ Purchase Option (collectively, the
“Transaction
Agreements”) have been duly and validly authorized by the Company and,
when duly executed and delivered, will constitute valid and binding agreements
of the Company, enforceable against the Company in accordance with their
respective terms, except: (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws; and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.12 No Conflicts,
etc. The execution, delivery, and performance by the Company
of this Agreement and the other Transaction Agreements, the consummation by the
Company of the transactions herein and therein contemplated and the compliance
by the Company with the terms hereof and thereof do not and will not, with or
without the giving of notice or the lapse of time or both: (i) result in a
breach of, or conflict with any of the terms and provisions of, or constitute a
default under, or result in the creation, modification, termination or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to the terms of any agreement or instrument to which the
Company is a party; (ii) result in any violation of the provisions of the
Amended and Restated Articles of Incorporation or the By-laws of the Company,
each as currently in effect (the “Charter Documents”); or (iii)
violate any existing applicable law, rule, regulation, judgment, order or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or business.
2.13 No Defaults;
Violations. No material default exists in the due performance
and observance of any term, covenant or condition of any material license,
contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or
any other agreement or instrument evidencing an obligation for borrowed money,
or any other material agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the properties or assets of
the Company is subject. The Company is not in violation of any term or provision
of its Charter Documents or in violation of any franchise, license, permit, or
rule, regulation, judgment or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or businesses.
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2.14 Corporate Power; Licenses;
Consents.
2.14.1 Conduct of
Business. The Company has all requisite corporate power and
authority, and has all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental regulatory officials and
bodies that it needs as of the date hereof to conduct its business for the
purposes described in the Prospectus. The disclosures in the
Registration Statement and the Prospectus concerning the effects of federal,
state and local regulation on this Offering and the Company’s business purpose
are correct in all respects.
2.14.2 Transactions Contemplated
Herein. The Company has all corporate power and authority to
enter into this Agreement and the other Transaction Agreements and to carry out
the provisions and conditions hereof and thereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained. No consent, authorization or order of, and no filing with,
any court, government agency or other body is required for the valid issuance,
sale and delivery, of the Securities and the consummation of the transactions
and agreements contemplated by this Agreement and the other Transaction
Agreements and as contemplated by the Prospectus, except with respect to
applicable federal and state securities laws and the rules and regulations
promulgated by FINRA.
2.15
D&O
Questionnaires. To the Company’s knowledge, all information
contained in the questionnaires (the “Questionnaires”) completed by
each of the Company’s officers, directors and 5% or more stockholders (the
“Insiders”) as well as
in the Lock-Up Agreements provided to the Underwriters is true and correct and
the Company has not become aware of any information which would cause the
information disclosed in the Questionnaires completed by each Insider to become
inaccurate and incorrect. The Company agrees to promptly inform the
Underwriter at any time when it (or any officer or director thereof) should
learn of any fact that would cause any such Questionnaire to not be complete and
accurate in all material respects or to contain an untrue statement of a
material fact or to omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading as of the date hereof
and as of the Closing Date or the Option Closing Date, if any.
2.16
Litigation; Governmental
Proceedings. There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding pending or, to
the Company’s knowledge, threatened against, or involving the Company or, to the
Company’s knowledge, any Insider which has not been disclosed in the Preliminary
Prospectus, the Time of Sale Prospectus, the Registration Statement, the
Prospectus or the Questionnaires, or in connection with the Company’s listing
application for the listing of the Public Securities on the NASDAQ Stock Market
(“NASDAQ”),
specifically, the NASDAQ Capital Market; and there are no statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed.
2.17
Good
Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the
Company.
2.18
Stop
Orders. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, Time of Sale Prospectus or
Prospectus or any part thereof.
2.19
Transactions Affecting
Disclosure to FINRA.
2.19.1 Finder’s
Fees. There are no claims, payments, arrangements, agreements
or understandings relating to the payment of a finder’s, consulting or
origination fee by the Company or any Insider with respect to the sale of the
Securities hereunder or any other arrangements, agreements or understandings of
the Company or, to the Company’s knowledge, any Insider that may affect the
Underwriters’ compensation, as determined by FINRA.
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2.19.2 Payments Within the Last
Twelve Months. The Company has not made any direct or indirect
payments (in cash, securities or otherwise) to: (i) any person, as a finder’s
fee, consulting fee or otherwise, in consideration of such person raising
capital for the Company or introducing to the Company persons who raised or
provided capital to the Company; (ii) to any FINRA member; or (iii) to any
person or entity that has any direct or indirect affiliation or association with
any FINRA member, within the twelve (12) months prior to the Effective Date,
other than the prior payment of $50,000 to the Representatives and payments made
in connection with the Company’s private placement.
2.19.3 Use of
Proceeds. None of the net proceeds of the Offering will be
paid by the Company to any participating FINRA member or its affiliates, except
as expressly authorized herein.
2.19.4 FINRA
Affiliation. Other than Richard Biele, Joseph Betti, Brian
Kuhns, Patrick Hehrer, Timothy Vickery and Kurt Focher, no officer, director or
any beneficial owner of the Company’s securities (whether debt or equity,
registered or unregistered, regardless of the time acquired or the source from
which derived) (any such individual or entity, a “Company Affiliate”) has any
direct or indirect affiliation or association with any FINRA member (as
determined in accordance with the rules and regulations of FINRA); no Company
Affiliate is an owner of stock or other securities of any member of FINRA (other
than securities purchased on the open market); no Company Affiliate has made a
subordinated loan to any member of FINRA; no proceeds from the sale of Public
Securities (excluding underwriting compensation as disclosed in the Preliminary
Prospectus, the Time of Sale Prospectus, the Registration Statement or
Prospectus) will be paid to any FINRA member, or any persons associated with or
affiliated with any member of FINRA.
2.19.5 FINRA
Compensation. Except as disclosed in the Preliminary
Prospectus, the Time of Sale Prospectus, the Registration Statement or the
Prospectus, the Company has not issued any warrants or other securities or
granted any options, directly or indirectly, to anyone who is a potential
underwriter in the offering or a related person (as defined by FINRA rules) of
such an underwriter within the 180-day period prior to the initial filing date
of the Registration Statement; no person to whom securities of the Company have
been privately issued within 180-day period prior to the initial filing date of
the Registration Statement has any relationship or affiliation or association
with any member of FINRA; and no FINRA member participating in the offering has
a conflict of interest with the Company. For this purpose, a
“conflict of interest” exists when a member of FINRA and/or its associated
persons, parent or affiliates in the aggregate beneficially own 10% or more of
the Company’s outstanding subordinated debt or common equity, or 10% or more of
the Company’s preferred equity. “FINRA member participating in the
offering” includes any associated person of a FINRA member that is
participating in the offering, any member of such associated person’s immediate
family and any affiliate of a FINRA member that is participating in the
offering.
2.20 Foreign Corrupt Practices
Act. Neither the Company nor any of its directors,
employees, officers or any other person acting on behalf of the
Company has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is, or may
be in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) that: (i) might subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding; (ii) if not given in the past, might have had a
material adverse effect on the assets, business or operations of the Company as
reflected in any of the financial statements contained in the Prospectus; or
(iii) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company’s
internal accounting controls and procedures are sufficient to cause the Company
to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
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2.21 Money Laundering
Laws. The operations of the Company are and have been
conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, the money laundering statutes of all jurisdictions, including
the Money Laundering Control Act of 1986, as amended, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
with respect to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.
2.22 OFAC. Neither
the Company nor any director or officer of the Company, nor, to the knowledge of
the Company, any agent or affiliate of the Company is currently subject to any
U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will not 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 person
or entity, for the purpose of financing the activities of any person subject to
any U.S. sanctions administered by OFAC.
2.23 Bank Secrecy Act; Money
Laundering; Patriot Act. Neither the Company nor any officer
or director of the Company has violated: (A) the Bank Secrecy Act, as amended,
(B) the Money Laundering Laws or (C) the Uniting and Strengthening of America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
PATRIOT ACT) Act of 2001, and/or the rules and regulations promulgated under any
such law or any successor law.
2.24 Subsidiaries. The
Company does not own an interest, directly or indirectly, in any corporation,
partnership, limited liability company, joint venture, trust or other business
entity.
2.25 Officers’
Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to the Representatives or to Mintz Levin
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
2.26 Warrant
Agreement. The Company has entered into a warrant agreement
with respect to the Warrants with Continental Stock Transfer and Trust Company
substantially in the form filed as an exhibit to the Registration Statement (the
“Warrant
Agreement”).
2.27 Lock-up
Agreements. Each of the Company’s officers and directors and
any affiliated party of such officers and directors, in each case, who currently
hold 10% or more on a fully-diluted basis of the Company’s outstanding shares of
Common Stock (collectively, the “Lock-Up Parties”) have agreed
pursuant to executed Lock-Up Agreements in the form attached hereto as Exhibit A that for a
period of six months from the effective date of the Prospectus (the “Lock-Up Period”), such persons
shall not sell, contract to sell, grant any option for the sale or otherwise
dispose of any of your equity securities, or any securities convertible into or
exercisable or exchangeable for our equity securities, without the consent of
the Underwriter. The Company has caused each of the Lock-Up Parties to deliver
to the Underwriter the agreements of each of the Lock-Up Parties to the
foregoing effect prior to the date that the Company requests that the Commission
declare the Registration Statement effective under the Act.
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2.28 Related Party
Transactions. Except as disclosed in the Preliminary
Prospectus, the Time of Sale Prospectus, the Registration Statement and the
Prospectus, there are no business relationships or related party transactions
involving the Company or any other person required to be described in the
Prospectus that have not been described as required. There are no outstanding
loans, advances (except normal advances for business expense in the ordinary
course of business) or guarantees of indebtedness by the Company, to or for the
benefit of any of the officers or directors of the Company or any of their
respective family members.
2.29 No
Influence. The Company has not offered, or caused the
Underwriters to offer, the Firm Units to any person or entity with the intention
of unlawfully influencing: (i) a customer or supplier of the Company or any
Company Affiliate to alter the customer’s or supplier’s level or type of
business with the Company or such affiliate; or (ii) a journalist or publication
to write or publish favorable information about the Company or any such
affiliate.
2.30 Board of
Directors. The Board of Directors of the Company is comprised
of the persons set forth under the heading of the Prospectus captioned
“Directors, Senior Management and Employees.” The qualifications of the persons
serving as board members and the overall composition of the Board comply with
the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder applicable
to the Company and the rules of the NASDAQ. At least one member of the Board of
Directors of the Company qualifies as a “financial expert” as such term is
defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated
thereunder and the rules of NASDAQ. In addition, at least a majority of the
persons serving on the Board of Directors qualify as “independent” as defined
under the rules of NASDAQ.
2.31
Sarbanes-Oxley
Compliance.
2.31.1 Disclosure
Controls. The Company has developed and currently maintains
disclosure controls and procedures that will comply with Rule 13a-15 or 15d-15
of the Exchange Act, and such controls and procedures are effective to ensure
that all material information concerning the Company will be made known on a
timely basis to the individuals responsible for the preparation of the Company’s
Exchange Act filings and other public disclosure documents.
2.31.2 Compliance. The
Company is, or on the Effective Date will be, in material compliance with the
provisions of the Sarbanes-Oxley Act of 2002 applicable to it, and has
implemented or will implement such programs and has taken reasonable steps to
ensure the Company’s future compliance (not later than the relevant statutory
and regulatory deadlines therefor) with all the material provisions of the
Sarbanes-Oxley Act of 2002.
2.32 No Investment Company
Status. The Company is not and, after giving effect to the
Offering and sale of the Securities and the application of the proceeds thereof
as described in the Preliminary Prospectus, the Time of Sale Prospectus, the
Registration Statement and the Prospectus, will not be, an “investment company”
as defined in the Investment Company Act of 1940, as amended.
2.33 No Labor
Disputes. No labor dispute with the employees of the Company
exists or, to the knowledge of the Company, is imminent and the Company is not
aware of any existing threatened or imminent labor disturbance by the employees
of any of its principal suppliers, manufacturers or contractors that could have
a material adverse effect on the Company, taken as a whole.
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2.34 Title to Real and Personal
Property. The Company has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it which is material to the business of the Company, in each
case free and clear of all liens, encumbrances and defects except such as are
described in the Preliminary Prospectus, the Time of Sale Prospectus and the
Prospectus or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease by the Company are
held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company, in each case except as
described in the Prospectus.
2.35 Intellectual
Property. The Company owns or possesses or has valid right to
use all patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets and similar rights (“Intellectual Property”)
necessary for the conduct of the business of the Company as currently carried on
and as described in the Preliminary Prospectus, the Time of Sale Prospectus, the
Registration Statement and the Prospectus (exclusive of any supplement
thereto). To the knowledge of the Company, no action or use by the
Company will involve or give rise to any infringement of, or license or similar
fees for, any Intellectual Property of others. The Company has not
received any notice alleging any such infringement or fee.
2.36 Taxes. The
Company has filed all returns (as hereinafter defined) required to be filed with
taxing authorities prior to the date hereof or has duly obtained extensions of
time for the filing thereof. The Company has paid all taxes (as
hereinafter defined) shown as due on such returns that were filed and has paid
all taxes imposed on or assessed against the Company. The provisions
for taxes payable, if any, shown on the financial statements filed with or as
part of the Registration Statement are sufficient for all accrued and unpaid
taxes, whether or not disputed, and for all periods to and including the dates
of such consolidated financial statements. Except as disclosed in
writing to the Representatives, (i) no issues have been raised (and are
currently pending) by any taxing authority in connection with any of the returns
or taxes asserted as due from the Company, and (ii) no waivers of statutes of
limitation with respect to the returns or collection of taxes have been given by
or requested from the Company. The term “taxes” mean all foreign,
federal, state, local, and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other taxes,
fees, assessments, or charges of any kind whatever, together with any interest
and any penalties, additions to tax, or additional amounts with respect
thereto. The term “returns” means all returns,
declarations, reports, statements, and other documents required to be filed in
respect to taxes.
2.37 Insurance
Matters. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the business in which it is engaged; all policies
of insurance and fidelity or surety bonds insuring the Company or its
businesses, assets, employees, officers and directors are in full force and
effect; the Company is in compliance with the terms of any such policies and
instruments in all material respects; there are no claims by the Company under
any such policy or instrument as to which an insurance company is denying
liability or defending under a reservation of rights clause; the Company has not
refused any insurance coverage sought or applied for; and the Company does not
have any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not have a material adverse effect on the condition (financial
or otherwise), prospects, earnings, business or properties of the Company,
whether or not arising from transactions in the ordinary course of business,
except as contemplated in the Preliminary Prospectus, the Time of Sale
Prospectus, the Registration Statement or Prospectus (exclusive of any
supplement thereto).
2.38 Definition of
“Knowledge.” As used in herein, the term “knowledge of the Company” (or
similar language) shall mean the knowledge of the officers and directors of the
Company who are named in the Prospectus, with the assumption that such officers
and directors shall have made reasonable and diligent inquiry of the matters
presented.
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3. Covenants of the
Company. The Company covenants and agrees as
follows:
3.1 Amendments to Registration
Statement. The Company will deliver to the Representatives,
prior to filing, any amendment or supplement to the Registration Statement or
Prospectus proposed to be filed after the Effective Date and not file any such
amendment or supplement to which the Representatives shall reasonably object in
writing.
3.2 Federal Securities
Laws.
3.2.1 Compliance. During
the time when a Prospectus is required to be delivered under the Act, the
Company will use its best efforts to comply with all requirements imposed upon
it by the Act, the Regulations and the Exchange Act and by the regulations under
the Exchange Act, as from time to time in effect, so far as necessary to permit
the continuance of sales of or dealings in the Public Securities in accordance
with the provisions hereof and the Prospectus. If at any time when a
Prospectus relating to the Public Securities is required to be delivered under
the Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or counsel for the Underwriters, the Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will notify the Representatives
promptly and prepare and file with the Commission, subject to Section 3.1
hereof, an appropriate amendment or supplement in accordance with Section 10 of
the Act (at the expense of the Company).
3.2.2 Filing of Final
Prospectus. The Company will file the Prospectus (in form and
substance satisfactory to the Representatives) with the Commission pursuant to
the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act
Registration. For a period of three (3) years from the
Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock and Warrants under the provisions of the
Exchange Act. The Company will not deregister the Public Securities
under the Exchange Act without the prior written consent of the
Representatives.
3.2.4 Free Writing
Prospectuses. The Company represents and agrees that it has
not made and will not make any offer relating to the Public Securities that
would constitute an issuer free writing prospectus, as defined in Rule 433 of
the 1933 Act, without the prior consent of the Representatives. Any such free
writing prospectus consented to by the Representatives is hereinafter referred
to as a “Permitted Free Writing
Prospectus.” The Company represents that it will treat each Permitted
Free Writing Prospectus as an “issuer free writing prospectus” as defined in
Rule 433, and has complied and will comply with the applicable requirements of
Rule 433 of the 1933 Act, including timely Commission filing where required,
legending and record keeping.
3.3 Blue Sky
Filings. The Company will endeavor in good faith, in
cooperation with the Representatives, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representatives may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Representatives
agree that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such times as
are or may be required by the laws of such jurisdiction.
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3.4 Delivery to Underwriters of
Preliminary Prospectuses and Prospectuses. The Company will
deliver to each of the several Underwriters, without charge, from time to time
during the period when the Prospectus is required to be delivered under the Act
or the Exchange Act such number of copies of each Preliminary Prospectus and
Prospectus and all amendments and supplements to such documents as such
Underwriters may reasonably request and, as soon as the Registration Statement
or any amendment or supplement thereto becomes effective, deliver to
Representatives two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.5 Effectiveness and Events
Requiring Notice to the Representatives. The Company will use
its best efforts to cause the Registration Statement to remain effective with a
current prospectus and will notify the Representatives immediately and confirm
the notice in writing of: (i) the effectiveness of the Registration Statement
and any amendment thereto; (ii) the issuance by the Commission of any stop order
or of the initiation, or the threatening, of any proceeding for that purpose;
(iii) the issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Public Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose; (iv) the mailing and delivery to the Commission for filing of any
amendment or supplement to the Registration Statement or Prospectus; (v) the
receipt of any comments or request for any additional information from the
Commission; and (vi) the happening of any event during the period described in
this Section 3.5 hereof that, in the judgment of the Company, makes any
statement of a material fact made in the Registration Statement and the
Prospectus untrue or that requires the making of any changes in the Registration
Statement and the Prospectus in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. If
the Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
3.6 Review of Financial
Statements. For a period of three (3) years from the Effective
Date, the Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company’s financial
statements for each of the first three fiscal quarters prior to the announcement
of quarterly financial information, the filing of the Company’s Form 10-Q
quarterly report and the mailing of quarterly financial information to
stockholders.
3.7 Secondary Market Trading and
Standard & Poor’s. The Company will apply to be included
in Standard & Poor’s Daily News and Corporation Records Corporate
Descriptions for a period of three (3) years immediately after the Effective
Date.
3.8 Reports to the
Representatives.
3.8.1 Periodic Reports,
Etc. For a period of three (3) years from the Effective Date,
the Company will furnish to the Representatives copies of such financial
statements and other periodic and special reports as the Company from time to
time furnishes generally to holders of any class of its securities, and also
promptly furnish to the Representatives: (i) a copy of each periodic report the
Company shall be required to file with the Commission; (ii) a copy of every
press release and every news item and article with respect to the Company or its
affairs which was released by the Company; (iii) a copy of each Form 8-K or
Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared and filed by the
Company; (iv) five copies of each Registration Statement; and (v) such
additional documents and information with respect to the Company and the affairs
of any future subsidiaries of the Company as the Representatives may from time
to time reasonably request; provided that the
Representatives shall sign, if requested by the Company, a Regulation FD
compliant confidentiality agreement which is reasonably acceptable to the
Representatives and Mintz Levin in connection with the Representatives’ receipt
of such information. Documents filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”) shall be deemed to
have been delivered to the Representatives pursuant to this
Section.
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3.8.2 Transfer
Sheets. For a period of three (3) years following the
Effective Date, the Company shall retain a transfer and warrant agent acceptable
to the Representatives (the “Transfer Agent”) and during
the two (2) year period following the Closing Date, will furnish to the
Underwriters at the Company’s sole cost and expense such transfer sheets of the
Company’s securities as the Representatives may request, including the daily and
monthly consolidated transfer sheets of the Transfer Agent and
DTC. Continental Stock Transfer and Trust Company is an acceptable
Transfer Agent to the Underwriters.
3.8.3 Trading
Reports. During such time as the Public Securities are listed
on the NASDAQ Stock Market, the Company shall provide to the Representatives, at
its expense, such reports published by NASDAQ relating to price trading of the
Public Securities, as the Representatives shall reasonably
request. In addition to the requirements of the preceding sentence,
for a period of two (2) years from the Closing Date, the Company, at its
expense, shall provide the Representatives with a subscription to the Company’s
weekly Depository Transfer Company Security Position Reports.
3.9 Disqualification of Form
S-1. For a period equal to seven (7) years from the
date hereof, the Company will not take any action or actions which may prevent
or disqualify the Company’s use of Form S-1 (or other appropriate form) for the
registration of the Warrants and the Representatives’ Purchase Option and the
securities underlying the Representatives’ Purchase Option under the
Act.
3.10 Payment of
Expenses.
3.10.1 General Expenses Related to
the Offering. The Company hereby agrees to pay on each of the
Closing Date and the Option Closing Date, if any, to the extent not paid at the
Closing Date, all expenses incident to the performance of the obligations of the
Company under this Agreement, including, but not limited to: (a) all filing fees
and communication expenses relating to the registration of the Public Securities
to be sold in the Offering with the Commission; (b) all COBRADesk filing fees
associated with the review of the Offering by FINRA; (c) all fees and expenses
relating to the listing of such Shares on the NASDAQ Capital Market or such
other stock exchanges as the Company and the Underwriters together determine;
(d) all fees, expenses and disbursements relating to background
checks of the Company’s officers and directors in an amount not to exceed $2,500
per individual; (e) all fees, expenses and disbursements relating to the
registration or qualification of such Shares under the “blue sky” securities
laws of such states and other jurisdictions as the Underwriters may reasonably
designate (including, without limitation, all filing and registration fees, and
the reasonable fees and disbursements of the Underwriters’ counsel, it being
agreed that if the Offering is commenced on the Over the Counter Bulletin Board,
the Company will make a payment of $10,000 to such counsel upon the commencement
of “blue sky” work by such counsel and an additional $10,000 at Closing); (f)
all fees, expenses and disbursements relating to the registration, qualification
or exemption of such Shares under the securities laws of such foreign
jurisdictions as the Underwriters may reasonably designate; (g) the costs of all
mailing and printing of the underwriting documents (including, without
limitation, the Underwriting Agreement, any Blue Sky Surveys and, if
appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement,
Underwriters’ Questionnaire and Power of Attorney), Registration Statements,
Prospectuses and all amendments, supplements and exhibits thereto and as many
preliminary and final Prospectuses as the Underwriters may reasonably deem
necessary, (h) the costs of preparing, printing and delivering certificates
representing the Shares; (i) fees and expenses of the transfer agent for the
Shares; (j) stock transfer and/or stamp taxes, if any, payable upon the transfer
of securities from the Company to the Underwriter; (k) the costs associated with
bound volumes of the public offering materials, which the Company or its
designee will provide within a reasonable time after the Closing in such
quantities as the Underwriters may reasonably request; (l) the fees and expenses
of the Company’s accountants; (m) the fees and expenses of the Company’s legal
counsel and other agents and representatives; and (n) up to $10,000 to cover the
Underwriters’ actual “road show” expenses for the Offering, including, but not
limited to, the expenses incurred in connection with one or more “road show”
marketing trips, while the Commission is reviewing the Registration Statement,
for the Company’s management to meet with prospective investors. Such trips will
include visits to a number of prospective institutional and retail investors.
The Company will pay for its own expenses, including, without limitation, the
costs of recording and hosting on the Internet of the Company’s road show
presentation and travel and lodging expenses associated with such trips. During
the 45-day period prior to the filing of the Registration Statement with the
Commission, and at all times thereafter prior and following the effectiveness of
the Registration Statement, the Company and its officers, directors and related
parties will abide by all rules and regulations of the Commission relating to
public offerings, including, without limitation, those relating to public
statements (i.e., “gun jumping”) and disclosures of material non-public
information. In addition, the Company will not, without the prior written
consent of the Representatives, make any offer relating to the Units that would
constitute an “issuer free writing prospectus,” as defined in Rule 433 under the
Securities Act, or that would otherwise constitute a “free writing prospectus,”
as defined in Rule 405 under the Securities Act required to be filed with the
Commission.
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3.10.2 In
addition to the Company’s responsibility for payment of the foregoing expenses,
the Company shall pay to the Representatives a non-accountable expense allowance
(the “Non-Accountable Expense
Allowance”) equal to one percent (1.0%) of the gross proceeds of the
Offering, which shall be paid at the Closing Date. Notwithstanding the
foregoing, the Representatives acknowledge that the Company has paid the
Representatives $50,000 in connection with the execution of the engagement
letter between the Company and the Representatives, which shall be applied
against the Non-Accountable Expense Allowance.
3.11 Application of Net
Proceeds. The Company will apply the net proceeds from the
Offering received by it in a manner consistent with the application described
under the caption “Use of
Proceeds” in the Prospectus.
3.12 Delivery of Earnings
Statements to Security Holders. The Company will make
generally available to its security holders as soon as practicable, but not
later than the first day of the fifteenth (15th) full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve (12)
consecutive months beginning after the Effective Date.
3.13 Stabilization.
Neither the Company, nor, to its knowledge, any of its employees, directors or
stockholders (without the consent of the Representatives) has taken or will
take, directly or indirectly, any action designed to or that has constituted or
that might reasonably be expected to cause or result in, under the Exchange Act,
or otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Units.
3.14 Internal
Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management’s general or specific
authorization; (ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
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3.15 Accountants. As
of the Effective Date, the Company shall retain independent public accountants
reasonably acceptable to the Representatives, and the Company shall continue to
retain a nationally recognized independent certified public accounting firm for
a period of at least three years after the Effective Date. The
Representatives acknowledge that Marcum is acceptable to them.
3.16 FINRA. The
Company shall advise the Representatives (who shall make an appropriate filing
with FINRA) and Mintz Levin if it becomes aware that any 5% or greater
stockholder of the Company becomes an affiliate or associated person of a FINRA
member participating in the distribution of the Public Securities.
3.17 Reservation of
Shares. The Company will reserve and keep available that
maximum number of its authorized but unissued securities which are issuable upon
exercise of the Warrants and the Representatives’ Purchase Option outstanding
from time to time.
3.18 No Fiduciary
Duties. The Company acknowledges and agrees that the
Representatives’ responsibility to the Company is solely contractual in nature
and that neither the Representatives’ nor their affiliates or any selling agent
shall be deemed to be acting in a fiduciary capacity, or otherwise owes any
fiduciary duty to the Company or any of its affiliates in connection with the
Offering and the other transactions contemplated by this Agreement.
4. Conditions of Underwriters’
Obligations. The obligations of the several Underwriters to
purchase and pay for the Units, as provided herein, shall be subject to the
continuing accuracy of the representations and warranties of the Company as of
the date hereof and as of each of the Closing Date and the Option Closing Date,
if any, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof and to the performance by the Company of its
obligations hereunder and to the following conditions:
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4.1
|
Regulatory
Matters.
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4.1.1 Effectiveness of
Registration Statement. The Registration Statement shall have
become effective not later than 5:00 P.M., New York time, on the date of this
Agreement or such later date and time as shall be consented to in writing by the
Representatives, and, at each of the Closing Date and the Option Closing Date,
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or shall be pending or contemplated by the Commission and any request on the
part of the Commission for additional information shall have been complied with
to the reasonable satisfaction of Mintz Levin.
4.1.2 FINRA
Clearance. By the Effective Date, the Representatives shall
have received clearance from the FINRA as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement.
4.1.3 No Commission Stop
Order. At each of the Closing Date and the Option Closing
Date, the Commission has not issued any order or threatened to issue any order
preventing or suspending the use of the Prospectus or any part thereof, and has
not instituted or threatened to institute any proceedings with respect to such
an order.
4.1.4 No Blue Sky Stop
Orders. No order suspending the sale of the Units in any
jurisdiction designated by the Representatives pursuant to the terms hereof
shall have been issued on either the Closing Date or the Option Closing Date,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
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4.1.5 Exchange
Clearance. On or before the Closing Date, the Company shall
make all filings required under applicable securities laws and by the NASDAQ
Stock Market (including any required registration under the Exchange Act) and on
the Closing Date, the Public Securities shall have been approved for listing on
NASDAQ.
4.2 Opinions of Counsel for the
Company. Ellenoff Grossman & Schole LLP, counsel for the
Company, shall have furnished to each of the Representatives, at the request of
the Company, their written opinion and 10b-5 statement, dated the Closing Date
or the Option Closing Date, as the case may be, and addressed to the
Underwriters, in form and substance reasonably satisfactory to the
Representatives, to the effect set forth in Exhibit B
hereto.
4.3 Comfort
Letter. At the time this Agreement is executed, and at each of
the Closing Date and the Option Closing Date, if any, Marcum shall have
furnished to each of the Representatives, at the request of the Company,
letters, dated the respective dates of delivery thereof and addressed to the
Underwriters, in form and substance reasonably satisfactory to the
Representatives, containing statements and information of the type customarily
included in accountants’ “comfort letters” to underwriters with respect to the
financial statements and certain financial and statistical information contained
in the Preliminary Prospectus, the Time of Sale Information, the Registration
Statement and the Prospectus; provided, that the letter delivered on the Closing
Date or the Option Closing Date, as the case may be, shall use a “cut-off” date
no more than three (3) Business Days prior to such Closing Date or such Option
Closing Date, as the case may be.
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4.4
|
Officers’
Certificates.
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4.4.1 Officers’
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representatives shall have received a certificate of
the Company signed by the Chief Executive Officer and the President of the
Company, dated the Closing Date or the Option Closing Date, as the case may be,
respectively, to the effect that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to and as of the Closing Date, or the Option
Closing Date, as the case may be, and that the conditions set forth in Section
4.5 hereof have been satisfied as of such date and that, as of Closing Date and
the Option Closing Date, as the case may be, the representations and warranties
of the Company set forth in Section 2 hereof are true and correct. In
addition, the Representatives will have received such other and further
certificates of officers of the Company as the Representatives may reasonably
request.
4.4.2 Secretary’s
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representatives shall have received a certificate of
the Company signed by the Secretary or Assistant Secretary of the Company, dated
the Closing Date or the Option Date, as the case may be, respectively,
certifying: (i) that the Charter Documents of the Company are true and complete,
have not been modified and are in full force and effect; (ii) that the
resolutions relating to the public offering contemplated by this Agreement are
in full force and effect and have not been modified; (iii) all correspondence
between the Company or its counsel and the Commission; and (iv) as to the
incumbency of the officers of the Company. The documents referred to
in such certificate shall be attached to such certificate.
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4.5 No Material
Changes. Prior to and on each of the Closing Date and the
Option Closing Date, if any: (i) there shall have been no material adverse
change or development involving a prospective material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) no action suit or proceeding, at law
or in equity, shall have been pending or threatened against the Company or any
Initial Stockholder before or by any court or federal or state commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus; (iii) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated or
threatened by the Commission; and (iv) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and shall conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
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4.6
|
Delivery of
Agreements.
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4.6.1 Effective Date
Deliveries. On the Effective Date, the Company shall have
delivered to the Representatives executed copies of this Agreement, the Lock-Up
Agreements and the Warrant Agreement.
4.6.2 Closing Date
Deliveries. On the Closing Date, the Company shall have
delivered to the Representatives and their designees executed copies of the
Representatives’ Purchase Option.
5. Indemnification.
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5.1
|
Indemnification of
Underwriters.
|
5.1.1 General. Subject
to the conditions set forth below, the Company agrees to indemnify and hold
harmless each Underwriter and each dealer selected by Representatives that
participates in the offer and sale of the Units (each a “Selected Dealer”) and each of
their respective directors, officers and employees and each person, if any, who
controls any such Underwriter (“Controlling Person”) within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against
any and all loss, liability, claim, damage and expense whatsoever (including but
not limited to any and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, whether arising out of any action between
any of the Underwriters and the Company or between any of the Underwriters and
any third party or otherwise) to which they or any of them may become subject
under the Act, the Exchange Act or any other federal, state or local statute,
law, rule, regulation or ordinance or at common law or otherwise or under the
laws, rules and regulation of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
in: (i) any Preliminary Prospectus, the Time of Sale Prospectus, the
Registration Statement or the Prospectus (as from time to time each may be
amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon exercise of the Representatives’ Purchase
Option; (iii) any materials or information provided to investors by, or with the
approval of, the Company in connection with the marketing of the Offering of the
Public Securities, including any “road show” or investor presentations made to
investors by the Company (whether in person or electronically); or (iv) any
application or other document or written communication (in this Section 5
collectively called “Application”) executed by the
Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Public Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the OTC Bulletin Board or NASDAQ or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to an Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Time of Sale
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereof, or in any Application, as the case may be. With
respect to any untrue statement or omission or alleged untrue statement or
omission made in the Preliminary Prospectus, the indemnity agreement contained
in this paragraph shall not inure to the benefit of any Underwriter to the
extent that any loss, liability, claim, damage or expense of such Underwriter
results from the fact that a copy of the Prospectus was not given or sent to the
person asserting any such loss, liability, claim or damage at or prior to the
written confirmation of sale of the Securities to such person as required by the
Act and the Regulations, and if the untrue statement or omission has been
corrected in the Prospectus, unless such failure to deliver the Prospectus was a
result of non-compliance by the Company with its obligations under Section 3.4
hereof. The Company agrees promptly to notify the Representatives of
the commencement of any litigation or proceedings against the Company or any of
its officers, directors or Controlling Persons in connection with the issue and
sale of the Securities or in connection with the Registration Statement or the
Prospectus.
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5.1.2 Procedure. If
any action is brought against an Underwriter, a Selected Dealer or a Controlling
Person in respect of which indemnity may be sought against the Company pursuant
to Section 5.1.1, such Underwriter or Selected Dealer shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of counsel
(subject to the reasonable approval of such Underwriter or Selected Dealer, as
the case may be) and payment of actual expenses. Such Underwriter,
Selected Dealer or Controlling Person shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such Underwriter, Selected Dealer or such Controlling
Person unless: (i) the employment of such counsel at the expense of the Company
shall have been authorized in writing by the Company in connection with the
defense of such action; (ii) the Company shall not have employed counsel to have
charge of the defense of such action; or (iii) such indemnified party or parties
shall have reasonably concluded that there may be defenses available to it or
them which are different from or additional to those available to the Company
(in which case the Company shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events the reasonable fees and expenses of not more than one additional firm of
attorneys (in addition to local counsel) selected by the Underwriter, Selected
Dealer and/or Controlling Person shall be borne by the
Company. Notwithstanding anything to the contrary contained herein,
if the Underwriter, Selected Dealer or Controlling Person shall assume the
defense of such action as provided above, the Company shall have the right to
approve the terms of any settlement of such action which approval shall not be
unreasonably withheld.
5.2 Indemnification of the
Company. Each Underwriter, severally and not jointly, agrees
to indemnify and hold harmless the Company, its directors, officers and
employees and agents who control the Company within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act against any and all loss, liability,
claim, damage and expense described in the foregoing indemnity from the Company
to the several Underwriters, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions made in any
Preliminary Prospectus, the Time of Sale Prospectus, the Registration Statement
or the Prospectus, or any amendment or supplement thereto, or in any
Application, in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to such Underwriter by or on
behalf of the Underwriter expressly for use in such Preliminary Prospectus, Time
of Sale Prospectus, Registration Statement or Prospectus, or any amendment or
supplement thereto or in any such Application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement, or the Prospectus, or
any amendment or supplement thereto or any Application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the several Underwriters
by the provisions of Section 5.1.2.
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5.3
|
Contribution.
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5.3.1 Contribution
Rights. In order to provide for just and equitable
contribution under the Act in any case in which: (i) any person entitled to
indemnification under this Section 5 makes claim for indemnification pursuant
hereto but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case; or (ii) contribution under the Act, the Exchange
Act or otherwise may be required on the part of any such person in circumstances
for which indemnification is provided under this Section 5, then, and in each
such case, the Company and the Underwriters shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
said indemnity agreement incurred by the Company and the Underwriters, as
incurred, in such proportions that the Underwriters are responsible for that
portion represented by the percentage that the underwriting discount appearing
on the cover page of the Prospectus bears to the initial offering price
appearing thereon and the Company is responsible for the balance; provided, that, no person
guilty of a 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. Notwithstanding the provisions of
this Section 5.3.1, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Public Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each director, officer and
employee of an Underwriter or the Company, as applicable, and each person, if
any, who controls an Underwriter or the Company, as applicable, within the
meaning of Section 15 of the Act shall have the same rights to contribution as
the Underwriters or the Company, as applicable.
5.3.2 Contribution
Procedure. Within fifteen (15) days after receipt by any party
to this Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party (“Contributing Party”), notify
the Contributing Party of the commencement thereof, but the omission to so
notify the Contributing Party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In
case any such action, suit or proceeding is brought against any party, and such
party notifies a Contributing Party or its representative of the commencement
thereof within the aforesaid fifteen (15) days, the Contributing Party will be
entitled to participate therein with the notifying party and any other
Contributing Party similarly notified. Any such Contributing Party
shall not be liable to any party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution on account of any settlement of any claim, action or proceeding
effected by such party seeking contribution without the written consent of such
Contributing Party. The contribution provisions contained in this
Section are intended to supersede, to the extent permitted by law, any right to
contribution under the Act, the Exchange Act or otherwise
available. The Underwriters’ obligations to contribute pursuant to
this Section 5.3 are several and not joint.
6. Representations and
Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Date or the Option Closing Date, if any, and such
representations, warranties and agreements of the Underwriters and Company,
including the indemnity agreements contained in Section 5 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company or any Controlling Person, and
shall survive termination of this Agreement or the issuance and delivery of the
Securities to the several Underwriters until the earlier of the expiration of
any applicable statute of limitations and the seventh anniversary of the later
of the Closing Date or the Option Closing Date, if any, at which time the
representations, warranties and agreements shall terminate and be of no further
force and effect.
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7. Additional
Covenants.
7.1 Board Composition and Board
Designations. The Company shall ensure that: (i) the
qualifications of the persons serving as board members and the overall
composition of the board comply with the Sarbanes-Oxley Act of 2002 and the
rules promulgated thereunder and with the listing requirements of, NASDAQ or any
other national securities exchange or national securities association, as the
case may be, in the event the Company seeks to have its Public Securities listed
on another exchange or quoted on an automated quotation system, and (ii) if
applicable, at least one member of the board of directors qualifies as a
“financial expert” as such term is defined under the Sarbanes-Oxley Act of 2002
and the rules promulgated thereunder.
7.2 Prohibition on Press
Releases and Public Announcements. The Company will not issue
press releases or engage in any other publicity, without the Representatives’
prior written consent, for a period ending at 5:00 p.m. Eastern time on the
first business day following the 40th day following the Closing Date, other than
normal and customary releases issued in the ordinary course of the Company’s
business.
8. Effective Date of this
Agreement and Termination hereof.
8.1 Effective
Date. This Agreement shall become effective when both the
Company and the Representatives have executed the same and delivered
counterparts of such signatures to such other party.
8.2 Termination. This
Agreement may be terminated in the absolute discretion of the Representatives,
by notice to the Company, if after the execution and delivery of this Agreement
and prior to the Closing Date or, in the case of the Option Units, prior to the
Option Closing Date: (i) trading generally shall have been suspended or
materially limited on or by any of the New York Stock Exchange, the NYSE Amex,
the NASDAQ Stock Market or the Financial Industry Regulatory Authority; (ii)
trading of any securities issued or guaranteed by the Company shall have been
suspended on any exchange or in any over-the-counter market; (iii) a general
moratorium on commercial banking activities shall have been declared by federal
or New York State authorities; (iv) there shall have occurred any outbreak or
escalation of hostilities or any change in financial markets or any calamity or
crisis, either within or outside the United States, that, in the judgment of the
Representatives, is material and adverse and makes it impracticable or
inadvisable to proceed with the offering, sale or delivery of the Securities on
the Closing Date or the Option Closing Date, as the case may be, on the terms
and in the manner contemplated by this Agreement, the Time of Sale Information
and the Prospectus; or (v) the representation in Section 3(b) is incorrect in
any respect.
8.3 Expenses. Whether
or not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company will pay or cause to be paid all costs and
expenses incident to the performance of its obligations hereunder, including
without limitation, the Company agrees to reimburse the Representatives for, or
otherwise pay and bear, the expenses and fees to be paid and borne by the
Company as provided herein and to reimburse the Representatives for the full
amount of their actual accountable expenses incurred as of the termination date,
up to a maximum or $100,000 for all such expenses (which expenses shall include,
but will not be limited to, all reasonable fees and disbursements of the
Representatives’ counsel, travel, lodging and other “road show” expenses,
mailing, printing and reproduction expenses, and any expenses incurred by the
Representatives in conducting due diligence, including background checks of the
Company’s officers and directors), less amounts, if any, previously paid to the
Representatives in reimbursement for such expenses.
- 23
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8.4 Indemnification. Notwithstanding
any contrary provision contained in this Agreement, any election hereunder or
any termination of this Agreement, and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 shall not be in any way
effected by, such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
9. Defaulting
Underwriter.
9.1 If,
on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter defaults on its obligation to purchase the Securities that it has
agreed to purchase hereunder on such date, the non-defaulting Underwriters may
in their discretion arrange for the purchase of such Securities by other persons
satisfactory to the Company on the terms contained in this Agreement. If, within
36 hours after any such default by any Underwriter, the non-defaulting
Underwriters do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of 36 hours within which to
procure other persons satisfactory to the non-defaulting Underwriters to
purchase such Securities on such terms. If other persons become obligated or
agree to purchase the Securities of a defaulting Underwriter, either the
non-defaulting Underwriters or the Company may postpone the Closing Date or the
Option Closing Date, as the case may be, for up to five (5) full business days
in order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement and
the Prospectus or in any other document or arrangement, and the Company agrees
to promptly prepare any amendment or supplement to the Registration Statement
and the Prospectus that effects any such changes. As used in this Agreement, the
term “Underwriter” includes, for all purposes of this Agreement unless the
context otherwise requires, any person not listed in Schedule 1 hereto
that, pursuant to this Section 9, purchases Securities that a defaulting
Underwriter agreed but failed to purchase.
9.2 If,
after giving effect to any arrangements for the purchase of the Securities of a
defaulting Underwriter or Underwriters by the non-defaulting Underwriters and
the Company as provided in Section 9.1 above, the aggregate number of Securities
that remain unpurchased on the Closing Date or the Option Closing Date, as the
case may be, does not exceed one-eleventh of the aggregate number of Securities
to be purchased on such date, then the Company shall have the right to require
each non-defaulting Underwriter to purchase the number of Securities that such
Underwriter agreed to purchase hereunder on such date plus such Underwriter’s
pro rata share (based on the number of Securities that such Underwriter agreed
to purchase on such date) of the Securities of such defaulting Underwriter or
Underwriters for which such arrangements have not been made.
9.3 If,
after giving effect to any arrangements for the purchase of the Securities of a
defaulting Underwriter or Underwriters by the non-defaulting Underwriters and
the Company as provided in Section 9.1 above, the aggregate number of Securities
that remain unpurchased on the Closing Date or the Option Closing Date, as the
case may be, exceeds one-eleventh of the aggregate amount of Securities to be
purchased on such date, or if the Company shall not exercise the right described
in Section 9.2 above, then this Agreement or, with respect to any Additional
Closing Date, the obligation of the Underwriters to purchase Securities on the
Option Closing Date, as the case may be, shall terminate without liability on
the part of the non-defaulting Underwriters. Any termination of this Agreement
pursuant to this Section 9 shall be without liability on the part of the
Company, except that the Company will continue to be liable for the payment of
expenses as set forth in Section 8.3 hereof and except that the provisions of
Section 5 hereof shall not terminate and shall remain in
effect.
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9.4 Nothing
contained herein shall relieve a defaulting Underwriter of any liability it may
have to the Company or any non-defaulting Underwriter for damages caused by its
default.
10.
Miscellaneous.
10.1 Notices. All
communications hereunder, except as herein otherwise specifically provided,
shall be in writing and shall be mailed (registered or certified mail, return
receipt requested), personally delivered or sent by facsimile transmission and
confirmed and shall be deemed given when so delivered or faxed (and confirmed,
if mailed, two (2) days after such mailing):
If to the
Representatives:
Sunrise
Securities Corp.
641
Lexington Avenue, 25th
Floor
New York,
NY 10022
Attn: ●
Fax: ●
and
Rodman
& Renshaw, LLC
1251
Avenue of the Americas, 20th
Floor
New York,
New York 10020
Attn: ●
Fax: ●
With a
copy (which shall not constitute notice) to:
Mintz
Levin Cohn Ferris Glovsky and Popeo, P.C.
666 Third
Avenue
New York,
New York 10017
Attn.:
Kenneth R. Koch, Esq.
Fax: (212)
983-3115
If to the
Company:
SMG
Indium Resources Ltd.
41
University Drive, Suite 400
Newtown,
Pennsylvania 18940
Attn.: ●
Fax: ●
With a
copy (which shall not constitute notice) to:
Ellenoff
Grossman & Schole LLP
150 East
42nd Street
New York,
New York 10017
Attn:
David Selengut, Esq.
Fax:
(212) 370-7889
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10.2 Headings. The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of any of
the terms or provisions of this Agreement.
10.3 Amendment. This
Agreement may only be amended by a written instrument executed by each of the
parties hereto.
10.4 Entire
Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
10.5 Binding
Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon the Representatives, the Underwriters, the Company and
the Controlling Persons, directors and officers referred to in Section 5 hereof,
and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. The term “successors and assigns” shall not include
a purchaser, in its capacity as such, of securities from an
Underwriter.
10.6 Governing Law, Venue,
etc.
10.6.1 This
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of New York, without giving effect to the conflict of laws
principles thereof. Each of the Representatives and the Company (and
any individual signatory hereto): (i) agrees that any legal suit, action or
proceeding arising out of or relating to this agreement and/or the transactions
contemplated hereby shall be instituted exclusively in New York Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York; (ii) waives any objection which such party may have or
hereafter to the venue of any such suit, action or proceeding; and (iii)
irrevocably and exclusively consents to the jurisdiction of the New York Supreme
Court, County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding.
10.6.2 Each
of the Representatives and the Company (and any individual signatory hereto)
further agrees to accept and acknowledge service of any and all process which
may be served in any such suit, action or proceeding in the New York Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agrees that service of process upon the
Company or any such individual mailed by certified mail to the Company’s address
shall be deemed in every respect effective service of process upon the Company
or any such individual in any such suit, action or proceeding, and service of
process upon the Representatives mailed by certified mail to the
Representatives’ addresses shall be deemed in every respect effective service
process upon the Representatives, in any such suit, action or
proceeding.
10.6.3 THE
COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ON
BEHALF OF ITS EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES ANY RIGHT TO A TRIAL
BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
REGISTRATION STATEMENT AND THE PROSPECTUS.
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10.6.4 The
Company agrees that the prevailing party(ies) in any such action shall be
entitled to recover from the other party(ies) all of its reasonable attorneys’
fees and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
10.7 Execution in
Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto. Delivery of a signed counterpart
of this Agreement by facsimile or email/.pdf transmission shall constitute valid
and sufficient delivery thereof.
10.8 Waiver,
etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Agreement shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
(Remainder
of page intentionally left blank. Signature page(s) to
follow.)
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If the
foregoing correctly sets forth the understanding between the Underwriters and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between
us.
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Very
truly yours,
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SMG
INDIUM RESOURCES LTD.
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By:
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Name:
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Title:
|
||||
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Agreed
to and accepted on the
date
first above written.
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SUNRISE
SECURITIES CORP.
as
Representative of the several Underwriters
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By:
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Name:
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||||
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Title:
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||||
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RODMAN
& RENSHAW, LLC
as
Representative of the several Underwriters
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By:
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Name:
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Title:
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||||
SCHEDULE
1
SMG
INDIUM RESOURCES LTD.
5,000,000
Units
|
Underwriter
|
Number of Firm Units
to be Purchased
|
|
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Sunrise
Securities Corp.
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Rodman
& Renshaw, LLC
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5,000,000
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EXHIBIT
A
FORM
OF LOCK-UP AGREEMENT
EXHIBIT
B
FORM OF LEGAL OPINION OF
COMPANY’S COUNSEL