Attached files
Exhibit 1.1
IRON EAGLE GROUP, INC.
(formerly known as Pinnacle Resources, Inc.)
3,000,000 Shares of Common Stock
UNDERWRITING AGREEMENT
August 5, 2011
Aegis Capital Corporation
810 Seventh Avenue, 11th Floor
New York, NY 10019
Ladies and Gentlemen:
Iron Eagle Group, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell, pursuant to the terms of this Underwriting
Agreement (the "Agreement") and the Subscription Agreement in the form
of Exhibit A attached hereto (the "Subscription Agreement"), on a best
efforts, minimum/maximum basis, a minimum of 2,000,000 shares and a
maximum of up to 3,000,000 shares (the "Shares") of common stock, par
value $0.00001 per share (the "Common Stock") to investors (the
"Investors").
The Company hereby confirms its agreement with Aegis to act as lead
underwriter in connection with such issuance and sale of the Shares,
and in particular agrees as follows:
1. Agreement to Act as Underwriter.
(i) On the basis of the representations, warranties and agreements
of the Company herein contained and subject to all the terms and
conditions of this Agreement, the Company hereby appoints Aegis Capital
Corporation ("Aegis"), and Aegis agrees to act, as the Company's lead
underwriter in connection with the issuance and sale, on a best-
efforts, minimum/maximum basis, by the Company of the Shares to the
Investors. The Company agrees that the FINRA registered broker-dealers
listed on Schedule 1 hereto shall act as co-underwriters for the Shares
(such co-underwriters, collectively with Aegis, the "Underwriters"), it
being agreed, however, that Aegis and such other co-underwriters
selected by Aegis shall be the exclusive underwriters for the Shares.
(ii) The Company shall pay to the Underwriters 7% of the proceeds
received by the Company from the sale of the Shares as set forth on the
cover page of the Prospectus (as hereinafter defined).
(iii) The Company will also issue to the Underwriters warrants to
purchase Common Stock (the "Underwriter Warrants") in an amount equal
to 4% of the Shares as set forth on the cover page of the Prospectus,
subject to certain adjustments, and allocated between them as they
shall mutually agree. The Underwriter Warrants will be subject to the
180-day lock-up provision of FINRA Rule 5110(g). The Underwriter
Warrants will also be non-exercisable for six (6) months after the
Closing Date and will expire five (5) years after the Effective Date of
the Registration Statement. The Underwriter Warrants are exercisable
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at $6.00 per share, equal to 120% of public offering price of the
Shares and shall not be redeemable by the Company, contain provisions
for one demand registration of the sale of the underlying shares of
common stock at the Company's expense, an additional demand
registration at the warrant holder's expense, and unlimited "piggyback"
registration rights for a period of five years after the Effective Date
at the Company's expense to the extent that the Registration Statement
is not effective at the time of exercise.
(iv) The Company shall pay to the Underwriters a non-accountable
expense allowance equal to 2.0% of the gross proceeds of the offering.
(v) The Company shall pay to Aegis advances against their
anticipated out-of-pocket expenses as follows: (i) $10,000 upon
execution of the initial engagement letter, which has previously been
paid, and (ii) up to $10,000 after receipt of the effective order if
the hourly billing of Meister Seelig & Fein LLP exceeds $10,000.
(vi) The Shares are being sold at a price of $5.00 per share (the
"Purchase Price"). The purchases of the Shares shall be evidenced by
the execution of Subscription Agreements by each of the Investors and
the Company. The offering contemplated hereby shall commence on the
date hereof and shall expire, inclusive of any extensions, on the
earliest to occur of: (i) September 2, 2011; or (ii) the Maximum Amount
is sold pursuant to this prospectus (the "Closing Date"). The period
of time set forth in this Section 1(f) is referred to herein as the
"Offering Period."
(vii) Subject to the provisions of this Agreement and to the
performance by the Company of all of its obligations to be performed
hereunder, the Underwriters agree to use their best efforts to assist
in arranging for sales of Shares. The Company recognizes that "best
efforts" does not assure that the offering contemplated hereby will be
consummated. It is understood and agreed that the Underwriters shall
not and are under no obligation to purchase any Shares for their own
account and that this Agreement does not create any partnership, joint
venture or other similar relationship between or among the Underwriters
and the Company.
2. Delivery and Payment.
(a) Concurrently with the execution and delivery of this Agreement,
the Company, the Underwriters, and the Signature Bank, as escrow agent
(the "Escrow Agent"), shall enter into an Escrow Agreement
substantially in the form of Exhibit C attached hereto (the "Escrow
Agreement"), pursuant to which an escrow account will be established,
at the Company's expense, for the benefit of the Investors (the "Escrow
Account"). Prior to any Closing Date (as hereinafter defined): (i)
each of the Investors will deposit in the Escrow Account an amount
equal to the price per Share as shown on the cover page of the
Prospectus (as hereinafter defined) multiplied by the number of Shares
purchased by it, and (ii) on the last business day of each week
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following the Effective Date (or such earlier date as may be reasonably
requested by the Company or Aegis), the Escrow Agent will notify the
Company and Aegis in writing of the amount of the funds then being held
by the Escrow Agent in payment for the Shares (the "Received Funds").
(b) At 10:00 a.m., New York City time, on such date as may be
agreed to as the Closing Date, the Escrow Agent will release the
Received Funds from the Escrow Account to each of the Company and the
Underwriters as provided in the Escrow Agreement, and the Company shall
deliver the Shares purchased thereby to the Investors, and the
Underwriter Warrants relating thereto to Aegis. The Company shall
deliver or cause to be delivered the Shares to the Investors with the
delivery of the Shares to be made through the facilities of The
Depositary Trust Company's DWAC system (or, if requested by any
investor, as indicated on the signature page of the Subscription
Agreement for such Investors, through the physical delivery of
certificates evidencing the Shares purchased by such Investor to the
residential or business address indicated on such signature page).
(c) One or more closings of the transactions contemplated hereby
(each, a "Closing") may be undertaken during the Offering Period. Such
Closings shall take place at the offices of Meister Seelig & Fein LLP,
counsel to the Underwriters ("Underwriter Counsel") at Two Grand
Central Tower, 140 East 45th Street, New York, NY 10017, or at such
other place as the Company and Aegis may agree. All actions taken at
any Closing shall be deemed to have occurred simultaneously. The
conditions set forth herein and the obligations of the Company set
forth herein shall apply equally to each Closing.
3. Representations and Warranties of the Company. The Company
represents and warrants and covenants to the Underwriters that:
(a) A registration statement (including all pre-effective effective
amendments thereto and all post-effective amendments thereto filed
before the execution of this Agreement, the "Registration Statement")
on Form S-1 (File No. 333-173705) with respect to the Shares and the
shares of Common Stock underlying the Underwriter Warrants
("Underwriter Warrant Shares") has been prepared by the Company in
conformity with the requirements of the Securities Act and the rules
and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission"), has been filed with the
Commission and has become effective. The Company and the transactions
contemplated by this Agreement meet the requirements and comply with
the conditions for the use of Form S-1. As used in this Agreement:
(i) "Applicable Time" means 5:30 p.m. (New York City time) on the
date of this Agreement;
(ii) "Effective Date" means the date as of which the Registration
Statement became, or is deemed to have become, effective under the
Securities Act in accordance with the Rules and Regulations;
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(iii) "Prospectus" means, collectively, each of: (i) the
preliminary prospectus relating to the Shares, dated _______, 2011,
(ii) the Company's free writing prospectus, dated ____, 2011 (the
"Approved FWP") and (iii) the final prospectus relating to the Shares,
including any prospectus contained in any post-effective amendment to
the Registration Statement and/or supplement thereto relating to the
Shares, in each case as filed with the Commission pursuant to the Rules
and Regulations; and
(iv) "Registration Statement" means, collectively, the various
parts of such registration statement, each as amended as of the
Effective Date for such part, including the Prospectus and all exhibits
to such registration statement.
(b) The Registration Statement has heretofore become effective
under the Securities Act or, with respect to any registration statement
to be filed to register the offer and sale of Shares pursuant to Rule
462(b) under the Securities Act, will be filed with the Commission and
become effective under the Securities Act no later than 10:00 p.m., New
York City time, on the date of determination of the public offering
price for the Shares. No stop order of the Commission preventing or
suspending the use of any Prospectus, or the effectiveness of the
Registration Statement, has been issued, and no proceedings for such
purpose have been instituted or, to the Company's knowledge, are
contemplated by the Commission.
(c) The Registration Statement, at the time it became effective, as
of the date hereof, and as of each Closing Date, conformed and will
conform in all material respects to the requirements of the Securities
Act and the Rules and Regulations. The Prospectus conforms to the
requirements of the Securities Act and the Rules and Regulations.
(d) The Registration Statement did not, as of the Effective Date,
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(e) The Prospectus will not, as of its date and as of each Closing
Date, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representation or warranty with respect to any statement contained in
the Prospectus in reliance upon and in conformity with information
concerning the Underwriters and furnished in writing by the
Underwriters to the Company expressly for use in the Prospectus, as set
forth in Section 8(b).
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(f) The exhibits filed as part of the Registration Statement, at
the time they were or hereafter are filed with the Commission, complied
and will comply in all material respects with the requirements of the
Securities Act, the Securities Exchange Act of 1934 (the "Exchange
Act") and the Rules and Regulations, and, when read together with the
other information in the Prospectus, do not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. There are no contracts or other documents (including,
without limitation, any voting agreement), which are required to be
described in the Registration Statement and the Prospectus or filed as
exhibits to the Registration Statement by the Securities Act, the
Exchange Act or the Rules and Regulations and which have not been so
described, filed or incorporated by reference. All such contracts and
other documents to which the Company is a party have been authorized,
executed and delivered by the Company, constitute valid and binding
agreements of the Company, and are enforceable against the Company in
accordance with the terms thereof, subject to the effect of applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and equitable principles of general applicability.
(g) The statistical, industry-related and market-related data
included in the Registration Statement and the Prospectus are based on
or derived from sources which the Company reasonably and in good faith
believes are reliable and, in all material respects, accurate. Such
data agree with the sources from which they are derived.
(h) The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Exchange Act (the "SEC
Reports"). Each SEC Report was, at the time of its filing, in
compliance in all material respects with the requirements of its
respective form and none of the SEC Reports, nor the financial
statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(i) The Company is, and as of each Closing Date will be, duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has, and as of each Closing Date will
have, full power and authority to conduct all the activities conducted
by it, to own or lease all the assets owned or leased by it and to
conduct its business as described in the Registration Statement and the
Prospectus. The Company is, and as of each Closing Date will be, duly
licensed or qualified to do business and in good standing as a foreign
organization in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it
makes such licensing or qualification necessary, except where the
failure to be so qualified or in good standing or have such power or
authority would not, individually or in the aggregate, have a material
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adverse effect or would not reasonably be expected to have a material
adverse effect on or affecting the business, properties, those
prospects specifically described in the Registration Statement and the
Prospectus, management, consolidated financial position, stockholders'
equity or results of operations of the Company and its Subsidiaries (as
defined below) taken as a whole (a "Material Adverse
Effect"). Complete and correct copies of the articles or certificate
of incorporation and of the bylaws of the Company and all amendments
thereto have been delivered to the Underwriters, and no changes therein
will be made subsequent to the date hereof and prior to the Initial
Closing Date, except as described in the Registration Statement.
(j) Schedule 3 of this Agreement contains a true and complete list
of all of the subsidiaries (each, a "Subsidiary" and collectively, the
"Subsidiaries"). Each Subsidiary has been duly organized and validly
exists as a corporation in good standing under the laws of its
jurisdiction of formation. The Subsidiaries are duly qualified and in
good standing as a foreign corporation in each jurisdiction in which
the character or location of its properties (owned, leased or licensed)
or the nature or conduct of its business makes such qualification
necessary, except for those failures to be so qualified or in good
standing which will not have a Material Adverse Effect. All of the
shares of issued capital stock of the Subsidiaries has been duly
authorized and validly issued, are fully paid and non-assessable and
are owned directly or indirectly by the Company, free and clear of any
lien, encumbrance, claim, security interest, restriction on transfer,
shareholders' agreement, voting trust or other defect of title
whatsoever.
(k) The issued and outstanding shares of capital stock of the
Company have been validly issued, are fully paid and nonassessable and,
other than as set forth in the Registration Statement, are not subject
to any preemptive rights, rights of first refusal or similar
rights. The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus as of the dates referred
to therein. The descriptions of the securities of the Company in the
Registration Statement and the Prospectus are, and as of each Closing
Date will be, complete and accurate in all respects. Except as set
forth in the Registration Statement and the Prospectus, the Company
does not have outstanding any options to purchase, or any rights or
warrants to subscribe for, or any securities or obligations convertible
into, or exchangeable for, or any contracts or commitments to issue or
sell, any shares of capital stock or other securities other than the
Shares.
(l) The Company has full legal right, power and authority to enter
into this Agreement, the Subscription Agreements and the Escrow
Agreement (together, the "Transaction Documents") and perform the
transactions contemplated hereby and thereby. The Transaction
Documents have been authorized and validly executed and delivered by
the Company and are legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their respective
terms, subject to the
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effect of applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and equitable principles of general
applicability.
(m) As of the date hereof, there are 1,506,333 shares of Common
Stock (after taking into account the Company's Eight (8) for One (1)
reverse stock split) issued and outstanding and no shares of preferred
stock, par value $0.00001, issued and outstanding. As of the date
hereof, there are 1,880,552 shares of Common Stock issuable upon the
exercise of all options, warrants and convertible securities
outstanding.
(n) The issuance and sale of each of the Shares have been duly
authorized by the Company, and the Shares, when issued and paid for in
accordance with this Agreement, will be duly and validly issued, fully
paid and nonassessable and will not be subject to preemptive or similar
rights. The Underwriter Warrant Shares have been duly authorized and
reserved for issuance pursuant to the terms of the Underwriter
Warrants, and the Warrants Shares, when issued by the Company upon
valid exercise of the Underwriter Warrants, and payment of the exercise
price, will be duly and validly issued, fully paid and nonassessable
and will not be subject to preemptive or similar rights. The holders
of the Shares will not be subject to personal liability by reason of
being such holders. The Shares, when issued, will conform in all
material respects to the description thereof set forth in or
incorporated into the Prospectus.
(o) The consolidated financial statements and the related notes
included in the Registration Statement and the Prospectus present
fairly, in all material respects, the financial condition of the
Company and its consolidated Subsidiaries as of the dates thereof and
the results of operations and cash flows at the dates and for the
periods covered thereby in conformity with generally accepted
accounting principles ("GAAP"). No other financial statements or
schedules of the Company, the Subsidiaries or any other entity are
required by the Securities Act or the Rules and Regulations to be
included in the Registration Statement or the Prospectus. All
disclosures contained in the Registration Statement and the Prospectus
regarding "non-GAAP financial measures" (as such term is defined by the
Rules and Regulations) comply with the Exchange Act and the Securities
Act, to the extent applicable. The Company and the Subsidiaries do not
have any material liabilities or obligations, direct or contingent
(including any off-balance sheet obligations or any variable interest
entities), not disclosed in the Registration Statement and the
Prospectus.
(p) There are no pro forma or as adjusted financial statements
which are required to be included in the Registration Statement and the
Prospectus in accordance with Regulation S-X under the Securities Act
which have not been included as so required. The pro forma and/or as
adjusted financial information included in the Registration Statement
and the Prospectus has been properly compiled and prepared in
accordance with the applicable requirements of the Securities Act and
the Rules and Regulations and include all adjustments necessary to
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present fairly, in accordance with GAAP and in all material respects,
the pro forma and as adjusted financial position of the respective
entity or entities presented therein at the respective dates indicated
and their cash flows and the results of operations for the respective
periods specified. The assumptions used in preparing the pro forma and
as adjusted financial information included in the Registration
Statement and the Prospectus provide a reasonable basis for presenting
the significant effects directly attributable to the transactions or
events described therein. The related pro forma and pro forma as
adjusted adjustments give appropriate effect to those assumptions; and
the pro forma and pro forma as adjusted financial information reflect
the proper application of those adjustments to the corresponding
historical financial statement amounts.
(q) The Hall Group, CPA (the "Accountants"), who have reported on
such consolidated financial statements and schedules, are registered
independent public accountants with respect to the Company as required
by the Securities Act and the Rules and Regulations and by the rules of
the Public Company Accounting Oversight Board. The consolidated
financial statements of the Company and the related notes and schedules
included in the Registration Statement and the Prospectus have been
prepared in conformity with the requirements of the Securities Act,
Exchange Act and the Rules and Regulations and present fairly the
information shown therein.
(r) There is and has been no failure on the part of the Company, or
to its knowledge, any of the Company's directors or officers, in their
capacities as such, to comply with any provisions of the Sarbanes Oxley
Act of 2002 and the rules and regulations promulgated therewith (the
"Sarbanes Oxley Act") applicable to the Company. Each of the principal
executive officer and the principal financial officer of the Company
(or each former principal executive officer of the Company and each
former principal financial officer of the Company, as applicable) has
made all certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act with respect to all reports, schedules, forms,
statements and other documents required to be filed by it with the
Commission. For purposes of the preceding sentence, "principal
executive officer" and "principal financial officer" shall have the
meanings given to such terms in the Sarbanes-Oxley Act. The Company
has taken all necessary actions to ensure that it is in compliance with
all provisions of the Sarbanes-Oxley Act that are in effect and with
which the Company is required to comply. The Company's Board of
Directors satisfies all "independence" requirements (as that term is
defined under applicable laws, rules and regulations), including,
without limitation, all members of the audit committee of the Company's
Board of Directors, meet the qualifications of independence as set
forth under applicable laws, rules and regulations and the audit
committee of the Company's Board of Directors has, or will have prior
to the approval of the listing of the Common Stock on the NASDAQ
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Capital Market ("NASDAQ") at least one member who is "financially
sophisticated" (as that term is defined under applicable laws, rules,
regulations and listing standards).
(s) The Company and its Subsidiaries maintain systems of internal
accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed
such disclosure controls and procedures to ensure that material
information relating to the Company and its Subsidiaries is made known
to the certifying officers by others within those entities,
particularly during the period in which the Company's Annual Report on
Form 10-K or Quarterly Report on Form 10-Q, as the case may be, is
being prepared. The Company presented in its Form 10-K for the year
ended December 31, 2010 (such date, the "Evaluation Date") the
conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no
significant changes in the Company's internal controls (as such term is
defined in Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the
Company's internal controls.
(t) Except as set forth in or otherwise contemplated by the
Registration Statement: (i) since the Evaluation Date and prior to the
Initial Closing Date, there has not been and will not have been any
change in the capital stock of the Company (except for changes in the
number of outstanding shares of Common Stock of the Company due to the
issuance of shares upon the exercise of stock options, the issuance of
shares upon the conversion of convertible promissory notes outstanding
as of the date hereof, or upon the grant of restricted stock pursuant
to the Company's authorized and approved employee incentive plans) or
long-term debt of the Company or the Subsidiaries or any dividend or
distribution of any kind declared, set aside for payment, paid or made
by the Company on any class of capital stock, or any material adverse
change, or any development that would reasonably be expected to result
in a material adverse change, in or affecting the business, properties,
those prospects specifically described in the Registration Statement
and the Prospectus, management, consolidated financial position,
stockholders' equity, or results of operations of the Company and its
Subsidiaries taken as a whole (a "Material Adverse Change") and (ii)
since the Evaluation Date, neither the Company nor the Subsidiaries
have sustained, and the Company is unaware of any existing condition
(other than those conditions occurring naturally and of equivalent risk
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to similarly situated businesses) with respect to any of its properties
that, to the knowledge of the Company, is reasonably likely to cause
the Company or its Subsidiaries to sustain, any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or
arbitrator or governmental or regulatory authority, except in each case
as otherwise disclosed in the Registration Statement and the
Prospectus.
(u) Since the date as of which information is given in the
Registration Statement, neither the Company nor the Subsidiaries have
entered or will enter into any transaction or agreement, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, or incurred or has reason to believe
that they will incur any liability or obligation, direct or contingent,
not in the ordinary course of business, that is material to the Company
and the Subsidiaries taken as a whole.
(v) Each of the Company and the Subsidiaries has good and valid
title to all real and personal property described in the Registration
Statement or the Prospectus as being owned by them that are material to
the businesses of the Company and the Subsidiaries taken as a whole, in
each case free and clear of all liens, encumbrances and claims except
those that: (i) do not materially interfere with the use made and
proposed to be made of such property by the Company and the
Subsidiaries or (ii) would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect. Any real property
described in the Registration Statement or the Prospectus as being
leased by the Company or the Subsidiaries that is material to the
business of the Company and the Subsidiaries taken as a whole is held
by them under valid, existing and enforceable leases, except those that
(A) do not materially interfere with the use made or proposed to be
made of such property by the Company and the Subsidiaries or (B) would
not be reasonably expected, individually or in the aggregate, to have a
Material Adverse Effect.
(w) The Company is not, nor upon completion of the transactions
contemplated herein will it be, an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
(x) There are no legal, governmental or regulatory actions, suits,
investigations or proceedings pending to which the Company, its
officers and directors or the Subsidiaries are a party or to which any
property of the Company or the Subsidiaries is the subject that,
individually or in the aggregate, if determined adversely to the
Company or the Subsidiaries, would reasonably be expected to have a
Material Adverse Effect or materially and adversely affect the ability
of the Company to perform its obligations under the Transaction
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Documents. To the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated by any governmental or
regulatory authority or threatened by others. To the Company's
knowledge, there are no current or pending legal, governmental or
regulatory investigations, actions, suits or proceedings that are
required under the Securities Act to be described in the Prospectus
that are not so described.
(y) Each of the Company and the Subsidiaries have, and as of each
Closing Date will have: (i) all governmental licenses, permits,
consents, orders, approvals and other authorizations necessary to carry
on its respective business as presently conducted except where the
failure to have such governmental licenses, permits, consents, orders,
approvals and other authorizations would not have a Material Adverse
Effect, (ii) complied with all laws, regulations and orders applicable
to either it or its business, except where the failure to so comply
would not have a Material Adverse Effect, and (iii) performed all its
obligations required to be performed, and is not, and as of each
Closing Date will not be, in default, under any indenture, mortgage,
deed of trust, voting trust agreement, loan agreement, bond, debenture,
note agreement, lease, contract or other agreement or instrument
(collectively, a "contract or other agreement") to which it is a party
or by which its property is bound or affected and, to the Company's
knowledge, no other party under any material contract or other
agreement to which it is a party is in default in any respect
thereunder, except where such default, individually or in the
aggregate, would not have a Material Adverse Effect. The Company and
the Subsidiaries are not in violation of any material provision of
their respective organizational or governing documents.
(z) The Company has all corporate power and authority to enter into
the Transaction Documents, and to carry out the provisions and
conditions hereof and thereof, and all consents, authorizations,
approvals and orders required in connection herewith and therewith have
been obtained, except such as have been obtained, such as may be
required under state securities or Blue Sky Laws or the by-laws and
rules of the Financial Industry Regulatory Authority or any successor
organization (the "FINRA") or the NASDAQ in connection with the
distribution of the Shares by the Underwriters.
(aa) Neither the execution of the Transaction Documents, nor the
issuance, offering or sale of the Shares, nor the consummation of any
of the transactions contemplated herein or in the Subscription
Agreements or Escrow Agreement, nor the compliance by the Company with
the terms and provisions hereof or thereof will conflict with, or will
result in a breach of, any of the terms and provisions of, or has
constituted or will constitute a default under, or has resulted in or
will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the
Subsidiaries pursuant to the terms of any contract or other agreement
to which the Company or the Subsidiaries may be bound or to which any
of the property or assets of
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the Company or the Subsidiaries are subject, except such conflicts,
breaches or defaults as may have been waived or such conflicts,
breaches or defaults, individually or in the aggregate, as shall not
result in a Material Adverse Effect; nor will such action result in any
violation of the provisions of the organizational or governing
documents of the Company or the Subsidiaries, or any statute or any
order, rule or regulation applicable to the Company or the Subsidiaries
or of any court or of any federal, state or other regulatory authority
or other government body having jurisdiction over the Company or the
Subsidiaries, except such violations, individually or in the aggregate,
that shall not result in a Material Adverse Effect.
(bb) No statement, representation or warranty made by the Company
in this Agreement or made in any certificate or document required by
the Transaction Documents to be delivered to the Underwriters, the
Investors or the Escrow Agent was or will be, when made, in light of
the circumstances under which such statement was made, inaccurate,
untrue or incorrect in any material respect.
(cc) The Company and its directors, officers or controlling persons
have not taken, directly or indirectly, any action intended, or which
might reasonably be expected, to cause or result, under the Exchange
Act or otherwise, in, or which has constituted, stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Common Stock.
(dd) No holder of securities of the Company has rights to the
registration of any securities of the Company as a result of the filing
of the Registration Statement or the transactions contemplated by this
Agreement, except for such rights as have been waived or satisfied, or
as described in the Registration Statement.
(ee) The Company's Common Stock is not currently quoted or traded
on any national exchange or trading market. The Company has applied
to list its Common Stock the NASDAQ Capital Market. The Company has no
reason to believe that it will not in the foreseeable future continue
to be in compliance with all listing and maintenance requirements of
the NASDAQ Capital Market.
(ff) The Company is not involved in any material labor dispute nor
is any such dispute known by the Company to be threatened.
(gg) The business and operations of the Company and the
Subsidiaries have been and are being conducted in compliance with all
applicable laws, ordinances, rules, regulations, licenses, permits,
approvals, plans, authorizations or requirements relating to
occupational safety and health, or pollution, or protection of health
or the environment (including, without limitation, those relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic substances, materials or wastes into
ambient air, surface water, groundwater or land, or relating to the
manufacture,
13
processing, distribution, use, treatment, storage, disposal, transport
or handling of chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid,
gaseous or liquid in nature) of any governmental department,
commission, board, bureau, agency or instrumentality of the United
States, any state or political subdivision thereof, or any foreign
jurisdiction, and all applicable judicial or administrative agency or
regulatory decrees, awards, judgments and orders relating thereto,
except where the failure to be in such compliance will not,
individually or in the aggregate, have a Material Adverse Effect; and
neither the Company nor the Subsidiaries have received any notice from
any governmental instrumentality or any third party alleging any
material violation thereof or liability thereunder (including, without
limitation, liability for costs of investigating or remediating sites
containing hazardous substances and/or damages to natural resources).
(hh) Except as disclosed in the Registration Statement: (i) to the
Company's knowledge, each of the Company and the Subsidiaries own or
have obtained valid and enforceable licenses or options for the
inventions, patent applications, patents, trademarks (both registered
and unregistered), trade names, copyrights and trade secrets necessary
for the conduct of its respective business as currently conducted
(collectively, the "Intellectual Property"); and (ii) (a) to the
Company's knowledge, there are no third parties who have any ownership
rights to any Intellectual Property that is owned by, or has been
licensed to, the Company or the Subsidiaries for the products described
in the Registration Statement that would preclude the Company or the
Subsidiaries from conducting its business as currently conducted and
have a Material Adverse Effect, except for the ownership rights of the
owners of the Intellectual Property licensed or optioned by the Company
or the Subsidiaries; (b) to the Company's knowledge, there are
currently no sales of any products that would constitute an
infringement by third parties of any Intellectual Property owned,
licensed or optioned by the Company or the Subsidiaries, which
infringement would have a Material Adverse Effect; (c) there is no
pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others challenging the rights of the Company or
the Subsidiaries in or to any Intellectual Property owned, licensed or
optioned by the Company or the Subsidiaries, other than claims which
would not reasonably be expected to have a Material Adverse Effect; (d)
there is no pending or, to the Company's knowledge, threatened action,
suit, proceeding or claim by others challenging the validity or scope
of any Intellectual Property owned, licensed or optioned by the Company
or the Subsidiaries, other than non-material actions, suits,
proceedings and claims, or other than normal patent application
examination procedures; and (e) there is no pending or, to the
Company's knowledge, threatened action, suit, proceeding or claim by
others that the Company or the Subsidiaries infringes or otherwise
violates any patent, trademark, copyright, trade secret or other
proprietary right of others, other than non-material actions, suits,
proceedings and claims.
14
(ii) Each of the Company and the Subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns
and have paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of any tax deficiency which has been or might
be asserted or threatened against it or the Subsidiaries which could
have a Material Adverse Effect.
(jj) On each Closing Date, all stock transfer or other taxes (other
than income taxes) which are required to be paid in connection with the
sale and transfer of the Shares to be sold hereunder will be, or will
have been, fully paid or provided for by the Company and all laws
imposing such taxes will be or will have been complied with in all
material respects.
(kk) Each of the Company and the Subsidiaries maintain insurance of
the types and in the amounts that the Company reasonably believes is
adequate for their respective businesses, including, but not limited
to, insurance covering all real and personal property owned or leased
by the Company or the Subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against by
similarly situated companies, all of which insurance is in full force
and effect.
(ll) Neither the Company nor the Subsidiaries, nor, to the
knowledge of the Company, any director or officer, has directly or
indirectly: (i) made any unlawful contribution to any candidate for
public office, or failed to disclose fully any contribution in
violation of law, (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof,
(iii) violated or is in violation of any provisions of the U.S. Foreign
Corrupt Practices Act of 1977 or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(mm) Each officer, director and any other holder of outstanding
shares in excess of 5% of Common Stock of the Company as of the
effective date of the Registration listed on Schedule 4 hereto has
delivered to Aegis an agreement in the form of Exhibit D hereto duly
executed by such persons.
(nn) The Company has delivered to Aegis an agreement in the form of
Exhibit E hereto to the effect that it will not, for a period of 90
days from the Final Closing Date, without the prior written consent of
Aegis and except as contemplated by this Agreement, offer to sell,
sell, contract to sell, grant any option to purchase or otherwise
dispose (or announce any offer, sale, grant of any option to purchase
or other disposition) of any shares of capital stock of the Company or
securities convertible into, or exchangeable or exercisable for, shares
of capital stock of the Company, except with respect to the capital
stock listed as an exhibit to the agreement attached hereto as Exhibit
E.
15
(oo) The Company has not distributed and, prior to the later to
occur of the Final Closing Date and completion of the distribution of
the Shares, will not distribute any offering material in connection
with the offering and sale of the Shares other than the Prospectus
(including the Approved FWP) and any Permitted Free Writing Prospectus
(as defined below) to which has consented.
(pp) Each material employee benefit plan, within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), that is maintained, administered or contributed to
by the Company or any of its affiliates for employees or former
employees of the Company and the Subsidiaries has been maintained in
material compliance with its terms and the requirements of any
applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"); no prohibited transaction, within the meaning of Section 406
of ERISA or Section 4975 of the Code, has occurred which would result
in a material liability to the Company or the Subsidiaries with respect
to any such plan excluding transactions effected pursuant to a
statutory or administrative exemption; and for each such plan that is
subject to the funding rules of Section 412 of the Code or Section 302
of ERISA, no "accumulated funding deficiency" as defined in Section 412
of the Code has been incurred, whether or not waived, and the fair
market value of the assets of each such plan (excluding for these
purposes accrued but unpaid contributions) exceeds the present value of
all benefits accrued under such plan determined using reasonable
actuarial assumptions.
(qq) Except as disclosed in the Registration Statement, the Company
is not a party to or subject to any employment contract or arrangement
providing for annual future compensation, or the opportunity to earn
annual future compensation (whether through fixed salary, bonus,
commission, options or otherwise) of more than $150,000 to any officer,
consultant, director or employee.
(rr) No relationship, direct or indirect, exists between or among
the Company or the Subsidiaries, on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or the
Subsidiaries, on the other, which is required by the Securities Act to
be disclosed in the Registration Statement and the Prospectus and is
not so disclosed.
(ss) The Company has not sold or issued any securities that would
be integrated with the offering of the Shares contemplated by this
Agreement pursuant to the Securities Act, the Rules and Regulation or
the interpretations thereof by the Commission.
(tt) Neither the Company nor the Subsidiaries are a party to any
contract, agreement or understanding with any person (other than this
Agreement) that would give rise to a valid claim against the Company or
the Subsidiaries or the Underwriters for a brokerage commission,
finder's
16
fee or like payment in connection with the offering and sale of the
Shares. Neither the Company nor the Subsidiaries are a party to any
contract, agreement or understanding with any person (other than this
Agreement) which would result in any compensation or other item of
value owed to such other person being aggregated with the compensation
to be received by the Underwriters hereunder.
(uu) No forward-looking statement (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act) (a
"Forward Looking Statement") contained in the Registration Statement
and the Prospectus has been made or reaffirmed without a reasonable
basis or has been disclosed other than in good faith. The Forward
Looking Statements under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations: (i) were
made by the Company with a reasonable basis and in good faith and
reflect the Company's good faith reasonable best estimate of the
matters described therein, and (ii) have been prepared in accordance
with Regulation S-K under the Securities Act.
(vv) The operations of the Company and the Subsidiaries are and
have been in material compliance with applicable financial record
keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the Uniting and
Strengthening of America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as
amended, the money laundering statutes of all jurisdictions to which
the Company or the Subsidiaries are subject, 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 or the Subsidiaries with
respect to the Money Laundering Laws is pending or, to the best
knowledge of the Company, threatened.
(ww) Neither the Company, nor the Subsidiaries, nor, to the
knowledge of the Company, any director or officer, employee, agent or
other person acting on behalf of the Company or the Subsidiaries have,
in the course of its actions for, or on behalf of, the Company: (i)
used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
(xx) As used in this Agreement, references to matters being
"material" with respect to the Company shall mean a material event,
change, condition, status or effect related to the condition (financial
or otherwise),
17
properties, assets (including intangible assets), liabilities, those
prospects specifically described in the Registration Statement and the
Prospectus, business, operations or results of operations of the
Company.
(yy) As used in this Agreement, 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.
(zz) Any certificate signed by or on behalf of the Company and
delivered to the Underwriters or to Underwriters' Counsel shall be
deemed to be a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.
4. Agreements of the Company. The Company covenants and agrees with
the Underwriters as follows:
(a) The Registration Statement has become effective, and if Rule
430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b), the Company will file the Prospectus (properly
completed if Rule 430A has been used), subject to the prior approval of
Aegis, pursuant to Rule 424(b) within the prescribed time period and
will provide a copy of such filing to Aegis promptly following such
filing.
(b) The Company will not, during such period as the Prospectus
would be required by law to be delivered in connection with sales of
the Shares by an underwriter or dealer in connection with the offering
contemplated by this Agreement, file any amendment or supplement to the
Registration Statement or the Prospectus unless a copy thereof shall
first have been submitted to Aegis within a reasonable period of time
prior to the filing thereof and Aegis shall not have reasonably
objected thereto in good faith.
(c) The Company will notify the Underwriters promptly, and will, if
requested, confirm such notification in writing: (i) when any post-
effective amendment to the Registration Statement becomes effective;
(ii) of any request by the Commission for any amendments to the
Registration Statement or any amendment or supplements to the
Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order preventing or suspending the effectiveness
of the Registration Statement, the Prospectus, or the initiation of any
proceedings for that purpose or the threat thereof; (iv) of becoming
aware of the occurrence of any event that in the judgment of the
Company makes any statement made in the Registration Statement or the
Prospectus untrue in any material respect or that requires the making
of any changes in the Registration Statement or the Prospectus in order
to make the statements therein, in light of the circumstances in which
they are made, not misleading; and (v) of receipt by the Company of any
notification with respect to any suspension of the qualification of the
18
Shares for offer and sale in any jurisdiction. If at any time the
Commission shall issue any order suspending the effectiveness of the
Registration Statement in connection with the offering contemplated
hereby, the Company will make every reasonable effort to obtain the
withdrawal of any such order at the earliest possible moment. If the
Company has omitted any information from the Registration Statement,
pursuant to Rule 430A, it will use its best efforts to comply with the
provisions of and make all requisite filings with the Commission
pursuant to said Rule 430A and to notify the Underwriters promptly of
all such filings.
(d) If, at any time when a Prospectus relating to the Shares is
required to be delivered under the Securities Act, the Company becomes
aware of the occurrence of any event as a result of which the
Prospectus, as then amended or supplemented, would, in the reasonable
judgment of counsel to the Company or Underwriter Counsel, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or the
Registration Statement, as then amended or supplemented, would, in the
reasonable judgment of counsel to the Company or Underwriter Counsel,
include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or if for
any other reason it is necessary, in the reasonable judgment of counsel
to the Company or Underwriter Counsel, at any time to amend or
supplement the Prospectus or the Registration Statement to comply with
the Securities Act or the Rules and Regulations, the Company will
promptly notify Aegis and, subject to Section 4(b) hereof, will
promptly prepare and file with the Commission, at the Company's
expense, an amendment to the Registration Statement or an amendment or
supplement to the Prospectus that corrects such statement or omission
or effects such compliance and will deliver to the Underwriters,
without charge, such number of copies thereof as the Underwriters may
reasonably request. The Company consents to the use of the Prospectus
or any amendment or supplement thereto by the Underwriters.
(e) The Company will furnish to the Underwriters and Underwriter
Counsel, without charge: (i) one conformed copy of the Registration
Statement as originally filed with the Commission and each amendment
thereto, including financial statements and schedules, and all exhibits
thereto, (ii) so long as a prospectus relating to the Shares is
required to be delivered under the Securities Act, as many copies of
the Prospectus or any amendment or supplement thereto as the
Underwriters may reasonably request.
(f) The Company will comply with all the undertakings contained in
the Registration Statement.
19
(g) The Company represents and agrees that, except for the Approved
FWP, it has not and will not, unless it obtains the prior consent of
Aegis, which consent will not be unreasonably withheld, conditioned or
delayed, make any offer relating to the Shares that would constitute an
"issuer free writing prospectus," as defined in Rule 433 promulgated
under the Securities Act, or that would otherwise constitute a "free
writing prospectus," as defined in Rule 405 promulgated under the
Securities Act, required to be filed with the Commission. Any such
free writing prospectus consented to by Aegis (including the Approved
FWP) is hereinafter referred to as a "Permitted Free Writing
Prospectus." The Company represents that it has treated or agrees that
it will treat each Permitted Free Writing Prospectus as an "issuer free
writing prospectus," as defined in Rule 433 promulgated under the
Securities Act, and has complied and will comply with the requirements
said Rule 433 applicable to any Permitted Free Writing Prospectus,
including timely filing with the Commission where required, legending
and record keeping. The Company will retain in accordance with the
Rules and Regulations all Permitted Free Writing Prospectuses not
required to be filed pursuant to the Rules and Regulations.
(h) Prior to the sale of the Shares to the Investors, the Company
will cooperate with Aegis and Underwriter Counsel in connection with
the registration or qualification of the Shares for offer and sale
under the state securities or Blue Sky laws of such jurisdictions as
Aegis may reasonably request, if any; provided, that in no event shall
the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would
subject it to general service of process in any jurisdiction where it
is not now so subject.
(i) The Company will apply the net proceeds from the offering and
sale of the Offered Securities in the manner set forth in the
Prospectus under the caption "Use of Proceeds." Without the written
consent of Aegis, which shall not be unreasonably withheld, conditioned
or delayed, no proceeds of the Offering will be used to pay outstanding
loans from officers, directors or stockholders.
(j) The Company will use its best efforts to ensure that the Shares
are listed on the NASDAQ Capital Market at the time of the Initial
Closing, and seeking and using its best efforts to maintain such
listing for a period of at least three (3) years after the Closing.
(k) The Company shall retain a firm of independent certificate
public accountants, acceptable to Aegis, which will have the
responsibility for the preparation of the financial statements and the
financial exhibits, if any, to be included in the Registration
Statement and continuing to retain such accountants, or comparable
accountants, for a period of at least three (3) years after the
Closing.
(l) The Company shall retain a transfer agent for the Company's
Common Stock and continue to retain such transfer agent, or a
comparable firm, for a period of three (3) years after the Closing.
20
(m) The Company shall engage a financial public relations firm
reasonably acceptable to their relations with their security holders,
and continue to retain such firm, or a comparable firm, for a period of
two (2) years after the Closing.
(n) The Company shall register with the Corporation Records Service
published by Standard & Poor's Corporation and covenant to maintain
such registration for a period of three (3) years from the Closing.
(o) The Company will not at any time, directly or indirectly, take
any action intended, or which might reasonably be expected, to cause or
result in, or which will constitute, stabilization of the price of the
Shares to facilitate the sale or resale of any of the Shares.
(p) The Company shall, upon the reasonable request of the
Underwriters, deliver written affirmation of any certificate delivered
to the Underwriters pursuant to Section 7 prior to any Closing Date
following the Initial Closing Date.
(q) The Company shall supply Aegis and its counsel, at the
Company's costs, with a reasonable number of bound volumes of the
public offering materials within a reasonable time after the Closing,
as well as a reasonable number of commemorative Lucite tombstones as
requested by Aegis.
(r) Upon the Closing, the Company will grant Aegis the right of first
refusal to co-manage any public underwriting or private placement of
debt or equity securities (excluding (i) sales to employees under any
compensation or stock option plan approved by the shareholders of the
Company, (ii) shares issued in payment of the consideration for an
acquisition and (iii) conventional banking arrangements and commercial
debt financing) of the Company or any subsidiary or successor of the
Company during the one year period following the Closing Date. If
Aegis accepts such right of first refusal, Aegis shall be entitled to
no less than 33.33% of the underwriting, non-accountable expenses
allowance, warrant coverage or other investment banking compensation
for any such offering and shall act as the lead manager of any such
offering. If Aegis fails to accept in writing any such proposal for
such public or private sale within 20 days after receipt of a written
notice from the Company containing such proposal, then Aegis will have
not claim or right with respect to any such sale contained in any such
notice.
5. Agreements of the Underwriters. The Underwriters agree that it
shall not include any "issuer information" (as defined in Rule 433
under the Securities Act) in any "free writing prospectus" (as defined
in Rule 405) used or referred to by such Underwriters without the prior
consent of the Company (any such issuer information with respect to
whose use the Company has given its consent, which consent will not be
unreasonably withheld, conditioned or delayed, "Permitted Issuer
Information"); provided that: (i) no such consent shall be required
21
with respect to any such issuer information contained in any document
filed by the Company with the Commission prior to the use of such free
writing prospectus and (ii) "issuer information," as used in this
Section 5 shall not be deemed to include information prepared by such
Underwriters on the basis of or derived from issuer information. The
Underwriters also agree to provide to each Investor, prior to the
Closing, a copy of the Prospectus and any amendments or supplements
thereto.
6. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company
will pay all costs and expenses incident to the performance of the
obligations of the Company under this Agreement, including but not
limited to costs and expenses of or relating to:
(a) the preparation, printing and filing of the Registration
Statement (including each pre- and post-effective amendment thereto)
and exhibits thereto, any Permitted Free Writing Prospectus, the
Prospectus and any amendments or supplements thereto, including all
fees, disbursements and other charges of counsel and accountants to the
Company;
(b) the preparation and delivery of certificates representing the
Shares;
(c) furnishing (including costs of shipping and mailing) such
copies of the Registration Statement (including all pre- and post-
effective amendments thereto), the Prospectus and any Permitted Free
Writing Prospectus, and all amendments and supplements thereto, as may
be requested for use in connection with the direct placement of the
Shares;
(d) the listing of the Common Stock on the NASDAQ Capital Market;
(e) any filings required to be made by the Underwriters with the
FINRA, and the fees, disbursements and other charges of counsel for the
Underwriters in connection therewith;
(f) the cost and charges of any transfer agent or registrar for the
Shares;
(g) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions
reasonably designated by Aegis, including the reasonable fees,
disbursements and other charges of Underwriter Counsel in connection
therewith and the preparation and printing of preliminary, supplemental
and final Blue Sky memoranda;
(h) fees, disbursements and other charges of counsel to the
Company;
22
(i) fees and disbursements of the Accountants, including those
incurred in delivering the letter(s) described in Section7(f) of this
Agreement;
(j) the fees of the Escrow Agent;
(k) any stock transfer taxes incurred in connection with the
offering contemplated by this Agreement;
(l) all expenses of the Company and its representatives incurred in
connection with attending or hosting meetings, or "road shows" with
prospective purchasers of the Shares;
(m) all reasonable travel and other out-of-pocket expenses of the
Underwriters on a fully accountable basis, up to a maximum of $50,000;
(n) all fees, expenses and disbursements relating to background
checks of the Company's officers and directors in an amount not to
exceed $3,000 per individual; provided, that the Company shall only be
responsible for the fees, expenses and disbursements for the background
checks for up to seven (7) individuals; and
(o) all other costs and expenses incident to the performance of the
Company obligations hereunder which are not otherwise specifically
provided for in this Section 6.
7. Conditions of the Obligations of the Underwriters. The obligations
of the Underwriters hereunder are subject to the following conditions:
(a) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for
that purpose shall be pending or threatened by any securities or other
governmental authority (including, without limitation, the Commission),
(ii) no order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Shares under the
securities or Blue Sky laws of any jurisdiction shall be in effect and
no proceeding for such purpose shall be pending before, or threatened
or contemplated by, any securities or other governmental authority
(including, without limitation, the Commission), (iii) any request for
additional information on the part of the staff of any securities or
other governmental authority (including, without limitation, the
Commission) shall have been complied with to the satisfaction of the
staff of the Commission or such authorities and (iv) after the date
hereof no amendment or supplement to the Registration Statement, any
Permitted Free Writing Prospectus or the Prospectus shall have been
filed unless a copy thereof was first submitted to Aegis and Aegis did
not object thereto in good faith, and Aegis shall have received
certificates of the Company, dated as of the Initial Closing Date and
signed by the President and Chief Executive Officer or the Chairman of
the Board of Directors of the Company, and the Chief Financial Officer
of the Company, to the effect of clauses (i), (ii) and (iii).
23
(b) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus: (i) there shall not have
been a Material Adverse Change, whether or not arising from
transactions in the ordinary course of business, in each case other
than as set forth in or contemplated by the Registration Statement and
the Prospectus and (ii) the Company shall not have sustained any
material loss or interference with its business or properties from
fire, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree, which is not set forth in
the Registration Statement and the Prospectus, if in the reasonable
judgment of Aegis any such development makes it impracticable or
inadvisable to consummate the sale and delivery of the Shares to
Investors as contemplated hereby.
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of
its officers or directors in their capacities as such, before or by any
Federal, state or local court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign,
which litigation or proceeding, in the reasonable judgment of Aegis,
could have a Material Adverse Effect.
(d) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects as
of each Closing Date, as if made on such date, and all covenants and
agreements herein contained to be performed on the part of the Company
and all conditions herein contained to be fulfilled or complied with by
the Company at or prior to such Closing Date shall have been duly
performed, fulfilled or complied with in all material respects.
(e) The Underwriters shall have received an opinion, dated the
Initial Closing Date, of Jody Walker, Esq. with respect to the matters
set forth in Exhibit F hereto.
(f) Satisfactory completion by Aegis of its due diligence
investigation and analysis of: (i) the Company's arrangements with its
officers, directors, employees, affiliates, customers and suppliers,
(ii) the audited historical financial statements of the Company for the
fiscal years ended December 31, 2010, March 31, 2011 and (iii) the
Company's financial results for the fiscal quarters ending June 30,
2011 through 2012.
(g) The execution of this Underwriting Agreement.
(h) The Company meeting the criteria necessary for inclusion of the
Common Stock on the NASDAQ Capital Market and seeking and using its
best efforts to maintain such listing for a period of at least three
(3) years after the Closing.
24
(i) Neither the Company not any of its affiliates has, either prior
to the initial filing or the effect date of the Registration Statement,
made any offer or sale of any securities which are required to be
"integrated" pursuant to the Securities Act or the regulations
thereunder with the offer and sale of the Shares pursuant to the
Registration Statement.
(j) The Company's registration of the Common Stock under the
provisions of Section 12(b) or (g), as applicable, of the Securities
Exchange Act of 1934 on or prior to the effective date of the offering.
(k) The Company obtaining and maintaining a qualified Chief
Financial Officer.
(l) The Company retaining a firm of independent certificate public
accountants acceptable to Aegis.
(m) The Company retaining a financial printer reasonably acceptable
to Aegis.
(n) The Company retaining a transfer agent for the Company's Common
Stock reasonably acceptable to Aegis.
(o) The Company engaging a financial public relations firm
reasonably acceptable to Aegis.
(p) The Company registering with the Corporation Records Services
published by Standard & Poor's Corporation.
(q) Prior to the Initial Closing Date, the Accountants shall have
furnished to the Underwriters a letter, dated the date of its delivery
(the "Comfort Letter"), addressed to the Underwriters and in form and
substance satisfactory to Aegis, confirming that: (i) they are
independent public accountants with respect to the Company within the
meaning of the Securities Act and the Rules and Regulations; (ii) in
their opinion, the financial statements and any supplementary financial
information included in the Registration Statement and examined by them
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Rules and
Regulations; (iii) on the basis of procedures, not constituting an
examination in accordance with generally accepted auditing standards,
set forth in detail in the Comfort Letter, a reading of the latest
available interim financial statements of the Company, inspections of
the minute books of the Company since the latest audited financial
statements included in the Prospectus, inquiries of officials of the
Company responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in the Comfort Letter to a
date not more than five days prior to the date of the Comfort Letter,
nothing came to their attention that caused them to believe that: (A)
as of a specified date not more than five days prior to the date of the
Comfort Letter, there have been any changes in the capital stock of the
Company or any increase in the long-term debt of the Company, or any
25
decreases in net current assets or net assets or other items specified
by Aegis, or any increases in any items specified by Aegis, in each
case as compared with amounts shown in the latest balance sheet
included in the Prospectus, except in each case for changes, increases
or decreases which the Prospectus discloses have occurred or may occur
or which are described in the Comfort Letter; and (B) for the period
from the date of the latest financial statements included in the
Prospectus to the specified date referred to in Clause (A), there were
any decreases in revenues or the total or per share amounts of net
income or other items specified by Aegis, or any increases in any items
specified by Aegis, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding length
specified by Aegis, except in each case for decreases or increases
which the Prospectus discloses have occurred or may occur or which are
described in the Comfort Letter; and (iv) in addition to the
examination referred to in their reports included in the Prospectus and
the procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an examination in
accordance with generally accepted auditing standards, with respect to
certain amounts, percentages and financial information specified by
Aegis, which are derived from the general accounting, financial or
other records of the Company, as the case may be, which appear in the
Prospectus or in Part II of, or in exhibits or schedules to, the
Registration Statement, and have compared such amounts, percentages and
financial information with such accounting, financial and other records
and have found them to be in agreement.
(r) At the Initial Closing Date, there shall be furnished to the
Underwriters a certificate, dated the date of its delivery, signed by
each of the Chief Executive Officer and the Chief Financial Officer of
the Company, in form and substance satisfactory to Aegis to the effect
that each signer has carefully examined the Registration Statement and
the Prospectus, and that to each of such person's knowledge:
(i) (A) As of the date of such certificate, (x) the Registration
Statement does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (y) the
Prospectus does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (B) no
event has occurred as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein not
untrue or misleading in any material respect.
(ii) All the representations and warranties of the Company
contained in this Agreement that are qualified as to materiality or
Material Adverse Effect shall have been on the date hereof and shall be
as of the Initial Closing Date, as if made on and as of the Initial
Closing Date, true and complete in all respects, and all the
representations and warranties of the Company contained in this
Agreement that are not qualified as to materiality or Material Adverse
Effect shall have been true and complete in all material respects on
26
the date hereof and shall be true and complete in all material respects
as of the Initial Closing Date, provided, however, that any
representation or warranty of the Company in this Agreement made only
as of some date other than the date hereof shall have been true and
complete only as of such other date.
(iii) Each of the covenants required herein to be performed by
the Company on or prior to the date of such certificate has been duly,
timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the delivery of such
certificate has been duly, timely and fully complied with.
(iv) No stop order or other order suspending the effectiveness of
the Registration Statement, or any part thereof, or the qualification
or registration of the Shares under the securities or Blue Sky laws of
any jurisdiction, has been issued and no proceedings for that purpose
have been instituted or are contemplated by the Commission.
(v) Any request for additional information on the part of the
staff of any securities or other governmental authority (including,
without limitation, the Commission) shall have been complied with to
the satisfaction of the staff of the Commission or such authorities.
(vi) Subsequent to the date of the most recent financial
statements in the Prospectus, there has been no Material Adverse
Change.
(s) (The Shares shall be qualified for sale in such states as Aegis
may reasonably request, and each such qualification shall be in effect
and not subject to any stop order or other proceeding on any Closing
Date with respect to the sale of the Shares in such state or states, as
provided for herein.
(t) The Company shall have furnished or caused to be furnished to
the Underwriters such a customary certificate of the Company's
Secretary, as well as certificates, in addition to those specifically
mentioned herein, as Aegis may have reasonably requested as to the
accuracy and completeness at the Initial Closing Date of any statement
in the Registration Statement or the Prospectus, as to the accuracy at
the Initial Closing Date of the representations and warranties of the
Company as to the performance by the Company of its obligations
hereunder, or as to the fulfillment of the conditions concurrent and
precedent to the obligations hereunder of the Underwriters.
(u) Aegis shall have received the agreements referred to in Section
3(mm) and (nn) hereof substantially in the form of Exhibits D and E
hereto.
27
8. Indemnification.
(a) The Company shall indemnify and hold harmless the Underwriters,
their respective present and former affiliated entities, managers,
members, legal counsel, directors, officers, partners, stockholders,
employees and agents and each person, if any, who controls the
Underwriters within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses,
claims, obligations, penalties, judgments, awards, costs,
disbursements, liabilities, expenses and damages, joint or several,
(including any and all investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted),
to which it, or any of them, may become subject under the Securities
Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses
or damages arise out of or are based on (i) any untrue statement or
alleged untrue statement made by the Company in Section 3 of this
Agreement, (ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or the
Prospectus or any amendment or supplement thereto, (B) any Permitted
Free Writing Prospectus or any amendment or supplement thereto, (C) any
application or other document, or any amendment or supplement thereto,
executed by the Company based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to qualify
the Offered Securities under the securities or Blue Sky laws thereof or
filed with the Commission or any securities association or securities
exchange (each, an "Application"), (iii) the omission or alleged
omission to state in the Registration Statement, the Prospectus or any
Permitted Free Writing Prospectus, or any amendment or supplement
thereto, or any Application a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or (iv) in
connection with the acceptance of or the performance or non-performance
of the Underwriters obligations under this Agreement; provided,
however, that the Company will not be liable to the extent that such
loss, claim, liability, expense or damage arises from the sale of the
Shares in the public offering to any person found in a final judgment
by a court of competent jurisdiction (not subject to further appeal) to
have resulted primarily and directly from the gross negligence and
willful misconduct of the Underwriters. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) The Underwriters will indemnify and hold harmless the Company,
each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
each director of the Company and each officer of the Company who signs
the Registration Statement to the same extent as the foregoing
indemnity from the Company to the Underwriters, but only insofar as
losses, claims, liabilities, expenses or damages arise out of or are
based on any untrue statement or omission or alleged untrue statement
or omission made in reliance on and in conformity with information
28
relating to the Underwriters furnished in writing to the Company by the
Underwriters expressly for use in the Registration Statement, the
Prospectus or any Permitted Free Writing Prospectus. This indemnity
agreement will be in addition to any liability that the Underwriters
might otherwise have. The Company acknowledges that, for all purposes
under this Agreement: (i) the fourth to last paragraph under the
heading "Plan of Distribution" in the Prospectus and (ii) the names of
the Underwriters, constitute the only information relating to the
Underwriters furnished in writing to the Company by the Underwriters
expressly for inclusion in the Registration Statement or the
Prospectus.
(c) Any party that proposes to assert the right to be indemnified
under this Section 8 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a
claim is to be made against an indemnifying party or parties under this
Section 8, notify each such indemnifying party of the commencement of
such action, enclosing a copy of all papers served, but the omission so
to notify such indemnifying party will not relieve it from any
liability that it may have to any indemnified party under the foregoing
provisions of this Section 8 unless, and only to the extent that, such
omission results in the forfeiture of substantive rights or defenses by
the indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in
and, to the extent that it elects by delivering written notice to the
indemnified party promptly after receiving notice of the commencement
of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the
action, with counsel reasonably satisfactory to the indemnified party,
and after notice from the indemnifying party to the indemnified party
of its election to assume the defense, the indemnifying party will not
be liable to the indemnified party for any legal or other expenses
except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in
connection with the defense. The indemnified party will have the right
to employ its own counsel in any such action, but the fees, expenses
and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying
party, (2) the indemnified party has reasonably concluded (based on
advice of counsel) that a conflict exists (based on advice of counsel
to the indemnified party) between the indemnified party and the
indemnifying party that would prevent the counsel selected by the
indemnifying party from representing the indemnified party (in which
case the indemnifying party will not have the right to direct the
defense of such action on behalf of the indemnified party) or (3) the
indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice
of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at
29
the expense of the indemnifying party or parties. It is understood
that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be
liable for the reasonable fees, disbursements and other charges of more
than one separate firm admitted to practice in such jurisdiction at any
one time for all such indemnified party or parties. All such fees,
disbursements and other charges will be reimbursed by the indemnifying
party promptly as they are incurred. The Company will not, without the
prior written consent of Aegis (which consent will not be unreasonably
withheld, conditioned or delayed), settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification has been sought
hereunder (whether or not the Underwriters or any person who controls
any of the Underwriters within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of the Underwriters and
each such controlling person from all liability arising out of such
claim, action, suit or proceeding. An indemnifying party will not be
liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld,
conditioned or delayed).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the
foregoing paragraphs of this Section 8 is applicable in accordance with
its terms but for any reason is held to be unavailable from the Company
or the Underwriters, the Company and the Underwriters will contribute
to the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claim asserted, but after deducting
any contribution received by the Company from persons other than the
Underwriters such as persons who control the Company within the meaning
of the Securities Act or the Exchange Act, officers of the Company who
signed the Registration Statement and directors of the Company, who
also may be liable for contribution) to which the Company and the
Underwriters may be subject in such proportion as shall be appropriate
to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting Company expenses) received by the
Company as set forth in the table on the cover page of the Prospectus
bear to the fee received by the Underwriters hereunder. If, but only
if, the allocation provided by the foregoing sentence is not permitted
by applicable law, the allocation of contribution shall be made in such
proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of
the Company, on the one hand, and the Underwriters on the other, with
respect to the statements or omissions which resulted in such loss,
30
claim, liability, expense or damage, or action in respect thereof, as
well as any other relevant equitable considerations with respect to
such offering. Such relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters, the intent of
the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 8(d) shall be deemed
to include, for purpose of this Section 8(d), any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 8(d), the
Underwriters shall not be required to contribute any amount in excess
of the fee received by it, and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8(d), any person who controls a party to this Agreement
within the meaning of the Securities Act or the Exchange Act will have
the same rights to contribution as that party, and each officer of the
Company who signed the Registration Statement will have the same rights
to contribution as the Company, subject in each case to the provisions
hereof. Any party entitled to contribution, promptly after receipt of
notice of commencement of any action against such party in respect of
which a claim for contribution may be made under this Section 8(d),
will notify any such party or parties from whom contribution may be
sought, but the omission so to notify will not relieve the party or
parties from whom contribution may be sought from any other obligation
it or they may have under this Section 8(d). No party will be liable
for contribution with respect to any action or claim settled without
its written consent (which consent will not be unreasonably withheld).
9. Termination.
(a) The obligations of the Underwriters under this Agreement may be
terminated at any time prior to the completion of the distribution of
the Shares, by notice to the Company from Aegis, without liability on
the part of the Underwriters to the Company if, prior to delivery and
payment for the Shares, in the sole judgment of Aegis: (i) trading in
the Common Stock of the Company shall have been suspended by the
Commission or by NASDAQ Capital Market, or, if the Common Stock is not
listed on NASDAQ Capital Market, if trading shall have been suspended
by the OTC Bulletin Board, (ii) trading in securities generally on the
New York Stock Exchange or the Nasdaq Stock Market shall have been
31
suspended or limited or minimum or maximum prices shall have been
generally established on any of such exchange or additional material
governmental restrictions, not in force on the date of this Agreement,
shall have been imposed upon trading in securities generally by any of
such exchange or by order of the Commission or any court or other
governmental authority, (iii) a general banking moratorium shall have
been declared by Federal or New York State authorities, or (iv) any
material adverse change in the financial or securities markets in the
United States or any outbreak or material escalation of hostilities or
declaration by the United States of a national emergency or war or
other calamity or crisis (including any material act of terrorism)
shall have occurred, the effect of any of which is such as to make it,
in the sole judgment of Aegis, impracticable or inadvisable to market
the Shares on the terms and in the manner contemplated by the
Prospectus.
(b) If this Agreement shall be terminated pursuant to any of the
provisions hereof, or if the sale of the Shares provided for herein is
not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied, in each case because of
any refusal, inability or failure on the part of the Company to perform
any agreement herein or comply with any provision hereof, the Company
will, subject to demand by Aegis, reimburse the Underwriters for all
actual out-of-pocket accountable expenses directly incurred in
connection herewith and Aegis will reimburse the Company any sums
advanced for such purposes not offset by its actual out-of-pocket
expenses.
10. No Fiduciary Duty. The Company acknowledges and agrees that in
connection with this offering, sale of the Shares or any other services
the Underwriters may be deemed to be providing hereunder,
notwithstanding any preexisting relationship, advisory or otherwise,
between the parties or any oral representations or assurances
previously or subsequently made by the Underwriters: (i) no fiduciary
relationship between the Company and any other person, on the one hand,
and the Underwriters, on the other, exists; (ii) the Underwriters are
not acting as advisors, experts or otherwise, to the Company,
including, without limitation, with respect to the determination of the
offering price of the Shares, and such relationship between the
Company, on the one hand, and the Underwriters, on the other, is
entirely and solely commercial, based on arms-length negotiations;
(iii) any duties and obligations that the Underwriters may have to the
Company shall be limited to those duties and obligations specifically
stated herein; and (iv) the Underwriters and their respective
affiliates may have interests that differ from those of the
Company. The Company hereby waives any claims that the Company may
have against the Underwriters with respect to any breach of fiduciary
duty in connection with this offering.
32
11. Notices. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and:
(a) if sent to Aegis or any Underwriter, shall be mailed,
delivered, or faxed and confirmed in writing, to Aegis Capital
Corporation, 810 Seventh Avenue, 11th Floor, New York, New York 10019,
Attention: Ed Cabrera, with copies to Meister Seelig & Fein LLP, Two
Grand Central Tower, 140 East 45th Street, New York, New York 10017,
Attention: Mitchell L. Lampert, Esq.; and
(b) if sent to the Company shall be mailed, delivered, or faxed and
confirmed in writing to the Company at the addresses set forth in the
Registration Statement, with a copy to Jody Walker, Esq., 7841 South
Garfield Way, Centennial, Colorado, 80122;
Any such notices and other communications shall take effect at the time
of receipt thereof.
12. Survival. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company
and the Underwriters set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain
in full force and effect, regardless of: (i) any investigation made by
or on behalf of the Company, any of its officers or directors, the
Underwriters or any controlling person referred to in Section 8 hereof
and (ii) delivery of and payment for the Shares. The respective
agreements, covenants, indemnities and other statements set forth in
Sections 6 and 8 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
13. Successors. This Agreement shall inure to the benefit of and
shall be binding upon the Underwriters, the Company and their
respective successors and legal representatives, and nothing expressed
or mentioned in this Agreement is intended or shall be construed to
give any other person any legal or equitable right, remedy or claim
under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of
such persons and for the benefit of no other person except that:
(i) the indemnification and contribution contained in Sections 8(a) and
(d) of this Agreement shall also be for the benefit of the directors,
officers, employees and agents of the Underwriters and any person or
persons who control the Underwriters within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act and (ii) the
indemnification and contribution contained in Sections 8(b) and (d) of
this Agreement shall also be for the benefit of the directors of the
Company, the officers of the Company who have signed the Registration
Statement and any person or persons who control the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act. No Investor shall be deemed a successor because of such
purchase.
33
14. Applicable Law; Venue. This Agreement shall be deemed to have
been executed and delivered in New York and both this Agreement and the
transactions contemplated hereby shall be governed as to validity,
interpretation, construction, effect, and in all other respects by the
laws of the State of New York, without regard to the conflicts of laws
principals thereof (other than Section 5-1401 of The New York General
Obligations Law). Each of the Underwriters and the Company: (a) 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 the Supreme Court of the State of New York,
New York County, or in the United States District Court for the
Southern District of New York, (b) waives any objection which it may
have or hereafter to the venue of any such suit, action or proceeding,
and (c) irrevocably consents to the jurisdiction of Supreme Court of
the State of New York, New York County, or in the United States
District Court for the Southern District of New York in any such suit,
action or proceeding. Each of the Underwriters and the Company further
agrees to accept and acknowledge service of any and all process which
may be served in any such suit, action or proceeding in the Supreme
Court of the State of New York, New York County, or in the United
States District Court for the Southern District of New York and agrees
that service of process upon the Company mailed by certified mail to
the Company's address or delivered by Federal Express via overnight
delivery shall be deemed in every respect effective service of process
upon the Company, in any such suit, action or proceeding, and service
of process upon the Underwriters mailed by certified mail to the
Underwriters' address or delivered by Federal Express via overnight
delivery shall be deemed in every respect effective service process
upon the Underwriter, in any such suit, action or proceeding. THE
COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY
LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY
WAIVES ANY RIGHT THEY MAY HAVE 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.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same
instrument. Delivery of a signed counterpart of this Agreement by
facsimile or other electronic transmission shall constitute valid and
sufficient delivery thereof.
16. Entire Agreement. This Agreement, together with the schedule and
exhibits attached hereto and as the same may be amended from time to
time in accordance with the terms hereof, contains the entire agreement
among the parties hereto relating to the subject matter hereof and
there are no other or further agreements outstanding not specifically
mentioned herein.
34
17. Severability. If any term or provision of this Agreement or the
performance thereof shall be invalid or unenforceable to any extent,
such invalidity or unenforceability shall not affect or render invalid
or unenforceable any other provision of this Agreement and this
Agreement shall be valid and enforced to the fullest extent permitted
by law.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the
meaning or interpretation of, this Agreement.
[Signature Page Follows]
35
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriters.
Very truly yours,
IRON EAGLE GROUP, INC.
By: /s/Jason Shapiro
-----------------------
Name: Jason Shapiro
Title: Chief Financial Officer
Confirmed by Aegis, acting for itself and as a representative of the
Underwriters named on Schedule 1 attached hereto, as of the date first
above mentioned:
AEGIS CAPITAL CORPORATION
By: /s/Ed Cabrera
----------------------
Name: Ed Cabrera
Title: Head of Investment Banking
36
SCHEDULE 1
UNDERWRITERS
37
SCHEDULE 2
SHARES SOLD BY OFFICERS AND DIRECTORS
38
SCHEDULE 3
SUBSIDIARIES
39
SCHEDULE 4
SCHEDULE OF LOCK-UPS
40
EXHIBIT A
FORM OF SUBSCRIPTION AGREEMENT
This subscription (this "Subscription") is dated ______, 2011, by and
between the investor identified on the signature page hereto (the
"Investor") and Iron Eagle Group, Inc., a Delaware corporation (the
"Company"). Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Underwriting Agreement.
1. Subscription.
Investor agrees to buy and the Company agrees to sell and issue to
Investor such number of (i) shares (the "Shares") of the Company's
common stock, $0.00001 par value per share (the "Common Stock"), as set
forth on the signature page hereto, for an aggregate purchase price
(the "Purchase Price") equal to the product of (x) the aggregate number
of Shares the Investor has agreed to purchase and (y) the purchase
price per Share as set forth on the signature page hereto. The
Purchase Price is set forth on the signature page hereto.
The Shares have been registered on a Registration Statement on Form S-
1, Registration No. 333-173705 (the "Registration Statement"). The
Registration Statement has been declared effective by the Securities
and Exchange Commission (the "Commission") and is effective on the date
hereof. A final prospectus supplement will be delivered to the
Investor as required by law.
The completion of the purchase and sale of the Shares (the "Closing")
shall take place on the earliest to occur of (i) the date all the
Shares are fully subscribed for, (ii) 30 days after the Effective Date,
unless extended to a later date with the mutual consent of the Company
and Aegis, or (iii) such date mutually agreed by the Company and Aegis
(the "Closing Date"). Upon satisfaction or waiver of all the
conditions to closing set forth in the Agreement, at the Closing, (i)
the Investor shall pay the Purchase Price by wire transfer of
immediately available funds to the escrow account designated by the
Company on Annex A attached hereto, and (ii) the Company shall cause
the Shares to be delivered to the Investor with the delivery of the
Shares to be made through the facilities of The Depository Trust
Company's DWAC system in accordance with the instructions set forth on
the signature page attached hereto under the heading "DWAC
Instructions" (or, if requested by the Investor on the signature page
hereto, through the physical delivery of certificates evidencing the
Shares to the residential or business address indicated thereon).
2. Company Representations and Warranties. The Company represents and
warrants that: (a) it has full corporate power and authority to enter
into this Subscription and to perform all of its obligations hereunder;
(b) this Subscription has been duly authorized and executed by, and
when delivered in accordance with the terms hereof will constitute a
valid and binding agreement of, the Company enforceable in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights and remedies of creditors generally or subject to
41
general principles of equity; (c) the execution and delivery of this
Subscription and the consummation of the transactions contemplated
hereby do not conflict with or result in a breach of (i) the Company's
Certificate of Incorporation or Bylaws and amendments thereto through
the date hereof, or (ii) any material agreement to which the Company is
a party or by which any of its property or assets is bound; (d) the
Shares when issued and paid for in accordance with the terms of this
Subscription will be duly authorized, validly issued, fully paid and
non-assessable; (e) the Registration Statement and any post-effective
amendment thereto, at the time it became effective, did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; (f) the prospectus contained in the
Registration Statement, as amended and/or supplemented, did not contain
as of the effective date thereof, and as of the date hereof does not
contain, any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
and (g) all preemptive rights or rights of first refusal held by
stockholders of the Company and applicable to the transactions
contemplated hereby have been duly satisfied or waived in accordance
with the terms of the agreements between the Company and such
stockholders conferring such rights.
3. Investor Representations, Warranties and Acknowledgments.
(a) The Investor represents and warrants that: (i) it has full right,
power and authority to enter into this Subscription and to perform all
of its obligations hereunder; (ii) this Subscription has been duly
authorized and executed by the Investor and, when delivered in
accordance with the terms hereof, will constitute a valid and binding
agreement of the Investor enforceable against the Investor in
accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights and remedies of creditors generally or subject to
general principles of equity; (iii) the execution and delivery of this
Subscription and the consummation of the transactions contemplated
hereby do not conflict with or result in a breach of (A) the Investor's
certificate of incorporation or by-laws (or other governing documents),
or (B) any material agreement or any law or regulation to which the
Investor is a party or by which any of its property or assets is bound;
(iv) it has had full access to the base prospectus included in the
Registration Statement, as amended and/or supplemented as of the date
hereof, and the Company's periodic reports and other information
incorporated by reference therein, and was able to read, review,
download and print such materials; (v) in making its investment
decision in this offering, the Investor and its advisors, if any, have
relied solely on the Company's public filings with the Commission; (vi)
it is knowledgeable, sophisticated and experienced in making, and is
qualified to make, decisions with respect to investments in securities
representing an investment decision like that involved in the purchase
of the Shares; (vii) the Investor has had no position, office or other
material relationship within the past three years with the Company or
persons known to it to be affiliates of the Company; (viii), except as
42
set forth below, the Investor is not a, and it has no direct or
indirect affiliation or association with any, member of FINRA or an
Associated Person (as such term is defined under the NASD Membership
and Registration Rules Section 1011) as of the date hereof; and (ix)
neither the Investor nor any group of Investors (as identified in a
public filing made with the Commission) of which the Investor is a part
in connection with the offering of the Shares, acquired, or obtained
the right to acquire, twenty percent (20%) or more of the Common Stock
(or securities convertible into or exercisable for Common Stock) or the
voting power of the Company on a post-transaction basis.
(b) The Investor also represents and warrants that, other than the
transactions contemplated hereunder, the Investor has not directly or
indirectly, nor has any person acting on behalf of or pursuant to any
understanding with the Investor, executed any transactions in
securities of the Company, including "short sales" as defined in Rule
200 of Regulation SHO under the Exchange Act ("Short Sales"), during
the period commencing from the time that the Investor first became
aware of the proposed transactions contemplated hereunder until the
date hereof (the "Discussion Time"). The Investor has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
4. Investor Covenant Regarding Short Sales and Confidentiality. The
Investor covenants that neither it nor any affiliates acting on its
behalf or pursuant to any understanding with it will execute any
transactions in securities of the Company, including Short Sales,
during the period after the Discussion Time and ending at the time that
the transactions contemplated by this Subscription are first publicly
announced through a press release and/or Form 8-K. The Investor
covenants that until such time as the transactions contemplated by this
Subscription are publicly disclosed by the Company through a press
release and/or Form 8-K, the Investor will maintain the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).
5. Miscellaneous.
This Subscription constitutes the entire understanding and agreement
between the parties with respect to its subject matter, and there are
no agreements or understandings with respect to the subject matter
hereof which are not contained in this Subscription. This Subscription
may be modified only in writing signed by the parties hereto.
This Subscription may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and
shall become effective when counterparts have been signed by each party
and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by
delivery by facsimile.
The provisions of this Subscription are severable and, in the event
that any court or officials of any regulatory agency of competent
jurisdiction shall determine that any one or more of the provisions or
43
part of the provisions contained in this Subscription shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Subscription and this
Subscription shall be reformed and construed as if such invalid or
illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid,
legal and enforceable to the maximum extent possible, so long as such
construction does not materially adversely effect the economic rights
of either party hereto.
All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and shall be mailed, hand
delivered, sent by a recognized overnight courier service such as
Federal Express, or sent via facsimile and confirmed by letter, to the
party to whom it is addressed at the following addresses or such other
address as such party may advise the other in writing:
To the Company: as set forth on the signature page hereto.
To the Investor: as set forth on the signature page hereto.
All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
(e) This Subscription shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be
wholly performed in such state and without giving effect to the
principles thereof regarding the conflict of laws. To the extent
determined by such court, the prevailing party shall reimburse the
other party for any reasonable legal fees and disbursements incurred in
enforcement of or protection of any of its rights under this
Subscription.
44
If the foregoing correctly sets forth our agreement, please confirm
this by signing and returning to us the duplicate copy of this
Subscription.
IRON EAGLE GROUP, INC.
By: _____________________________
Name: Jason Shapiro
Number of Shares:
Purchase Price per Share: $5.00
Aggregate Purchase Price: $
Title: Chief Financial Officer
Address for Notice:
61 West 62nd Street, Suite 23F
New York, NY 10023
Tel. No.: (888) 481-4445
INVESTOR: ________________________________
By: ________________________________________
Name:
Title:
Select method of delivery of Shares:
- DWAC DELIVERY
DWAC Instructions:
Name of DTC Participant (broker-dealer at which the account or accounts
to be credited with the Shares are maintained):
__________________________
DTC Participant Number: _____________________________________
Name of Account at DTC Participant being
credited with the Shares:
_____________________________________
Account Number at DTC Participant being credited
with the Shares:
_____________________________________
- PHYSICAL DELIVERY OF CERTIFICATES
Delivery Instructions:
Name in which Shares should be issued:
_______________________________________ Address for delivery:
c/o _______________________________
Street: ____________________________
City/State/Zip: ______________________
Attention: __________________________
Telephone No.: _____________________
45
EXHIBIT B
FORM OF UNDERWRITER WARRANT
UNDERWRITER'S WARRANT AGREEMENT
UNDERWRITER'S WARRANT AGREEMENT dated as of July ___, 2011 (this
"Agreement"), between Iron Eagle Group, Inc., a Delaware corporation
(the "Company"), and Aegis Capital Corp. (hereinafter referred to as
the "Underwriter").
RECITALS
A. The Company proposes to issue to the Underwriter warrants (the
"Warrants") to purchase up to an aggregate of 120,000 (as such number
may be adjusted from time to time pursuant to Article 8 of this Warrant
Agreement) shares (the "Shares") of common stock, $.00001 par value per
share (the "Common Stock"), of the Company.
B. The Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated July ____, 2011 between
the Underwriter and the Company, to act as the Underwriter in
connection with the Company's proposed initial public offering (the
"Public Offering") of up to 3,000,000 shares of Common Stock (the
"Public Shares") at an initial public offering price of $5.00 per
Public Share.
C. The Warrants issued pursuant to this Agreement are being issued
by the Company to the Underwriter or to its designees who are officers
or partners of the Underwriter (collectively, the "Designees"), in
consideration for, and as part of the Underwriter's compensation in
connection with the Underwriting Agreement.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of the aggregate amount of $120.00, the
agreements herein set forth and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Grant. The Underwriter is and/or the Designees are hereby granted
the right to purchase, at the time of the closing of the offering,
warrants to purchase an aggregate number of fully paid and non-
assessable Shares of common stock as shall equal 4% of the total number
of shares sold in the public offering, as reflected in a warrant
certificate (the "Warrant Certificate"), at an initial exercise price
(subject to adjustment as provided in Article 6 hereof) of $6.00 per
Share, at any time from July ____, 2012 until 5:00 P.M., New York time,
on July __, 2016(the "Warrant Term"). Except with respect to the rights
granted pursuant to Article 7 hereof, the Shares are in all respects
identical to the Public Shares being sold to the public pursuant to the
terms and provisions of the Underwriting Agreement.
46
2. Exercise of Warrant.
2.1 Cash Exercise. The Warrants initially are exercisable at a
price of $6.00 per Share, payable in cash, by wire transfer of
immediately available funds to an account specified by the Company, or
(if the total exercise price being paid is less than $1,000) by check
to the order of the Company, or any combination thereof, subject to
adjustment as provided in Article 8 hereof. Upon surrender of the
Warrant Certificate(s) with the annexed Cash Exercise Form duly
executed, together with payment of the Exercise Price (as hereinafter
defined) for the Shares, at the Company's principal office (currently
located at 61 West 62nd Street, Suite 23F, New York, NY 10023), or at
the office of its transfer agent, as applicable, the registered holder
of a Warrant Certificate shall be entitled to receive a certificate or
certificates for the Shares so purchased. The purchase rights
represented by the Warrant Certificate are exercisable at the option of
the Holder hereof, in whole or in part. In the case of the purchase of
less than all of the Shares purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate upon the surrender
thereof and shall execute and deliver a new Warrant Certificate of like
tenor for the balance of the Shares. As used in this Agreement, the
terms "Holder" and "Holders" refer to the registered holder of a
Warrant Certificate or the Shares issued upon exercise of the Warrants
as the context requires.
2.2 Cashless Exercise. At any time during the Warrant Term, the
Holder may, at the Holder's option, exchange, in whole or in part, the
Warrants represented by such Holder's Warrant Certificate which are
exercisable for the purchase of Shares into the number of Shares
determined in accordance with this Article 2.2 (a "Warrant Exchange"),
by surrendering such Warrant Certificate at the principal office of the
Company or at the office of its transfer agent, accompanied by a notice
stating such Holder's intent to effect such exchange, the number of
Warrants to be so exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the Notice
of Exchange or, if later, the date the Notice of Exchange is received
by the Company or at the office of its transfer agent, as applicable
(the "Exchange Date"). Certificates for the Shares issuable upon such
Warrant Exchange and, if applicable, a new Warrant Certificate of like
tenor representing the Warrants which were subject to the surrendered
Warrant Certificate and not included in the Warrant Exchange, shall be
issued as of the Exchange Date and delivered to the Holder within ten
(10) business days following the Exchange Date. In connection with any
Warrant Exchange, the Holder shall be entitled to subscribe for and
acquire (i) the number of Shares (rounded to the next highest integer)
which would, but for such Warrant Exchange, then be issuable pursuant
to the provisions of Article 2.1 above upon the exercise of the
Warrants specified by the Holder in its Notice of Exchange (the "Total
Share Number") less (ii) the number of Shares equal to the quotient
obtained by dividing (a) the product of the Total Share Number and the
existing Exercise Price per Share (as hereinafter defined) by (b) the
Market Price (as hereinafter defined) of a Public Share on the trading
day immediately preceding the Exchange Date. "Market Price" at any date
shall be deemed to be the closing sale price or, in case no reported
47
sales takes place on such day, the average of the closing sale prices
for the last three consecutive trading days on which reported sales
have taken place, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, the closing bid price
as reported by (i) Bloomberg Financial Markets (or any successor
thereto) ("Bloomberg") through the OTC Bulletin Board or successor
trading market or (ii) if not listed on the OTC Bulletin Board (or its
successor market), the "pink sheets." If the Common Stock is not listed
or admitted to trading on any national securities exchange, and bid
prices are not reported by Bloomberg through the OTC Bulletin Board or
successor trading market, or the "pink sheets," then the Market Price
shall be determined in good faith by the mutual agreement of the Board
of Directors of the Company and the Holder, where the Board of
Directors of the Company shall prepare and deliver to the Holder its
proposed market price and an analysis setting forth the basis for its
determination.
3. Issuance of Stock Certificates.
Upon the exercise of the Warrants, the issuance of certificates for
the Shares purchased shall be made no later than ten (10) business days
thereafter without charge to the Holder thereof including, without
limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of
Article 4) be issued in the name of the Holder thereof, or, if a sale,
transfer, pledge or other disposition of the Warrants or the Shares to
be issued upon exercise thereof would be permitted by this Agreement
and applicable federal and state securities laws, in such names as may
be directed by the Holder; provided, however, that the Company shall
not be required to pay any transfer tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such
certificates in a name other than that of the Holder, and the Company
shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
The certificates representing the Shares shall be executed on behalf
of the Company in the manner contemplated by the Company's articles of
incorporation or bylaws. Warrant Certificates shall be dated the date
of execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
Upon exercise, in part or in whole, of the Warrants, certificates
representing the Shares purchased shall bear a legend substantially
similar to the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF 1933,
48
AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) UPON THE
DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL TO THE COMPANY, STATING THAT AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IS AVAILABLE.
4. Restriction on Transfer of Warrants.
As used herein, "Lock-Up Period" means the period beginning on the
date of the final prospectus used in the Public Offering (the "Start
Date") and ending on (and including) the date that is 365 days after
the Start Date. The Underwriter (and the Holder of a Warrant
Certificate, by the Holder's acceptance thereof) covenants and agrees
that, as required by FINRA Rule 5110(g), the Warrants and the Shares
may not be sold during the Public Offering, or sold, transferred,
assigned, pledged or hypothecated, or be the subject of any hedging,
short sale, derivative, put or call transaction that would result in
the effective economic disposition of the Warrants and the Shares
during the Lock-Up Period, except (i) to the Underwriter or the
Designees, provided that any portion of the Warrant and the Shares so
transferred shall remain subject to the above restriction for the
remainder of the restriction period, and (ii) any sale of Shares in
accordance with Article 7 in a firm commitment underwritten public
offering of Common Stock that closes at least 180 days after the Start
Date.
5. Representations and Warranties of Holder.
The Holder of a Warrant (including the Underwriter) represents and
warrants to the Company as follows:
5.1 Acquisition of Warrant for Personal Account. The Holder is
acquiring this Warrant and the Shares issuable upon exercise of this
Warrant (collectively the "Securities") for investment for its own
account and not with a present view to, or for resale in connection
with, any public resale or distribution thereof. The Holder
understands that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Act"), by reason of a specific
exemption from the registration provisions of the Act which depends
upon, among other things, the bona fide nature of the investment intent
as expressed herein. The Holder further understands that the Securities
have not been passed upon or the merits thereof endorsed or approved by
any state or federal authorities.
5.2 Rule 144. The Holder acknowledges that the Securities must be
held indefinitely unless subsequently registered under the Act or an
exemption from such registration is available. The Holder is aware of
the provisions of Rule 144 promulgated under the Act.
5.3 Accredited Investor. As of the date hereof the Holder is, and
upon any exercise of this Warrant the Holder will be, an "accredited
investor" within the meaning of Regulation D promulgated under the Act.
49
The Holder is sophisticated in financial matters, and is able to
evaluate the risks and benefits of an investment in the Securities for
an indefinite period of time.
5.4 Opportunity To Discuss; Information. The Holder has been
afforded the opportunity to ask questions of, and receive answers from,
the officers and/or directors of the Company acting on its behalf
concerning the terms and conditions of this transaction and to obtain
any additional information, to the extent that the Company possesses
such information or can acquire it without unreasonable effort or
expense, necessary to verify the accuracy of the information furnished;
and has availed itself of the opportunity to the extent the Holder
considers appropriate in order to permit it to evaluate the merits and
risks of an investment in the Company.
5.5 Future Registration. The Holder acknowledges and recognizes
that, except as provided in Article 7 hereof, the Company has not
agreed to register the resale of the Shares in any Registration
Statement to be filed by the Company under the Act.
6. Price.
6.1 Initial and Adjusted Exercise Price. The initial Exercise Price
of each Warrant shall be $6.00 per Share. The adjusted Exercise Price
per Share shall be the prices which shall result from time to time from
any and all adjustments of the initial Exercise Price per Share in
accordance with the provisions of Article 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
Registration Under the Securities Act of 1933. As of the date hereof,
none of the Warrants or the Shares have been registered for purposes of
public resale or distribution under the Act.
7.1 Registrable Securities. As used herein, the term "Registrable
Security" means each of the Shares and any shares of Common Stock
issued upon any stock split or stock dividend in respect of such
Shares; provided, however, that with respect to any particular
7.2 Registrable Security, such security shall cease to be a
Registrable Security when, as of the date of determination, (i) it has
been registered under the Act and disposed of pursuant thereto, (ii)
registration under the Act is no longer required for the Holder for
subsequent public distribution of such security under Rule 144
promulgated under the Act or otherwise, or (iii) it has ceased to be
outstanding. The term "Registrable Securities" means any and/or all of
the securities falling within the foregoing definition of a
"Registrable Security." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure
affecting the Common Stock, such adjustment shall be made in the
50
definition of "Registrable Security" as is appropriate in order to
prevent any dilution or enlargement of the rights granted pursuant to
this Article 7.
7.3 Piggyback Registration. If, within seven (7) years following
the effective date of the Public Offering, the Company proposes to
prepare and file one or more post-effective amendments to the
registration statement filed in connection with the Public Offering or
any new registration statement or post-effective amendments thereto
covering equity or debt securities of the Company, or any such
securities of the Company held by its shareholders (in any such case,
other than in connection with a merger, acquisition or pursuant to Form
S-8 or successor form)(for purposes of this Article 7, collectively,
the "Registration Statement"), it will give written notice of its
intention to do so ("Notice"), at least thirty (30) days prior to the
filing of each such Registration Statement, to all Holders of the
Registrable Securities. Upon the written request of such a Holder (a
"Requesting Holder"), made within twenty (20) days after receipt by the
Holder of the Notice, that the Company include any of the Requesting
Holder's Registrable Securities in the proposed Registration Statement,
the Company shall, as to each such Requesting Holder, use commercially
reasonable efforts to effect the registration under the Act of the
Registrable Securities which it has been so requested to register
("Piggyback Registration"), at the Company's sole cost and expense and
at no cost or expense to the Requesting Holders (except as provided in
Article 7.5(b) hereof).
Notwithstanding the provisions of this Article 7.3, the Company
shall have the right at any time after it shall have given written
notice pursuant to this Article 7.3 (irrespective of whether any
written request for inclusion of Registrable Securities shall have
already been made) to elect not to file any such proposed Registration
Statement, or to withdraw the same after the filing but prior to the
effective date thereof, without incurring any liability to any Holder
of Registrable Securities.
8.4 Demand Registration.
(a) At any time beginning at such time as the Company is eligible
to use a registration statement on Form S-3 under the Act (or
applicable successor form) for secondary offerings of securities and
ending five (5) years after the effective date of the Public Offering,
any "Majority Holder" (as such term is defined in Article 7.4(c) below)
of the Registrable Securities shall have the right, exercisable by
written notice to the Company (the "Demand Registration Request"), to
have the Company prepare and file with the Securities and Exchange
Commission (the "Commission") on one occasion, at the sole expense of
the Company (except as provided in Article 7.5(b) hereof), a
Registration Statement on Form S-3 (or applicable successor form) and
such other documents, including a prospectus, as may be necessary (in
the opinion of both counsel for the Company and counsel for such
Majority Holder) in order to comply with the provisions of the Act, so
as to permit a public offering and sale of the Registrable Securities
by the Holders thereof. This right is in addition to the piggyback
51
registration rights provided for under Article 7.3 hereof, provided
that the Company shall not be required to effect a Demand Registration
pursuant to this Article 7.4 within 180 days of the effective date of a
Registration Statement filed by the Company to which the rights
provided by Article 7.3 would apply if the Holders were properly
notified pursuant to Article 7.3 hereof. The Company shall use
commercially reasonable efforts to cause the Registration Statement to
become effective under the Act so as to permit a public offering and
sale of the Registrable Securities by the Holders thereof. Once
effective, the Company will use commercially reasonable efforts to
maintain the effectiveness of the Registration Statement until the
earlier of (i) the date that all of the Registrable Securities have
been sold or (ii) the date the Holders thereof receive an opinion of
counsel to the Company that all of the Registrable Securities may be
freely traded without registration under the Act under Rule 144
promulgated under the Act or otherwise.
(b) The Company covenants and agrees to give written notice of
any Demand Registration Request to all Holders of the Registrable
Securities within ten (10) business days from the date of the Company's
receipt of any such Demand Registration Request. After receiving notice
from the Company as provided in this Article 7.4(b), Holders of
Registrable Securities may request the Company to include their
Registrable Securities in the Registration Statement to be filed
pursuant to Article 7.4(a) hereof by notifying the Company of their
decision to have such securities included within fifteen (15) business
days of their receipt of the Company's notice.
(c) The term "Majority Holder" as used in Article 7.4 hereof
shall mean any Holder or any combination of Holders of Registrable
Securities that hold an aggregate number of shares of Common Stock
(including Shares already issued and Shares issuable pursuant to the
exercise of outstanding Warrants) as would constitute a majority of the
aggregate number of Shares that are Registrable Securities (including
Shares already issued and Shares issuable pursuant to the exercise of
outstanding Warrants).
8.5 Covenants of the Company With Respect to Registration. The Company
covenants and agrees as follows:
(a) In connection with any registration under Article 7.4 hereof,
the Company shall file the Registration Statement as expeditiously as
possible, but in any event no later than thirty (30) days following
receipt of any demand therefore, shall use commercially reasonable
efforts to have any such Registration Statement declared effective at
the earliest possible time, and shall furnish each Holder of
Registrable Securities such number of prospectuses as shall reasonably
be requested.
(b) The Company shall pay all costs, fees and expenses (other
than underwriting fees, discounts and nonaccountable expense allowance
applicable to the Registrable Securities and fees and expenses of
counsel retained by the Holders of Registrable Securities) in
connection with all Registration Statements filed pursuant to Articles
52
7.3 and 7.4(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and
expenses and any fees due to the FINRA related to such registration or
sale of any of the Registrable Securities.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Registrable Securities
included in the Registration Statement for offering and sale under the
securities or blue sky laws of such states as are requested by the
Holders of such securities and for obtaining the clearance of FINRA
member firms to participate in the distribution of such Registrable
Securities; provided, however, that the Company shall not be required
in connection therewith to qualify to do business or file a general
consent to service of process in any jurisdiction if the Board of
Directors of the Company determines in good faith that the same would
be materially detrimental to the Company.
(d) The Company shall indemnify any Holder of the Registrable
Securities to be sold pursuant to any Registration Statement and any
underwriter or person deemed to be an underwriter under the Act and
each person, if any, who controls such Holder or underwriter or person
deemed to be an underwriter within the meaning of Section 15 of the Act
or Section 20(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing
or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising
from such Registration Statement to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to
indemnify the Underwriter as set forth in Section 6 of the Underwriting
Agreement and to provide for just and equitable contribution as set
forth in Section 6 of the Underwriting Agreement.
(e) Any Holder of Registrable Securities to be sold pursuant to a
Registration Statement, and such Holder's successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holder, or such Holder's successors
or assigns, for specific inclusion in such Registration Statement to
the same extent and with the same effect as the provisions pursuant to
which the Underwriter has agreed to indemnify the Company as set forth
in Section 6 of the Underwriting Agreement and to provide for just and
equitable contribution as set forth in Section 6 of the Underwriting
Agreement.
(f) Nothing contained in this Agreement shall be construed as
requiring any Holder to exercise the Warrants held by such Holder prior
to the initial filing of any Registration statement or the
effectiveness thereof.
53
(g) If the Company shall fail to comply with the provisions of
this Article 7, the Company shall, in addition to any other equitable
or other relief available to the Holders of Registrable Securities, be
liable for any or all incidental, special and consequential damages
sustained by the Holders of Registrable Securities requesting
registration of their Registrable Securities.
(h) In connection with any offering involving an underwriting of
shares of the Company's Common Stock pursuant to Article 7.3, the
Company shall not be required to include any of the Registrable
Securities in such underwriting unless the Holders accept the terms of
the underwriting as agreed upon between the Company and its
underwriters. If the total number of securities to be included in such
offering, including the Registrable Securities requested by Holders to
be included therein, exceeds the amount of securities that the
underwriters determine in their reasonable discretion is compatible
with the success of the offering (the "Maximum Number of Securities"),
then the Company shall be required to include in the offering only that
number of such securities, including Registrable Securities, which the
underwriters and the Company determine in their sole discretion will
not jeopardize the success of the offering. In the event that the
underwriters determine that the Maximum Number of Securities is less
than the number of securities to be offered by the Company plus all of
the other Registrable Securities requested to be registered by Holders
or other security holders with similar registration rights, then the
securities that are included in such offering shall be allocated in the
following manner: (i) to the Company and, if there is a balance
remaining, (ii) to the Holders, provided that if the balance remaining
is not sufficient to include in the offering all of the Registrable
Securities requested to be registered by the Holders, the number of
Registrable Securities to be included for any holder shall be
determined pro rata based on the proportionate number of Registrable
Securities then held (regardless of whether or not such any such Holder
has requested that all such Registrable Securities be included), and,
if there is a balance remaining, (iii) to any other shareholders
holding similar registration rights as selling security holders.
(i) The Company shall promptly deliver copies of all
correspondence between the Commission and the Company, its counsel or
its auditors with respect to the Registration Statement to each Holder
of Registrable Securities included for registration in such
Registration Statement pursuant to Article 7.3 hereof or Article 7.4
hereof and to the managing underwriter, if any, of the offering in
connection with which such Holder's Registrable Securities are being
registered and shall permit each Holder of Registrable Securities and
such underwriter to do such reasonable investigation, upon reasonable
advance notice, with respect to information contained in or omitted
from the Registration Statement as it deems reasonably necessary to
comply with applicable securities laws or rules of the FINRA. Such
investigation shall include access to books, records and properties,
and opportunities to discuss the business of the Company with its
officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder of Registrable
Securities or underwriter shall reasonably request; provided, that the
54
Company may require each such Holder or underwriter to enter into
reasonable confidentiality and non-disclosure agreements with respect
to the information contained in or derived from such investigations.
8. Adjustments of Exercise Price and Number of Securities. The
following adjustments apply to the Exercise Price of the Warrants with
respect to the Shares and the number of Shares purchasable upon
exercise of the Warrants.
8.1 Computation of Adjusted Price. In case the Company at any time
after the date hereof pays a dividend in shares of Common Stock or
makes a distribution in shares of Common Stock, then upon such dividend
or distribution, the Exercise Price in effect immediately prior to such
dividend or distribution shall forthwith be reduced to a price
determined by dividing (a) an amount equal to the total number of
shares of Common Stock outstanding immediately prior to such dividend
or distribution multiplied by the Exercise Price in effect immediately
prior to such dividend or distribution, by (b) the total number of
shares of Common Stock outstanding immediately after such issuance or
sale.
8.2 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case
of subdivision or proportionately increased in the case of combination.
8.3 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Article 8, the number
of Shares issuable upon the exercise of each Warrant shall be adjusted
to the nearest full number by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the
number of Shares issuable upon exercise of the Warrants immediately
prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
8.4 Reclassification, Consolidation, Merger, etc. Subject to
Article 12, in case of any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value to
no par value, or from no par value to par value, or as a result of a
subdivision or combination), or in the case of any consolidation of the
Company with, or merger of the Company into, another corporation (other
than a consolidation or merger in which the Company is the surviving
corporation and which does not result in any reclassification or change
of the outstanding shares of Common Stock, except a change as a result
of a subdivision or combination of such shares or a change in par
value, as aforesaid), or in the case of a sale or conveyance to another
corporation of all or substantially all of the assets of the Company,
the Holders shall thereafter have the right to convert this Warrant
into the kind and amount of shares of stock and other securities and
property which the Holder would have owned or have been entitled to
receive immediately after such reclassification, change, consolidation,
merger, sale or conveyance had this Warrant been converted immediately
prior to the effective date of such reclassification, change,
consolidation, merger, sale or conveyance, and in any such case, if
55
necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Article 8 with respect to the rights
and interests thereafter of the Holder of this Warrant, to the end that
the provisions set forth in this Article 8 shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in
relation to any shares of stock and other securities and property
thereafter deliverable on the exercise of this Warrant. The provisions
of this Article 8.4 shall similarly apply to successive such
reclassifications, changes, consolidations, mergers, sales or
conveyances. In the event of any conflict between Article 8.4 and
Article 12, the latter shall control.
8.5 Determination of Outstanding Common Shares. For purposes of
this Agreement, the number of shares of Common Stock at any one time
outstanding shall include: (i) the aggregate number of shares of common
stock issued and outstanding, and (ii) the aggregate number of shares
of common stock issuable upon the exercise of any outstanding options,
rights, and warrants, and upon the conversion or exchange of any
outstanding convertible or exchangeable securities.
8.6 Dividends and Other Distributions with Respect to Outstanding
Securities. In the event that the Company shall at any time prior to
the exercise of all Warrants make any distribution of its assets to
holders of its Common Stock as a liquidating or a partial liquidating
dividend, then the Holder of Warrants who exercises its Warrants after
the record date for the determination of those Holders of Common Stock
entitled to such distribution of assets as a liquidating or partial
liquidating dividend shall be entitled to receive for the exercise
price per Warrant, in addition to each share of Common Stock, the
amount of such distribution (or, at the option of the Company, a sum
equal to the value of any such assets at the time of such distribution
as determined by the Board of Directors of the Company in good faith)
which would have been payable to such Holder had he been the Holder of
record of the Common Stock receivable upon exercise of his Warrant on
the record date for the determination of those entitled to such
distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely
performance of the provisions of this Article 8.6.
8.7 Subscription Rights for Shares of Common Stock or Other
Securities. In the case that the Company or an affiliate of the Company
shall at any time after the date hereof and prior to the exercise of
all the Warrants issue any rights, warrants or options to subscribe for
shares of Common Stock or any other securities of the Company or of
such affiliate to all the shareholders of the Company, the Holders of
unexercised Warrants on the record date of such issuance of rights,
warrants or options shall be entitled, in addition to the shares of
Common Stock or other securities receivable upon the exercise of the
Warrants, to receive such rights, warrants or options that such Holders
would have been entitled to receive had they been, on the record date
set by the Company or such affiliate in connection with such issuance
of rights, warrants or options, the holders of record of the number of
whole shares of Common Stock then issuable upon exercise of their
outstanding Warrants.
56
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive
office of the Company, for a new Warrant Certificate of like tenor and
date representing in the aggregate the right to purchase the same
number of securities in such denominations as shall be designated by
the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant
Certificate and, in case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, and upon surrender and cancellation of
the Warrant Certificate, if mutilated, the Company will make and
deliver a new Warrant Certificate of like tenor in lieu thereof.
10. Elimination of Fractional Interests.
The Company shall not be required to issue certificates representing
fractions of Shares upon the exercise of the Warrants, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of
Shares.
11. Reservation and Listing of Securities.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Warrants, such number of shares of Common
Stock as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and payment of
the Exercise Price therefore, all Shares issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any shareholder. As long as the
Warrants shall be outstanding, the Company shall use its best efforts
to cause all shares of Common Stock issuable upon the exercise of the
Warrants to be listed on any securities exchange or trading market on
which the Common Stock may be listed and/or quoted.
12. Sale of the Company.
(a) As used herein, a "Sale of the Company" means (i) any sale
(however effected, including without limitation by sale of stock,
merger, share exchange or otherwise, including without limitation in a
single transaction or series of related transactions) of all or
substantially all of the outstanding voting stock of the Company, or
(ii) any sale, lease or disposition of all or substantially all of the
assets of the Company and its subsidiaries, taken as a whole; provided,
that in neither case, shall a Sale of the Company include a transaction
set forth above where the holders of the Company's voting stock
immediately prior to the transaction hold more than 50% of the
outstanding voting stock of the Company or its successor following such
transaction.
57
(b) The Company shall give each Holder at least twenty (20) days
prior notice of any Sale of the Company.
(c) Notwithstanding anything to the contrary herein, this Warrant
will expire at the closing for a Sale of the Company.
(d) Upon receipt of the notice contemplated by Article 12(b)
hereof, any Holder may:
(i) elect (by giving written notice received by the Company no
later than five days before the closing of such Sale of the Company and
surrendering the Warrants) to receive, upon the closing of the Sale of
the Company, (1) the same amount and kind of securities, cash or
property as the Holder would have been entitled to receive upon the
closing of the Sale of the Company if the Holder had been, immediately
prior to the Sale of the Company, the holder of the number of Shares of
Common Stock then issuable upon exercise in full of this Warrant less
(2) an amount of such securities, cash or property equal to the
aggregate exercise price of the Warrants surrendered. If holders of
Common Stock are given any choice as to the securities, cash or
property to be received in a Sale of the Company, then the Holder shall
be given the same choice as to such alternate consideration it receives
pursuant to an election under this Article 12(d);
(ii) let the Holders' Warrants expire in accordance with their
terms (subject to Article 12(c)); or
(iii) exercise the Holder's Warrants in accordance with their
terms prior to the expiration thereof (subject to the Article 12(c)).
(e) Neither this Article 12, nor any notice or election
contemplated by this Article 12, shall create any obligation on the
Company's part to consummate any Sale of the Company. If, after any
notice or election contemplated by this Article 12 is given, the
Company determines not to consummate the Sale of the Company, then the
Company shall notify the Holders of such determination, whereupon any
preceding notices or elections under this Article 12 regarding such
Sale of the Company shall be null and void and of no effect.
13. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as conferring
upon the Holder or Holders the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as
having any rights whatsoever as a shareholder of the Company. If,
however, at any time prior to the expiration of the Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
58
distribution payable otherwise than out of current or retained
earnings, as indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital stock
of the Company, or any option, right or warrant to subscribe therefore;
or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger); or
(d) reclassification or change of the outstanding shares of
Common Stock (other than a change in par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), consolidation of the Company with, or merger of the
Company into, another corporation (other than a consolidation or merger
in which the Company is the surviving corporation and which does not
result in any reclassification or change of the outstanding shares of
Common Stock, except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or
a sale or conveyance to another corporation of the property of the
Company as an entirety is proposed; or
(e) The Company or an affiliate of the Company shall propose to
issue any rights to subscribe for shares of Common Stock or any other
securities of the Company or of such affiliate to all the shareholders
of the Company; then, in any one or more of said events, the Company
shall give written notice to the Holder or Holders of such event at
least twenty (20) days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or
entitled to vote on such proposed dissolution, liquidation, winding up
or sale. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be. Failure to give such
notice or any defect therein shall not affect the validity of any
action taken in connection with the declaration or payment of any such
dividend or distribution, or the issuance of any convertible or
exchangeable securities or subscription rights, options or warrants, or
any proposed dissolution, liquidation, winding up or sale.
14. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made (1) one
business day after being sent by overnight courier, (2) three business
days after having been sent by first-class U.S. mail (certified or
regular), (3) at the time sent, if sent by email or facsimile between
8:00 a.m. and 5:00 p.m. on a business day, or one business day after
being sent, if sent by email or facsimile at any other time, and
(4) upon delivery, if hand-delivered by any other means.
59
(a) If to a registered Holder of the Warrants, to the address (or
email or facsimile number, as applicable) of such Holder as shown on
the signature page hereto or the books of the Company; or
(b) If to the Company, to:
Iron Eagle Group, Inc.
Attn: Chief Executive Officer
61 West 62nd Street, Suite 23F
New York, NY 10023
or to such other address as the Company may designate by notice to the
Holders given pursuant to this Article.
15. Supplements and Amendments.
The Company and the Underwriter may from time to time supplement or
amend this Agreement without the approval of any Holders of the
Warrants and/or Shares issued upon exercise of the Warrants in order to
cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions
herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Underwriter may
deem mutually necessary or desirable and which the Company and the
Underwriter mutually deem not to adversely affect the interests of the
Holders of Warrant Certificates.
16. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holders inure to the benefit of their
respective successors and permitted assigns hereunder.
17. Governing Law.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Minnesota
and for all purposes shall be construed in accordance with the laws of
said State, other than its conflicts of laws provisions.
18. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Underwriter and any other
registered Holder or Holders of the Warrant Certificates or Shares any
legal or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole and exclusive benefit of the
Company and the Underwriter and any other Holder or Holders of the
Warrant Certificates or Shares.
19. Counterparts.
This Agreement may be executed in any number of counterparts, and may
be delivered to each of the parties by facsimile or e-mail. Facsimile
or photocopy signatures shall be deemed as legally enforceable as the
60
original. Each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but
one and the same instrument.
[Signature page follows.]
61
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed as of the day and year first above written.
IRON EAGLE GROUP, INC.
By: /s/
-------------------
Chief Executive Officer
Agreed and Accepted as of the day and year first above written:
AEGIS CAPITAL CORP.
By: /s/
-------------------
Name:
Title: Director, Corp. Finance
Aegis Capital Corp.
Main:
with a copy to (that shall not constitute notice):
Mitchell Lampert, Esq.
Meister, Seelig, & Fein LLP
Two Grand Central Tower
140 East 45th Street, 19th Floor
New York, NY 10017
Phone: (212) 655-3575
Fax: (612) 766-1600
62
WARRANT CERTIFICATE
NEITHER THE WARRANTS NOR THE SHARES UNDERLYING THE WARRANTS REPRESENTED
BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS. NEITHER THE
WARRANTS NOR THE SHARES UNDERLYING THE WARRANTS MAY BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR THE WARRANTS OR THE SHARES UNDERLYING THE
WARRANTS, AS APPLICABLE, UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS, OR (B) UPON THE DELIVERY BY THE
HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY
TO COUNSEL TO THE COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, JULY, 2016
No. W-1000 ___,000 Warrants
This Warrant Certificate certifies that Aegis Capital, Corp. or its
registered assigns, is the registered holder of 3,000,000 Warrants to
purchase, at any time from July ____, 2011 until 5:00 P.M. New York
time on September 2, 2011 ("Expiration Date"), up to _____,000 fully-
paid and non-assessable shares (the "Shares") of the common stock,
$.00001 par value per share (the "Common Stock"), of Iron Eagle Group,
Inc., a Delaware corporation (the "Company"), at an initial exercise
price, subject to adjustment in certain events (the "Exercise Price"),
of $6.00 per Share, upon surrender of this Warrant Certificate and
payment of the Exercise Price at an office or agency of the Company,
but subject to the conditions set forth herein and in the Underwriter's
Warrant Agreement dated as of July ___, 2011, between the Company and
Aegis Capital Corp.. (the "Warrant Agreement"). Payment of the Exercise
Price may be made in cash, wire transfer, or by check payable to the
order of the Company, by surrender of a portion of the Warrants
represented by the Warrant Certificate, or any combination thereof, in
each case subject to the terms of the Warrant Agreement.
No Warrant may be exercised after 5:00 P.M., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made
a part of this instrument and is hereby referred to for a description
of the rights, limitation of rights, obligations, duties and immunities
thereunder of the Company and the holders (the words "holders" or
"holder" means the registered holders or registered holder) of the
Warrants.
63
The Warrant Agreement provides that upon the occurrence of certain
events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be
adjusted. In such event, the Company will, at the request of the
holder, issue a new Warrant Certificate evidencing the adjustment in
the Exercise Price and the number and/or type of securities issuable
upon the exercise of the Warrants; provided, however, that the failure
of the Company to issue such new Warrant Certificates shall not in any
way change, alter, or otherwise impair the rights of the holder as set
forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the
transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided herein and in the Warrant Agreement, without any
charge except for any tax or other governmental charge imposed in
connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised
Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, and of any distribution to the
holder(s) hereof, and for all other purposes, and the Company shall not
be affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the
Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed.
Dated: July ____, 2011
IRON EAGLE GROUP INC.
By: /s/
--------------------
Chief Executive Officer
64
CASH EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase __________ Shares
of Common Stock and herewith tenders in payment for such securities, in
cash, by wire transfer of immediately available funds to an account
specified by Iron Eagle Group, Inc., a Delaware corporation (the
"Company"), or (if the total exercise price being paid is less than
$1,000) by check to the order of the Company, or any combination
thereof, in the amount of $__________, all in accordance with the terms
of the Warrant Certificate. The undersigned requests that a
certificate for such securities be registered in the name of the
undersigned, or, if permitted by the Underwriter's Warrant Agreement
dated as of July ___,2011 between the Company and Aegis Capital Corp.,
the name of:
_______________________________________________,
whose address is ____________________________
____________________________
____________________________
The undersigned requests that such Certificate be delivered to:
_______________________________________________,
whose address is ____________________________
____________________________
____________________________
Dated: ____________________________
Signature: ____________________________
SSN or Tax ID No: ____________________________
65
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate and such transfer is permitted
pursuant to the terms of the Underwriter's Warrant Agreement dated July
____, 2011 between the Company and Aegis Capital Corp.
FOR VALUE RECEIVED, ______________________________________ hereby
sells, assigns and transfers unto:
_______________________________________________,
whose address is ____________________________
____________________________
____________________________
and whose tax ID
No. or SSN is: ____________________________,
this Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_________________, Attorney, to transfer the within Warrant Certificate
on the books of the within-named Company, with full power of
substitution.
66
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant pursuant to Article 2.2 of the
Underwriter's Warrant Agreement dated July ___, 2011 between the
Company and Aegis Capital Corp. (the "Warrant Agreement")
To: IRON EAGLE GROUP, INC.
The undersigned hereby irrevocably elects a cashless exercise of the
right to purchase represented by the attached Warrant Certificate for,
and to purchase thereunder, _____________________ Shares, as provided
for in Article 2.2 of the Warrant Agreement.
Please issue a certificate or certificates for such Shares in the name
of the undersigned, or, if permitted by the Warrant Agreement, the name
of:
_______________________________________________,
whose address is ____________________________
____________________________
____________________________
and whose tax ID
No. or SSN is: ____________________________,
The undersigned requests that such Certificate be delivered to:
_______________________________________________,
whose address is ____________________________
____________________________
____________________________
Dated: ____________________________
Signature: ____________________________
NOTE: The above signature should correspond exactly with the name on
the first page of this Warrant Certificate or with the name of the
assignee appearing in the assignment form, if any.
And if said number of shares shall not be all the shares purchasable
under the attached Warrant Certificate, a new Warrant Certificate is to
be issued in the name of the undersigned for the remaining balance of
the shares purchasable thereunder.
67
EXHIBIT C
FORM OF ESCROW AGREEMENT
68
EXHIBIT D
FORM OF INDIVIDUAL LOCK-UP AGREEMENT
This AGREEMENT (the "Agreement") is made as of the date set forth on
the signature page of this Agreement by ______ ("Holder"), maintaining
an address at ___________________, in connection with its ownership of
shares of common stock of [______], a [_____] company (the "Company").
All capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to such terms in the Underwriting Agreement.
NOW THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which consideration are hereby acknowledged, Holder agrees
as follows:
Background
A. The holder understands that the Company and Aegis Capital
Corporation (the "Underwriter") intend to enter into the Underwriting
Agreement, relating to the initial public offering of up to 3,000,000
shares of its common stock (the "Maximum Offering"), par value $0.00001
per share (the "Common Stock"), at $5.00 per share, to investors on a
"best efforts" basis (the "Offering").
B. The Company intends to apply for the listing of its Common Stock on
the Nasdaq Capital Market (the "Nasdaq").
C. Holder is the beneficial owner of the amount of shares of Common
Stock of the Company designated on the signature page hereto.
D. In order to induce the Company and Underwriter to enter into the
Underwriting Agreement and to proceed with the Offering, and in
recognition of the benefit that such Offering will confer upon the
Holder as a stockholder of the Company, the Holder agrees that he will
not sell any of the Lockup Shares (defined below) for a period of
twelve (12) months after the Common Stock is listed on the Nasdaq,
unless Holder receives Board approval.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Sale Restriction. Holder hereby agrees that during the Restriction
Period, the Holder will not offer, pledge, sell, contract to sell, sell
any option or contract to purchase, lend, transfer or otherwise dispose
of any shares of Common Stock or any options, warrants or other rights
to purchase shares of Common Stock or any other security of the Company
which Holder owns or has a right to acquire as of the date hereof
(collectively, the "Lockup Shares"). Any subsequent issuance to and/or
acquisition by Holder of shares of Common Stock or options or
instruments convertible into shares of Common Stock will be subject to
the provisions of this Agreement. Notwithstanding the foregoing
restrictions on transfer, the Holder may, at any time and from time to
time during the Restriction Period, transfer the Lockup Shares (i) as
bona fide gifts or transfers by will or intestacy, (ii) to any trust
for the direct or indirect benefit of the undersigned or
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the immediate family of the Holder, provided that any such transfer
shall not involve a disposition for value, (iii) to a partnership which
is the general partner of a partnership of which the Holder is a
general partner, provided, that, in the case of any gift or transfer
described in clauses (i), (ii) or (iii), each donee or transferee
agrees in writing to be bound by the terms and conditions contained
herein in the same manner as such terms and conditions apply to the
undersigned. For purposes hereof, "immediate family" means any
relationship by blood, marriage or adoption, not more remote than first
cousin.
2. Ownership. During the Restriction Period, the Holder shall retain
all rights of ownership in the Lockup Shares, including, without
limitation, voting rights and the right to receive any dividends that
may be declared in respect thereof.
3. Company and Transfer Agent. The undersigned confirms that he
understands that Underwriter and the Company will rely upon the
representations set forth in this agreement in proceeding with the
Offering. The undersigned agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent against the
transfer of Common Stock except in compliance with this agreement. .
4. Notice. All notices, communications and instructions required or
desired to be given under this Agreement must be in writing and shall
be deemed to be duly given if sent by registered or certified mail,
return receipt requested, or overnight courier to the following
addresses:
If to the Company: Jason Shapiro
61 West 62nd Street, Suite 23F
New York, NY 10023
With copies to: Jody Walker, Esq.
7841 South Garfield Way
Centennial, Colorado, 80122
If to the Underwriter: Aegis Capital Corp.
810 Seventh Avenue
New York, New York 10019
With copies to: Mitchell Lampert, Esq.
Meister Seelig & Fein LLP
Two Grand Central Tower
140 East 45th Street, 19th Floor
New York, New York 10017
If to the Holder, to the address set forth on the signature page
hereto.
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5. Miscellaneous.
a. At any time, and from time to time, after the signing of this
Agreement, Holder will execute such additional instruments and take
such action as may be reasonably requested by the Investor to carry out
the intent and purposes of this Agreement.
b. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of
conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall
be brought only in the state courts of New York or in the federal
courts located in the state of New York. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any
action instituted hereunder and shall not assert any defense based on
lack of jurisdiction or venue or based upon forum non conveniens. The
parties executing this Agreement and other agreements referred to
herein or delivered in connection herewith agree to submit to the in
personam jurisdiction of such courts and hereby irrevocably waive trial
by jury. The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs. In the event
that any provision of this Agreement or any other agreement delivered
in connection herewith is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative
to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision of any
agreement. Notices hereunder shall be given in the same manner as set
forth in the Subscription Agreement. Each party hereby irrevocably
waives personal service of process and consents to process being served
in any suit, action or proceeding in connection with this Agreement or
any other Offering documents by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law. Holder irrevocably appoints the
Company its true and lawful agent for service of process upon whom all
processes of law and notices may be served and given in the manner
described above; and such service and notice shall be deemed valid
personal service and notice upon Holder with the same force and
validity as if served upon Holder.
c. The restrictions on transfer described in this Agreement are in
addition to and cumulative with any other restrictions on transfer
otherwise agreed to by the Holder or to which the Holder is subject to
by applicable law.
d. This Agreement shall be binding upon Holder, its legal
representatives, successors and assigns.
e. This Agreement may be signed and delivered by facsimile signature
and delivered electronically.
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f. The Company agrees not to take any action or allow any act to be
taken which would be inconsistent with this Agreement.
g. This Agreement may not be modified, amended, altered or
supplemented, except by a written agreement executed by the Company and
Underwriter.
h. If for any reason the Underwriting Agreement shall be terminated
prior to the Closing Date (as such term is defined in the Underwriting
Agreement), the agreement set forth above shall likewise be terminated.
i. This Agreement contains the entire understanding and agreement of
the parties relating to the subject matter hereof and supersedes all
prior and/or contemporaneous understandings and agreements of any kind
and nature (whether written or oral) among the parties with respect to
such subject matter.
[Signature Page Follows]
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IN WITNESS WHEREOF, and intending to be legally bound hereby, Holder
has executed this Agreement as of the day and year first above written.
HOLDER:
__________________________
(Signature of Holder)
__________________________
(Print Name of Holder)
____________________________________________
Number of Ordinary Shares Beneficially Owned
____________________________________________
(Address)
[Signature Page to the Lock-Up Agreement]
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EXHIBIT E
FORM OF COMPANY LOCK-UP AGREEMENT
74
EXHIBIT F
MATTERS TO BE COVERED IN THE
LEGAL OPINION
Aegis Capital Corporation
August 5, 2011
Page 34 of 52
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5085-001 Doc#9
5085-001 Doc#
