UNDERWRITING AGREEMENT
November
23, 2020
Aegis
Capital Corp.
As
Representative of the Underwriters named on Schedule 1 attached
hereto
810
Seventh Avenue 18th Floor
New
York, NY 10019
As Representative of the several Underwriters
named on Schedule 1 attached hereto
Ladies
and Gentlemen:
The
undersigned, HF Enterprises Inc., a Delaware corporation (the
“Company”), hereby
confirms its agreement (this “Agreement”) with
Aegis Capital Corp. (hereinafter referred to as “you”
(including its correlatives) or the “Representative”)
and with the other underwriters named on Schedule 1
hereto for which the Representative is acting as representative
(the Representative and such other underwriters being collectively
called the “Underwriters” or,
individually, an “Underwriter”) as
follows:
1.
Purchase
and Sale of Shares.
1.1 Firm
Shares.
1.1.1. Nature and Purchase of
Firm Shares.
(i) On the basis of the representations
and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell in the
aggregate 2,160,000 shares
of common stock of the Company, par value $0.001 per share (the
“Common Stock”),
and each Underwriter agrees to purchase, severally and not jointly,
at the Closing, an aggregate of 2,160,000 shares (“Firm Shares”) of
the Common Stock.
(ii) The Firm Shares are to be offered
together to the public at the offering price per one Firm Share as
set forth on Schedule
2-A hereto (the “Purchase Price”).
The Underwriters, severally and not jointly, agree to purchase from
the Company the number of Firm Shares set forth opposite their
respective names on Schedule 1
attached hereto and made a part hereof at the purchase price for
one Firm Share of $6.475 (or
92.5% of the Purchase Price).
1.1.2. Firm Shares Payment
and Delivery.
(i) Delivery and payment for the Firm
Shares shall be made at 10:00 a.m., Eastern time, on the second
(2nd) Business Day following
the signing of this Agreement (the “Effective Date”)
(or the third (3rd) Business
Day following the Effective Date if this Agreement is signed after
4:01 p.m., Eastern time) or at such earlier time as shall be agreed
upon by the Representative and the Company, at the offices of
Manatt, Phelps & Phillips, LLP, 695 Town Center Drive,
14th Floor, Costa Mesa, CA
92646 (“Representative’s
Counsel”), or at such other place (or remotely by
facsimile or other electronic transmission) as shall be agreed upon
by the Representative and the Company. The hour and date of
delivery and payment for the Firm Shares is called the
“Closing
Date.”
(ii) Payment for the Firm Shares shall be
made on the Closing Date by wire transfer in Federal (same day)
funds, payable to the order of the Company upon delivery of the
certificates (in form and substance satisfactory to the
Underwriters) representing the Firm Shares (or through the
facilities of the Depository Trust Company (“DTC”)) for the
account of the Underwriters. The Firm Shares shall be registered in
such name or names and in such authorized denominations as the
Representative may request in writing at least one full Business
Day prior to the Closing Date. The Company shall not be obligated
to sell or deliver the Firm Shares except upon tender of payment by
the Representative for all of the Firm Shares. The term
“Business
Day” means any day other than a Saturday, a Sunday or
a legal holiday or a day on which banking institutions are
authorized or obligated by law to close in New York, New
York.
1.2. Over-allotment
Option.
1.2.1. Option Shares.
For the purposes of covering any over-allotments in connection with
the distribution and sale of the Firm Shares, the Company hereby
grants to the Representative an option (the “Over-allotment
Option”) to purchase additional shares of the Common
Stock (the “Option
Shares,” and along
with the Firm Shares, the “Shares”),
representing up to fifteen percent (15%) of the Firm Shares sold in
the offering, from the Company. The purchase price to be paid per
Option Share shall be equal to the price per Option Share set forth
in Schedule 2-A.
The Shares shall be issued directly by the Company and shall have
the rights and privileges described in the Registration Statement,
the Pricing Disclosure Package and the Prospectus referred to
below. The offering and sale of the Shares is herein referred to as
the “Offering.”
1.2.2. Exercise of
Option. The Over-allotment Option granted pursuant to
Section 1.2.1
hereof may be exercised by the Representative as to all (at any
time) or any part (from time to time) of the Option Shares within
sixty (60) days after the Effective Date. The Underwriters shall
not be under any obligation to purchase any the Option Shares prior
to the exercise of the Over-allotment Option. The Over-allotment
Option granted hereby may be exercised by the giving of written
notice to the Company from the Representative, setting forth the
number of the Option Shares to be purchased and the date and time
for delivery of and payment for the Option Shares (the
“Option
Closing Date”), which shall not be later than five (5)
full Business Days after the date of the notice or such other time
as shall be agreed upon by the Company and the Representative, at
the offices of Representative’s Counsel or at such other
place (including remotely by facsimile or other electronic
transmission) as shall be agreed upon by the Company and the
Representative. If such delivery and payment for the Option Shares
does not occur on the Closing Date, the Option Closing Date will be
as set forth in the notice. Upon exercise of the Over-allotment
Option with respect to all or any portion of the Option Shares
subject to the terms and conditions set forth herein, (i) the
Company shall become obligated to sell to the Underwriters the
number of the Option Shares specified in such notice and (ii) each
of the Underwriters, acting severally and not jointly, shall
purchase that portion of the total number of the Option Shares then
being purchased as set forth in Schedule 1
opposite the name of such Underwriter
1.2.3. Payment and
Delivery. Payment for the Option Shares shall be made on the
Option Closing Date by wire transfer in Federal (same day) funds,
payable to the order of the Company upon delivery to you of
certificates (in form and substance satisfactory to the
Underwriters) representing the Option Shares (or through the
facilities of DTC or via DWAC transfer) for the account of the
Underwriters. The Option Shares shall be registered in such name or
names and in such authorized denominations as the Representative
may request in writing at least one full Business Day prior to the
Option Closing Date. The Company shall not be obligated to sell or
deliver the Option Shares except upon tender of payment by the
Representative for applicable Option Shares.
1.3
Representative’s
Warrants.
1.3.1.
Purchase Warrants.
The Company hereby agrees to issue and sell to the Representatives
(and/or its designees) on the Closing Date an option
(“Representative’s
Warrant”) as applicable, a three-year warrant for the
purchase of a number of the Firm Shares equal to 5% of the number of the Firm Shares and
Option Shares, if any, issued in the Offering, pursuant to a
warrant in the form attached hereto as Exhibit A,
at an initial exercise price of $9.80 (or 140% of the public offering price per
Firm Share). The Representative’s Warrant and the Shares
issuable upon exercise thereof are hereinafter referred to together
as the “Representatives’
Securities.” The Representative understands and agrees
that there are significant restrictions pursuant to FINRA Rule 5110
against transferring the Representative’s Warrant and the
underlying Shares during the one hundred eighty (180) days after
the Effective Date and by its acceptance thereof shall agree that
it will not sell, transfer, assign, pledge or hypothecate the
Representative’s Warrant, or any portion thereof, or be the
subject of any hedging, short sale, derivative, put or call
transaction that would result in the effective economic disposition
of such securities for a period of one hundred eighty (180) days
following the Effective Date to anyone other than (i) an
Underwriter or a selected dealer in connection with the Offering,
or (ii) a bona fide officer or partner of the Representative or of
any such Underwriter or selected dealer; and only if any such
transferee agrees to the foregoing lock-up
restrictions.
1.3.2.
Delivery. Delivery
of the Representative’s Warrant shall be made on the Closing
Date or the Option Closing Date, as applicable, and shall be issued
in the name or names and in such authorized denominations as the
Representative may request.
2. Representations
and Warranties of the Company. The Company represents and
warrants to the Underwriters as of the Applicable Time (as defined
below), as of the Closing Date and as of the Option Closing Date,
if any, as follows:
2.1. Filing
of Registration Statement.
2.1.1. Pursuant to the
Securities Act. The Company has filed with the U.S.
Securities and Exchange Commission (the “Commission”) a
registration statement, and an amendment or amendments thereto, on
Form S-1 (File No. 333-235693), including any related prospectus or
prospectuses, for the registration of the Shares and the
Representative’s Securities under the Securities Act of 1933,
as amended (the “Securities Act”),
which registration statement and amendment or amendments have been
prepared by the Company in all material respects in conformity with
the requirements of the Securities Act and the rules and
regulations of the Commission under the Securities Act (the
“Securities
Act Regulations”) and will contain all material
statements that are required to be stated therein in accordance
with the Securities Act and the Securities Act Regulations. Except
as the context may otherwise require, such registration statement,
as amended, on file with the Commission at the time the
registration statement became effective (including the Preliminary
Prospectus included in the registration statement, financial
statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein and all information deemed to
be a part thereof as of the Effective Date pursuant to paragraph
(b) of Rule 430A of the Securities Act Regulations (the
“Rule 430A
Information”)), is referred to herein as the
“Registration
Statement.” If the Company files any registration
statement pursuant to Rule 462(b) of the Securities Act
Regulations, then after such filing, the term “Registration
Statement” shall include such registration statement
filed pursuant to Rule 462(b). The Registration Statement has been
declared effective by the Commission on the date
hereof.
Each
prospectus used prior to the effectiveness of the Registration
Statement, and each prospectus that omitted the Rule 430A
Information that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a
“Preliminary
Prospectus.” The Preliminary Prospectus, subject to
completion, dated November 9,
2020, that was included in the Registration Statement
immediately prior to the Applicable Time is hereinafter called the
“Pricing Prospectus.” The final prospectus in the form
first furnished to the Underwriters for use in the Offering is
hereinafter called the “Prospectus.” Any
reference to the “most recent Preliminary Prospectus”
shall be deemed to refer to the latest Preliminary Prospectus
included in the Registration Statement.
“Applicable Time”
means 4:00 p.m., Eastern time, on the date of this
Agreement.
“Issuer Free Writing
Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433 of the Securities Act
Regulations (“Rule 433”),
including without limitation any “free writing
prospectus” (as defined in Rule 405 of the Securities Act
Regulations) relating to the Shares that is (i) required to be
filed with the Commission by the Company, (ii) a “road show
that is a written communication” within the meaning of Rule
433(d)(8)(i), whether or not required to be filed with the
Commission, or (iii) exempt from filing with the Commission
pursuant to Rule 433(d)(5)(i) because it contains a description of
the Shares or of the Offering that does not reflect the final
terms, in each case in the form filed or required to be filed with
the Commission or, if not required to be filed, in the form
retained in the Company’s records pursuant to Rule
433(g).
“Issuer General Use Free Writing
Prospectus” means any Issuer Free Writing Prospectus
that is intended for general distribution to prospective investors
(other than a “bona fide electronic
road show,” as defined in Rule 433 (the “Bona Fide Electronic Road
Show”)), as evidenced by its being specified in
Schedule
2-B hereto.
“Issuer Limited Use Free Writing
Prospectus” means any Issuer Free Writing Prospectus
that is not an Issuer General Use Free Writing
Prospectus.
“Pricing Disclosure
Package” means any Issuer General Use Free Writing
Prospectus issued at or prior to the Applicable Time, the Pricing
Prospectus and the information included on Schedule 2-A
hereto, all considered together.
2.1.2. Pursuant to the
Exchange Act. The Company has filed with the Commission a
Form 8-A (File Number 001-39732) providing for the registration
pursuant to Section 12(b) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), of
the Common Stock. The registration of the Common Stock under the
Exchange Act has become effective on or prior to the date hereof.
The Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under
the Exchange Act, nor has the Company received any notification
that the Commission is contemplating terminating such
registration.
2.2. Stock
Exchange Listing. The Shares and the shares of Common Stock
underlying the Representative’s Warrants have been approved
for listing on the NASDAQ Capital Market (the
“Exchange”), and the Company has taken no action
designed to, or likely to have the effect of, delisting of the
Shares or the shares of Common Stock underlying the
Representative’s Warrants from the Exchange, nor has the
Company received any notification that the Exchange is
contemplating terminating such listing.
2.3. No
Stop Orders, etc. Neither the Commission nor, to the Company’s
knowledge, any state regulatory authority has issued any order
preventing or suspending the use of the Registration Statement, any
Preliminary Prospectus or the Prospectus or has instituted or, to
the Company’s knowledge, threatened to institute, any
proceedings with respect to such an order. The Company has complied
with each request (if any) from the Commission for additional
information.
2.4. Disclosures
in Registration Statement.
2.4.1. Compliance with
Securities Act and 10b-5 Representation.
(i) Each of the Registration Statement
and any post-effective amendment thereto, at the time it became
effective, complied in all material respects with the requirements
of the Securities Act and the Securities Act Regulations. Each
Preliminary Prospectus, including the prospectus filed as part of
the Registration Statement as originally filed or as part of any
amendment or supplement thereto, and the Prospectus, at the time
each was filed with the Commission, complied in all material
respects with the requirements of the Securities Act and the
Securities Act Regulations. Each Preliminary Prospectus delivered
to the Underwriters for use in connection with this
Offering and the Prospectus
was or will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(ii) Neither the Registration Statement
nor any amendment thereto, at its effective time, as of the
Applicable Time, at the Closing Date or at any Option Closing Date
(if any), contained, contains or will contain an untrue statement
of a material fact or omitted, omits or will omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading.
(iii) The Pricing Disclosure Package, as of
the Applicable Time, at the Closing Date or at any Option Closing
Date (if any), did not, does not and will not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and
each Issuer Limited Use Free Writing Prospectus hereto does not
conflict with the information contained in the Registration
Statement, any Preliminary Prospectus, the Pricing Prospectus or
the Prospectus, and each such Issuer Limited Use Free Writing
Prospectus, as supplemented by and taken together with the Pricing
Prospectus as of the Applicable Time, did not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided,
however,
that this representation and warranty shall not apply to statements
made in reliance upon and in conformity with written information
furnished to the Company in writing with respect to the
Underwriters by the Representative expressly for use in the
Registration Statement, the Pricing Prospectus or the Prospectus or
any amendment thereof or supplement thereto. The parties
acknowledge and agree that such information provided by or on
behalf of any Underwriter consists solely of the disclosure
contained in the “Underwriting” subsections “-
Underwriting Commissions and Discounts and Expenses,”
“Stabilization,” “Discretionary Accounts”
and “Other Relationships” of the Prospectus (the
“Underwriters’
Information”); and
(iv) Neither the Prospectus nor any
amendment or supplement thereto (including any prospectus wrapper),
as of its issue date, at the time of any filing with the Commission
pursuant to Rule 424(b), at the Closing Date or at any Option
Closing Date, included, includes or will include an untrue
statement of a material fact or omitted, omits or will omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and
warranty shall not apply to the Underwriters’
Information.
2.4.2. Disclosure of
Agreements. The agreements and documents described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus conform in all material respects to the descriptions
thereof contained therein and there are no agreements or other
documents required by the Securities Act and the Securities Act
Regulations to be described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus or to be filed with
the Commission as exhibits to the Registration Statement, that have
not been so described or filed. Each agreement or other instrument
(however characterized or described) to which the Company is a
party or by which it is or may be bound or affected and (i) that is
filed as an exhibit to the Registration Statement, the Pricing
Disclosure Package and the Prospectus, or (ii) is material to the
Company’s business, has been duly authorized and validly
executed by the Company, is in full force and effect in all
material respects and is enforceable against the Company and, to
the Company’s knowledge, the other parties thereto, in
accordance with its terms, except (x) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors’ rights generally, (y) as enforceability
of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (z) that the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefor
may be brought. None of such agreements or instruments has been
assigned by the Company, and neither the Company nor, to the
Company’s knowledge, any other party is in default thereunder
and, to the Company’s knowledge, no event has occurred that,
with the lapse of time or the giving of notice, or both, would
constitute a default thereunder, except for any default or event
which would not reasonably be expected to result in a Material
Adverse Change. To the Company’s knowledge, performance by
the Company of the material provisions of such agreements or
instruments will not result in a violation of any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses
(each, a “Governmental
Entity”), including, without limitation, those
relating to environmental laws and regulations, except for any
violation which would not reasonably be expected to result in a
Material Adverse Change.
2.4.3. Prior Securities
Transactions. During the past three (3) years from the date
of this Agreement, no securities of the Company have been sold by
the Company or by or on behalf of, or for the benefit of, any
person or persons controlling, controlled by or under common
control with the Company, except as disclosed in the Registration
Statement, the Pricing Disclosure Package and any Preliminary
Prospectus.
2.4.4. Regulations.
The disclosures in the Registration Statement, the Pricing
Disclosure Package and the Prospectus concerning the effects of
federal, state, local and all foreign regulation on the Offering
and the Company’s business as currently contemplated are
correct in all material respects and no other such regulations are
required to be disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus which are not so
disclosed
2.5. Changes
after Dates in Registration Statement.
2.5.1. No Material Adverse
Change. Since the respective
dates as of which information is given in the Registration
Statement, the Pricing Disclosure Package and the Prospectus,
except as otherwise specifically stated therein: (i) there has been
no material adverse change in the financial position or results of
operations of the Company or its Subsidiaries taken as a whole, nor
any change or development that, singularly or in the aggregate,
would involve a material adverse change in or affecting the
condition (financial or otherwise), results of operations,
business, or assets of the Company or its Subsidiaries taken as a
whole (a “Material Adverse
Change”); (ii) there have
been no material transactions entered into by the Company or its
Subsidiaries, other than as contemplated pursuant to this
Agreement; and (iii) no officer or director of the Company has
resigned from any position with the Company.
2.5.2. Recent Securities
Transactions, etc. Subsequent
to the respective dates as of which information is given in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus, and except as may otherwise be indicated or
contemplated herein or disclosed in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, the Company has not:
(i) issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money; or (ii) declared or paid
any dividend or made any other distribution on or in respect to its
capital Share.
2.6. Independent
Accountants. To the knowledge
of the Company, Rosenberg Rich Baker Berman, P.A.
(“Auditor”), whose report is filed with the
Commission as part of the Registration Statement, the Pricing
Disclosure Package and the Prospectus, is an independent registered
public accounting firm as required by the Securities Act and the
Securities Act Regulations and the Public Company Accounting
Oversight Board. The Auditor has not, during the periods covered by
the financial statements included in the Registration Statement,
the Pricing Disclosure Package and the Prospectus, provided to the
Company any non-audit services, as such term is used in Section
10A(g) of the Exchange Act, except for permitted tax services to
the Company and certain of its Subsidiaries.
2.7. Financial
Statements, etc. The financial statements, including the notes
thereto and supporting schedules, if any, included in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus, fairly present in all material respects the financial
position and the results of operations of the Company at the dates
and for the periods to which they apply; and such financial
statements have been prepared in conformity with U.S. generally
accepted accounting principles (“GAAP”), consistently applied throughout the
periods involved (provided that unaudited interim financial
statements are subject to year-end audit adjustments that are not
expected to be material in the aggregate and do not contain all
footnotes required by GAAP); and any supporting schedules included
in the Registration Statement present fairly in all material
respects the information required to be stated therein. Except as
included therein, no historical or pro forma financial statements
are required to be included in the Registration Statement, the
Pricing Disclosure Package or the Prospectus under the Securities
Act or the Securities Act Regulations. The pro forma and pro forma
as adjusted financial information and the related notes, if any,
included in the Registration Statement, the Pricing Disclosure
Package and the Prospectus have been properly compiled and prepared
in accordance with the applicable requirements of the Securities
Act and the Securities Act Regulations and present fairly in all
material respects the information shown therein, and the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein. All disclosures
contained in the Registration Statement, the Pricing Disclosure
Package or the Prospectus regarding “non-GAAP financial
measures” (as such term is defined by the rules and
regulations of the Commission), if any, comply with Regulation G of
the Exchange Act and Item 10 of Regulation S-K of the Securities
Act, to the extent applicable. Each of the Registration Statement,
the Pricing Disclosure Package and the Prospectus discloses all
material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the
Company with unconsolidated entities or other persons that may have
a material current or future effect on the Company’s
financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or
significant components of revenues or expenses. Except as disclosed
in the Registration Statement, the Pricing Disclosure Package and
the Prospectus, (a) neither the Company nor any of its consolidated
subsidiaries listed in Exhibit 21.1 to the Registration Statement
(each, a “Subsidiary” and, collectively, the
“Subsidiaries”), has incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions other than in the ordinary course of business, (b) the
Company has not declared or paid any dividends or made any
distribution of any kind with respect to its Common Stock or
preferred stock (c) there has not been
any change in the capital of the Company or any of its
Subsidiaries, or, other than in the course of business, any grants
under any stock compensation plan, and (d) there has not been any
Material Adverse Change in the Company’s long-term or
short-term debt. The Company represents that it has no direct or
indirect subsidiaries other than those listed in Exhibit 21.1 to
the Registration Statement.
2.8. Authorized
Capital; Options, etc. The
Company had, at the date or dates indicated in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, the
duly authorized, issued and outstanding capitalization as set forth
therein. Based on the assumptions stated in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, the
Company will have on the Closing Date the adjusted capitalization
set forth therein. Except as set forth in, or contemplated by, the
Registration Statement, the Pricing Disclosure Package and the
Prospectus, on the Effective Date, as of the Applicable Time and on
the Closing Date and any Option Closing Date, there will be no
options, warrants, or other rights to purchase or otherwise acquire
any authorized, but unissued Common Stock or any security convertible or exercisable
into Common Stock, or any
contracts or commitments to issue or sell Common Stock
or any such options, warrants, rights
or convertible securities.
2.9. Valid
Issuance of Securities, etc.
2.9.1. Outstanding
Securities. All issued and outstanding securities of the
Company issued prior to the transactions contemplated by this
Agreement have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any
holders of any security of the Company or similar contractual
rights granted by the Company. The Common Stock, preferred stock,
and any other securities outstanding or to be outstanding upon
consummation of the Offering conform in all material respects to
all statements relating thereto contained in the Registration
Statement, the Pricing Disclosure Package and the Prospectus. The
offers and sales of the outstanding Common Stock were at all
relevant times either registered under the Securities Act and the
applicable state securities or “blue sky” laws or,
based in part on the representations and warranties of the
purchasers of such shares, exempt from such registration
requirements.
2.9.2. Securities Sold
Pursuant to this Agreement. The Shares and
Representative’s Warrant have been duly authorized for
issuance and sale and, when issued and paid for, will be validly
issued, fully paid and non-assessable; the holders thereof are not
and will not be subject to personal liability by reason of being
such holders; the Shares and Representative’s Warrant are not
and will not be subject to the preemptive rights of any holders of
any security of the Company or similar contractual rights granted
by the Company; and all corporate action required to be taken for
the authorization, issuance and sale of the Shares and
Representative’s Warrant has been duly and validly taken; the
Common Stock issuable upon exercise of the Representative’s
Warrant have been duly authorized and reserved for issuance by all
necessary corporate action on the part of the Company and when
issued in accordance with such Representative’s Warrant, as
the case may be, such Common Stock will be validly issued, fully
paid and non-assessable. The Shares and the Representative’s
Warrant conform in all material respects to all statements with
respect thereto contained in the Registration Statement, the
Pricing Disclosure Package and the Prospectus.
2.10. Registration
Rights of Third Parties. Except
as set forth in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, no holders of any securities of the
Company or any rights exercisable for or convertible or
exchangeable into securities of the Company have the right to
require the Company to register any such securities of the Company
under the Securities Act or to include any such securities in a
registration statement to be filed by the
Company.
2.11. Validity
and Binding Effect of Agreements. This Agreement and the Representative’s
Warrant have been duly and validly authorized by the Company, and,
when executed and delivered, will constitute, the valid and binding
agreements of the Company, enforceable against the Company in
accordance with their respective terms, except: (i) as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights
generally; (ii) as enforceability of any indemnification or
contribution provision may be limited under the federal and state
securities laws; and (iii) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject
to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
2.12. No
Conflicts, etc. The execution, delivery and performance by the
Company of this Agreement and all ancillary documents, the
consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms
hereof and thereof do not and will not, with or without the giving
of notice or the lapse of time or both: (i) result in a material
breach of, or conflict with any of the terms and provisions of, or
constitute a material default under, or result in the creation,
modification, termination or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to
the terms of any agreement or instrument to which the Company is a
party; (ii) result in any violation of the provisions of the
Company’s Certificate Incorporation (as the same may be
amended or restated from time to time, the
“Charter”) or the by-laws of the Company; or (iii)
violate any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Entity as of the date
hereof.
2.13. No
Defaults; Violations. No material default exists in the due performance
and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan
or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which
the Company may be bound or to which any of the properties or
assets of the Company is subject. The Company is not (i) in
violation of any term or provision of its Charter or by-laws, or
(ii) in violation of any franchise, license, permit, applicable
law, rule, regulation, judgment or decree of any Governmental
Entity, except in the cases of clause (ii) for such violations
which would not reasonably be expected to cause a Material Adverse
Change.
2.14. Corporate
Power; Licenses; Consents.
2.14.1. Conduct of
Business. Except as described in the Registration Statement,
the Pricing Disclosure Package and the Prospectus, the Company has
all requisite corporate power and authority, and has all necessary
authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental regulatory officials and
bodies that it needs as of the date hereof to conduct its business
purpose as described in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, except for the absence of
which would not reasonably be expected to have a Material Adverse
Change.
2.14.2. Transactions
Contemplated Herein. The Company has all corporate power and
authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been
obtained. No consent, authorization or order of, and no filing
with, any court, government agency, the Exchange or other body is
required for the valid issuance, sale and delivery of the Shares
and the consummation of the transactions and agreements
contemplated by this Agreement and the delivery of the
Representative’s Warrant and as contemplated by the
Registration Statement, the Pricing Disclosure Package and the
Prospectus, except with respect to applicable Securities Act
Regulations, state securities laws and the rules and regulations of
the Financial Industry Regulatory Authority, Inc.
(“FINRA”).
2.15. D&O
Questionnaires. To the Company’s knowledge, all information
contained in the questionnaires (the “Questionnaires”)
completed by each of the Company’s directors and officers
immediately prior to the Offering (the “Insiders”) as supplemented by all information
concerning the Company’s directors, officers and principal
shareholders as described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, as well as in the
Lock-Up Agreement (as defined in Section 2.24
below), provided to the Underwriters,
is true and correct in all material respects and the Company has
not become aware of any information which would cause the
information disclosed in the Questionnaires to become materially
inaccurate and incorrect.
2.16. Litigation;
Governmental Proceedings. There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding
pending or, to the Company’s knowledge, threatened against,
or involving the Company or, to the Company’s knowledge, any
executive officer or director which has not been disclosed in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus.
2.17. Good
Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of
the State of Delaware as of the date hereof, and is duly qualified
to do business and is in good standing in each other jurisdiction
in which its ownership or lease of property or the conduct of
business requires such qualification, except where the failure to
qualify, singularly or in the aggregate, would not have or
reasonably be expected to result in a Material Adverse
Change.
2.18. Insurance.
The Company carries or is entitled to
the benefits of insurance, (including, without limitation, as to
directors and officers insurance coverage), with, to the
Company’s knowledge, reputable insurers, in the amount of
directors and officers insurance coverage at a level commensurate
with policies obtained by similarly situated companies in similar
situations, and the Company has included each Underwriter as an
additional insured party to the directors and officers insurance
coverage and all such insurance is in full force and effect. The
Company has no reason to believe that it will not be able (i) to
renew its existing insurance coverage as and when such policies
expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its
business as now conducted and at a cost that would not result in a
Material Adverse Change.
2.19. Transactions
Affecting Disclosure to FINRA.
2.19.1. Finder’s
Fees. Except as described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, there are no claims,
payments, arrangements, agreements or understandings relating to
the payment of a finder’s, consulting or origination fee by
the Company or any Insider with respect to the sale of the Shares
hereunder or any other arrangements, agreements or understandings
of the Company or, to the Company’s knowledge, any of its
shareholders that may affect the Underwriters’ compensation,
as determined by FINRA.
2.19.2. Payments within Six
(6) Months. Except as described in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, the
Company has not made any direct or indirect payments (in cash,
securities or otherwise) to: (i) any person, as a finder’s
fee, consulting fee or otherwise, in consideration of such person
raising capital for the Company or introducing to the Company
persons who raised or provided capital to the Company; (ii) any
FINRA member; or (iii) any person or entity that has any direct or
indirect affiliation or association with any FINRA member, within
the six (6) months immediately prior to the original filing of the
Registration Statement, other than the payment to the Underwriters
as provided hereunder in connection with the Offering.
2.19.3. Use of
Proceeds. None of the net proceeds of the Offering will be
paid by the Company to any participating FINRA member or its
affiliates, except as specifically authorized herein.
2.19.4. FINRA
Affiliation. To the Company’s knowledge, and except as
may otherwise be disclosed in FINRA questionnaires provided to the
Representative’s Counsel, there is no (i) officer or director
of the Company, (ii) beneficial owner of 5% or more of any class of
the Company's securities or (iii) beneficial owner of the Company's
unregistered equity securities which were acquired during the
180-day period immediately preceding the filing of the Registration
Statement that is an affiliate or associated person of a FINRA
member participating in the Offering (as determined in accordance
with the rules and regulations of FINRA).
2.19.5. Information.
All information provided by the Company in its FINRA questionnaire
to Representative’s Counsel specifically for use by
Representative’s Counsel in connection with its Public
Offering System filings (and related disclosure) with FINRA is
true, correct and complete in all material respects.
2.20. Foreign
Corrupt Practices Act. None of the Company and its Subsidiaries or, to
the Company’s knowledge, any director, officer, agent,
employee or affiliate of the Company and its Subsidiaries or any
other person acting on behalf of the Company and its Subsidiaries,
has, directly or indirectly, given or agreed to give any money,
gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency or instrumentality of any
government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was,
is, or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed
transaction) that (i) might subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, might have had a
Material Adverse Change or (iii) if not continued in the future,
might adversely affect the assets, business, operations or
prospects of the Company. The Company has taken reasonable steps to
ensure that its accounting controls and procedures are sufficient
to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as
amended.
2.21. Compliance
with OFAC. None of the Company and its Subsidiaries or, to
the Company’s knowledge, any director, officer, agent,
employee or affiliate of the Company and its Subsidiaries or any
other person acting on behalf of the Company and its Subsidiaries,
is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Department of the
Treasury (“OFAC”), and the Company will not, directly or
indirectly, use the proceeds of the Offering hereunder, or lend,
contribute or otherwise make available such proceeds to any
subsidiary, joint venture partner or other person or entity, for
the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by
OFAC.
2.22. Money
Laundering Laws. The operations of the Company and its Subsidiaries
are and have been conducted at all times in compliance with
applicable financial recordkeeping and reporting requirements of
the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the money laundering statutes of all jurisdictions, the
rules and regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any
Governmental Entity (collectively, the “Money Laundering
Laws”); and no action,
suit or proceeding by or before any Governmental Entity involving
the Company with respect to the Money Laundering Laws is pending
or, to the best knowledge of the Company,
threatened.
2.23. Officers’
Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to you or to
Representative’s Counsel shall be deemed a representation and
warranty by the Company to the Underwriters as to the matters
covered thereby.
2.24. Lock-Up
Agreements. Schedule 3
hereto contains a complete and
accurate list of the Company’s officers, directors and each
owner of 5% or more of the Company’s outstanding
Common Stock (or securities
convertible or exercisable into Common Stock) (collectively, the “Lock-Up
Parties”). The Company
has caused each of the Lock-Up Parties to deliver to the
Representative an executed Lock-Up Agreement, in a form
substantially similar to that attached hereto as
Exhibit
B (the
“Lock-Up
Agreement”), prior to the
execution of this Agreement.
2.25. Subsidiaries.
All Subsidiaries of the Company are duly organized and in good
standing under the laws of the place of organization or
incorporation, and each Subsidiary is in good standing in each
jurisdiction in which its ownership or lease of property or the
conduct of business requires such qualification, except where the
failure to qualify would not have a Material Adverse Change. The
Company’s ownership and control of each Subsidiary is as
described in the Registration Statement, the Pricing Disclosure
Package and the Prospectus.
2.26. Related
Party Transactions. There are no business relationships or related
party transactions involving the Company or any other person
required to be described in the Registration Statement, the Pricing
Disclosure Package and the Prospectus that have not been described
as required by the Securities Act Regulations.
2.27. Board
of Directors. The Board of Directors of the Company is comprised
of the persons set forth under the heading of the Prospectus
captioned “Management.” Charles MacKenzie and John
“JT” Thatch will not be appointed to the Board of
Directors at the Closing. The qualifications of the persons serving
as board members and the overall composition of the board comply
with the Exchange Act, the Exchange Act Regulations, the
Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder
(the “Sarbanes-Oxley
Act”) applicable to the
Company and the listing rules of the Exchange. At least one
proposed member of the Audit Committee of the Board of Directors of
the Company as of the closing of the Offering qualifies as an
“audit committee financial expert,” as such term is
defined under Regulation S-K and the listing rules of the Exchange.
The Company qualifies as a “controlled company” within
the meaning of the listing rules of the Exchange and, accordingly,
the Company may not have a majority of independent directors on its
Board of Directors.
2.28. Sarbanes-Oxley
Compliance.
2.28.1. Disclosure
Controls. Except as disclosed
in the Registration Statement, Pricing Disclosure Package and the
Prospectus, the Company has developed and currently
maintains disclosure controls and procedures that will comply with
Rule 13a-15 or 15d-15 under the Exchange Act Regulations, and such
controls and procedures are effective to ensure that all material
information concerning the Company will be made known on a timely
basis to the individuals responsible for the preparation of the
Company’s Exchange Act filings and other public disclosure
documents.
2.28.2. Compliance. The
Company is, or at the Applicable Time and on the Closing Date will
be, in material compliance with the provisions of the
Sarbanes-Oxley Act applicable to it, and has implemented or will
implement such programs and has taken reasonable steps to ensure
the Company’s future compliance (not later than the relevant
statutory and regulatory deadlines therefor) with all of the
material provisions of the Sarbanes-Oxley Act.
2.29. Accounting
Controls. Except as disclosed
in the Registration Statement, Pricing Disclosure Package and the
Prospectus, the Company maintains systems of “internal
control over financial reporting” (as defined under Rules
13a-15 and 15d-15 under the Exchange Act Regulations) that comply
in all material respects with the requirements of the Exchange Act
and have been designed by, or under the supervision of, its
respective principal executive and principal financial officers, or
persons performing similar functions, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP, including, but not limited to, internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s
general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. Except as disclosed in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, the
Company is not aware of any material weaknesses in its internal
control over financial reporting, and with respect to such remedial
actions disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, the Company represents that
it has taken all remedial actions set forth in such disclosure. The
Company’s auditors and the Audit Committee of the Board of
Directors of the Company have been advised of: (i) all significant
deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are known to the
Company’s management and that have adversely affected or are
reasonably likely to adversely affect the Company’ ability to
record, process, summarize and report financial information; and
(ii) any fraud known to the Company’s management, whether or
not material, that involves management or other employees who have
a significant role in the Company’s internal controls over
financial reporting.
2.30. No
Investment Company Status. The
Company is not and, after giving effect to the Offering and the
application of the proceeds thereof as described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus, will not be, required to register as an
“investment company,” as defined in the Investment
Company Act of 1940, as amended.
2.31. No
Labor Disputes. No labor dispute with the employees of the Company
or any of its Subsidiaries exists or, to the knowledge of the
Company, is imminent.
2.32. Intellectual
Property Rights. The Company
and each of its Subsidiaries owns or possesses or has valid rights
to use all patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service mark registrations,
copyrights, licenses, inventions, trade secrets and similar rights
(“Intellectual Property
Rights”) necessary for
the conduct of the business of the Company and its Subsidiaries as
currently carried on and as described in the Registration
Statement, the Pricing Disclosure Package and the Prospectus. To
the knowledge of the Company, no action or use by the Company or
any of its Subsidiaries necessary for the conduct of its business
as currently carried on and as described in the Registration
Statement and the Prospectus will involve or give rise to any
infringement of, or license or similar fees for, any Intellectual
Property Rights of others. Neither the Company nor any of its
Subsidiaries has received any written notice alleging any such
infringement, fee or conflict with asserted Intellectual Property
Rights of others. Except as would not reasonably be expected to
result, individually or in the aggregate, in a Material Adverse
Change (A) to the knowledge of the Company, there is no
infringement, misappropriation or violation by third parties of any
of the Intellectual Property Rights owned by the Company; (B) there
is no pending or, to the knowledge of the Company, threatened
action, suit, proceeding or claim by others challenging the rights
of the Company in or to any such Intellectual Property Rights, and
the Company is unaware of any facts which would form a reasonable
basis for any such claim, that would, individually or in the
aggregate, together with any other claims in this
Section
2.32, reasonably be expected to
result in a Material Adverse Change; (C) the Intellectual Property
Rights owned by the Company and, to the knowledge of the Company,
the Intellectual Property Rights licensed to the Company have not
been adjudged by a court of competent jurisdiction invalid or
unenforceable, in whole or in part, and there is no pending or, to
the Company’s knowledge, threatened action, suit, proceeding
or claim by others challenging the validity or scope of any such
Intellectual Property Rights, and the Company is unaware of any
facts which would form a reasonable basis for any such claim that
would, individually or in the aggregate, together with any other
claims in this Section
2.32, reasonably be expected to
result in a Material Adverse Change; (D) there is no pending or, to
the Company’s knowledge, threatened action, suit, proceeding
or claim by others that the Company infringes, misappropriates or
otherwise violates any Intellectual Property Rights or other
proprietary rights of others, the Company has not received any
written notice of such claim and the Company is unaware of any
other facts which would form a reasonable basis for any such claim
that would, individually or in the aggregate, together with any
other claims in this Section
2.32, reasonably be expected to
result in a Material Adverse Change; and (E) to the Company’s
knowledge, no employee of the Company is in or has ever been in
violation in any material respect of any term of any employment
contract, patent disclosure agreement, invention assignment
agreement, non-competition agreement, non-solicitation agreement,
nondisclosure agreement or any restrictive covenant to or with a
former employer where the basis of such violation relates to such
employee’s employment with the Company, or actions undertaken
by the employee while employed with the Company and could
reasonably be expected to result, individually or in the aggregate,
in a Material Adverse Change. To the Company’s knowledge, all
material technical information developed by and belonging to the
Company which has not been patented has been kept confidential. The
Company is not a party to or bound by any options, licenses or
agreements with respect to the Intellectual Property Rights of any
other person or entity that are required to be set forth in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus and are not described therein. The Registration
Statement, the Pricing Disclosure Package and the Prospectus
contain in all material respects the same description of the
matters set forth in the preceding sentence. None of the technology
employed by the Company has been obtained or is being used by the
Company in violation of any contractual obligation binding on the
Company or, to the Company’s knowledge, any of its officers,
directors or employees, or otherwise in violation of the rights of
any persons.
2.33. Taxes.
Each of the Company and its Subsidiaries has filed all returns (as
hereinafter defined) required to be filed with taxing authorities
prior to the date hereof or has duly obtained extensions of time
for the filing thereof, except in any case in which the failure so
to file would not reasonably be expected to cause a Material
Adverse Change. Each of the Company and its Subsidiaries has paid
all taxes (as hereinafter defined) shown as due on such returns
that were filed and has paid all taxes imposed on or assessed
against the Company or such respective Subsidiary, except for any
such taxes that are currently being contested in good faith or as
would not reasonably be expected to cause a Material Adverse
Change. The provisions for taxes payable, if any, shown on the
financial statements filed with or as part of the Registration
Statement are sufficient for all accrued and unpaid taxes, whether
or not disputed, and for all periods to and including the dates of
such consolidated financial statements. Except as disclosed in
writing to the Underwriters, (i) no issues have been raised (and
are currently pending) by any taxing authority in connection with
any of the returns or taxes asserted as due from the Company or its
Subsidiaries, and (ii) no waivers of statutes of limitation with
respect to the returns or collection of taxes have been given by or
requested from the Company or its Subsidiaries. The term
“taxes” means all federal, state, local, foreign and
other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind
whatever, together with any interest and any penalties, additions
to tax or additional amounts with respect thereto. The term
“returns” means all returns, declarations, reports,
statements and other documents required to be filed in respect to
taxes.
2.34. ERISA
Compliance. The Company is not subject to the Employee
Retirement Income Security Act of 1974, as amended, or the
regulations and published interpretations
thereunder.
2.35. Compliance
with Laws. Except as otherwise
disclosed in the Registration Statement, Pricing Disclosure Package
and Prospectus and as could not, individually or in the aggregate,
be expected to result in a Material Adverse Change, each of the
Company and each Subsidiary, the Company: (A) is and at all times
has been in compliance with all statutes, rules, or regulations
applicable to the services provided by the Company
(“Applicable
Laws”), except as could
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Change; (B) has not received any warning
letter, untitled letter or other correspondence or notice from any
other governmental authority alleging or asserting noncompliance
with any Applicable Laws or any licenses, certificates, approvals,
clearances, authorizations, permits and supplements or amendments
thereto required by any such Applicable Laws
(“Authorizations”);
(C) possesses all material Authorizations and such material
Authorizations are valid and in full force and effect and are not
in material violation of any term of any such Authorizations; (D)
has not received written notice of any claim, action, suit,
proceeding, hearing, enforcement, investigation, arbitration or
other action from any governmental authority or third party
alleging that any product operation or activity is in violation of
any Applicable Laws or Authorizations and has no knowledge that any
such governmental authority or third party is considering any such
claim, litigation, arbitration, action, suit, investigation or
proceeding that if brought would result in a Material Adverse
Change; (E) has not received written notice that any governmental
authority has taken, is taking or intends to take action to limit,
suspend, modify or revoke any Authorizations and has no knowledge
that any such governmental authority is considering such action;
(F) has filed, obtained, maintained or submitted all material
reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any
Applicable Laws or Authorizations and that all such reports,
documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete and correct
in all material respects on the date filed (or were corrected or
supplemented by a subsequent submission); and (G) has not, either
voluntarily or involuntarily, initiated, conducted, or issued or
caused to be initiated, conducted or issued, any recall, market
withdrawal or replacement, safety alert, post-sale warning, or
other notice or action relating to the alleged lack of safety of
any product or any alleged product defect or violation and, to the
Company’s knowledge, no third party has initiated, conducted
or intends to initiate any such notice or
action.
2.36. Ineligible
Issuer. At the time of filing the Registration Statement
and any post-effective amendment thereto, at the time of
effectiveness of the Registration Statement and any amendment
thereto, at the earliest time thereafter that the Company or
another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) of the Securities Act Regulations) of the
Shares and at the date hereof, the Company was not and is not an
“ineligible issuer,” as defined in Rule 405, without
taking account of any determination by the Commission pursuant to
Rule 405 that it is not necessary that the Company be considered an
ineligible issuer.
2.37. Real
Property. Except as set forth in the Registration Statement,
the Pricing Disclosure Package and the Prospectus, the Company and
its Subsidiaries have good and marketable title in fee simple to,
or have valid rights to lease or otherwise use, all items of real
or personal property which are material to the business of the
Company and its Subsidiaries taken as a whole, in each case free
and clear of all liens, encumbrances, security interests, claims
and defects that do not, singly or in the aggregate, materially
affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or its
Subsidiaries; and all of the leases and subleases material to the
business of the Company and its Subsidiaries, considered as one
enterprise, and under which the Company or any of its Subsidiaries
holds properties described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, are in full force
and effect, and neither the Company nor any Subsidiary has received
any written notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any
Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such
Subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease, which would result in a
Material Adverse Change.
2.38. Contracts
Affecting Capital. There are no
transactions, arrangements or other relationships between and/or
among the Company, any of its affiliates (as such term is defined
in Rule 405 of the Securities Act Regulations) and any
unconsolidated entity, including, but not limited to, any
structured finance, special purpose or limited purpose entity that
could reasonably be expected to materially affect the
Company’s or its Subsidiaries’ liquidity or the
availability of or requirements for their capital resources
required to be described or incorporated by reference in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus which have not been described or incorporated by
reference as required.
2.39. Loans
to Directors or Officers. There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of
business) or guarantees or indebtedness by the Company or its
Subsidiaries to or for the benefit of any of the officers or
directors of the Company, its Subsidiaries or any of their
respective family members, except as disclosed in the Registration
Statement, the Pricing Disclosure Package and the
Prospectus.
2.40. Industry
Data; Forward-looking statements. The statistical and market-related data included
in each of the Registration Statement, the Pricing Disclosure
Package and the Prospectus are based on or derived from sources
that the Company reasonably and in good faith believes are reliable
and accurate or represent the Company’s good faith estimates
that are made on the basis of data derived from such sources. No
forward-looking statement (within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act) contained in
the Prospectus has been made or reaffirmed without a reasonable
basis or has been disclosed other than in good
faith.
2.41. [Intentionally
omitted]
2.42. Testing-the-Waters
Communications. The Company has not (i) alone engaged in any
Testing-the-Waters Communications, other than Testing-the-Waters
Communications with the written consent of the Representative and
with entities that are qualified institutional buyers within the
meaning of Rule 144A under the Securities Act or institutions that
are accredited investors within the meaning of Rule 501 under the
Securities Act and (ii) authorized anyone other than the
Representative to engage in Testing-the-Waters Communications. The
Company confirms that the Representative has been authorized to act
on its behalf in undertaking Testing-the-Waters Communications. The
Company has not distributed any Written Testing-the-Waters
Communications other than those listed on Schedule 2-C
hereto. “Written Testing-the-Waters
Communication” means any
Testing-the-Waters Communication that is a written communication
within the meaning of Rule 405 under the Securities Act;
“Testing-the-Waters
Communication” means any
oral or written communication with potential investors undertaken
in reliance on Section 5(d) of the Securities
Act.
2.43. [Intentionally
omitted]
2.44. Margin
Securities. The Company owns no “margin
securities” as that term is defined in Regulation U of the
Board of Governors of the Federal Reserve System (the
“Federal Reserve
Board”), and none of the
proceeds of Offering will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security, for the
purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Common Stock
to be considered a “purpose
credit” within the meanings of Regulation T, U or X of the
Federal Reserve Board.
2.45. Dividends
and Distributions. Except as
disclosed in the Pricing Disclosure Package, Registration Statement
and the Prospectus, no Subsidiary of the Company is currently
prohibited or restricted, directly or indirectly, from paying any
dividends to the Company, from making any other distribution on
such Subsidiary’s capital stock, from repaying to the Company
any loans or advances to such Subsidiary from the Company or from
transferring any of such Subsidiary’s property or assets to
the Company or any other Subsidiary of the
Company.
2.46. Lending
Relationships. Except as
disclosed in the Pricing Disclosure Package, Registration Statement
and the Prospectus, the Company (i) does not have any material
lending or other relationship with any bank or lending affiliate of
the Underwriters and (ii) does not intend to use any of the
proceeds from the sale of the Securities hereunder to repay any
outstanding debt owed to any affiliate of the
Underwriters.
3. Covenants
of the Company. The Company covenants and agrees as
follows:
3.1. Amendments
to Registration Statement. The Company shall deliver to the Representative,
prior to filing, any amendment or supplement to the Registration
Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the
Representative shall reasonably object in
writing.
3.2. Federal
Securities Laws.
3.2.1. Compliance. The
Company, subject to Section 3.2.2, shall comply
with the requirements of Rule 430A of the Securities Act
Regulations, and will notify the Representative promptly, and
confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective or
any amendment or supplement to the Prospectus shall have been
filed; (ii) of the receipt of any comments from the Commission;
(iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the
Prospectus or for additional information; (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of
the Registration Statement or any post-effective amendment or of
any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus, or of the suspension of the
qualification of the Shares and the Representative’s Warrant
for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes or of any
examination pursuant to Section 8(d) or 8(e) of the Securities Act
concerning the Registration Statement and (v) if the Company
becomes the subject of a proceeding under Section 8A of the
Securities Act in connection with the Offering of the Shares and
Representative’s Warrant. The Company shall effect all
filings required under Rule 424(b) of the Securities Act
Regulations, in the manner and within the time period required by
Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take
such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was
received for filing by the Commission and, in the event that it was
not, it will promptly file such prospectus. The Company shall use
its best efforts to prevent the issuance of any stop order,
prevention or suspension and, if any such order is issued, to
obtain the lifting thereof at the earliest possible
moment.
3.2.2. Continued
Compliance. The Company shall comply with the Securities
Act, the Securities Act Regulations, the Exchange Act and the
Exchange Act Regulations so as to permit the completion of the
distribution of the Shares as contemplated in this Agreement and in
the Registration Statement, the Pricing Disclosure Package and the
Prospectus. If at any time when a prospectus relating to the Shares
is (or, but for the exception afforded by Rule 172 of the
Securities Act Regulations (“Rule 172”), would
be) required by the Securities Act to be delivered in connection
with sales of the Shares, any event shall occur or condition shall
exist as a result of which it is necessary, in the opinion of
counsel for the Underwriters or for the Company, to (i) amend the
Registration Statement in order that the Registration Statement
will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; (ii) amend or
supplement the Pricing Disclosure Package or the Prospectus in
order that the Pricing Disclosure Package or the Prospectus, as the
case may be, will not include any untrue statement of a material
fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser
or (iii) amend the Registration Statement or amend or supplement
the Pricing Disclosure Package or the Prospectus, as the case may
be, in order to comply with the requirements of the Securities Act
or the Securities Act Regulations, the Company will promptly (A)
give the Representative notice of such event; (B) prepare any
amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement, the
Pricing Disclosure Package or the Prospectus comply with such
requirements and, a reasonable amount of time prior to any proposed
filing or use, furnish the Representative with copies of any such
amendment or supplement and (C) file with the Commission any such
amendment or supplement; provided that the Company shall not
file or use any such amendment or supplement to which the
Representative or Representative’s Counsel shall reasonably
object. The Company will furnish to the Underwriters such number of
copies of such amendment or supplement as the Underwriters may
reasonably request. The Company has given the Representative notice
of any filings made pursuant to the Exchange Act or the Exchange
Act Regulations within 48 hours prior to the Applicable Time. The
Company shall give the Representative notice of its intention to
make any such filing from the Applicable Time until the later of
the Closing Date and the exercise in full or expiration of the
Over-allotment Option specified in Section 1.2 hereof and will
furnish the Representative with copies of the related document(s) a
reasonable amount of time prior to such proposed filing, as the
case may be, and will not file or use any such document to which
the Representative or counsel for the Underwriters shall reasonably
object.
3.2.3. Exchange Act
Registration. Until three years
after the date of this Agreement, the Company shall use its
commercially reasonable efforts to maintain the registration of the
Common Stock under the Exchange Act.
3.2.4. Free Writing
Prospectuses. The Company agrees that, unless it obtains the
prior written consent of the Representative, it shall not make any
offer relating to the Shares that would constitute an Issuer Free
Writing Prospectus or that would otherwise constitute a “free
writing prospectus,” or a portion thereof, required to be
filed by the Company with the Commission or retained by the Company
under Rule 433; provided
that the Representative shall be deemed to have consented to each
Issuer General Use Free Writing Prospectus set forth in
Schedule 2-B. The
Company represents that it has treated or agrees that it will treat
each such free writing prospectus consented to, or deemed consented
to, by the Underwriters as an “issuer free writing
prospectus,” as defined in Rule 433, and that it has complied
and will comply with the applicable requirements of Rule 433 with
respect thereto, including timely filing with the Commission where
required, legending and record keeping. If at any time following
issuance of an Issuer Free Writing Prospectus there occurred or
occurs an event or development as a result of which such Issuer
Free Writing Prospectus conflicted or would conflict with the
information contained in the Registration Statement or included or
would include an untrue statement of a material fact or omitted or
would omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at
that subsequent time, not misleading, the Company will promptly
notify the Underwriters and will promptly amend or supplement, at
its own expense, such Issuer Free Writing Prospectus to eliminate
or correct such conflict, untrue statement or
omission.
3.2.5. Testing-the-Waters
Communications. If at any time following the distribution of
any Written Testing-the-Waters Communication there occurred or
occurs an event or development as a result of which such Written
Testing-the-Waters Communication included or would include an
untrue statement of a material fact or omitted or would omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at that
subsequent time, not misleading, the Company shall promptly notify
the Representative and shall promptly amend or supplement, at its
own expense, such Written Testing-the-Waters Communication to
eliminate or correct such untrue statement or
omission.
3.3. Delivery
to the Underwriters of Registration Statements. The Company has delivered or made available or
shall deliver or make available to the Representative and
Representative’s Counsel, without charge, signed copies of
the Registration Statement as originally filed and each amendment
thereto (including exhibits filed therewith) and signed copies of
all consents and certificates of experts, and upon request will
also deliver to the Underwriters, without charge, a conformed copy
of the Registration Statement as originally filed and each
amendment thereto (without exhibits) for each of the Underwriters.
The copies of the Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
3.4. Delivery
to the Underwriters of Prospectuses. The Company has delivered or made available or
will deliver or make available to each Underwriter, without charge,
as many copies of each Preliminary Prospectus as such Underwriter
reasonably requested, and the Company hereby consents to the use of
such copies for purposes permitted by the Securities Act. The
Company will furnish to each Underwriter, without charge, during
the period when a prospectus relating to the Shares is (or, but for
the exception afforded by Rule 172, would be) required to be
delivered under the Securities Act, such number of copies of the
Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be identical
to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
3.5. Effectiveness
and Events Requiring Notice to the
Representative.
The Company shall use its commercially
reasonable efforts to cause the Registration Statement covering the
issuance of the Common Stock underlying the Warrants to remain effective with a
current prospectus for at least nine (9) months after the
Applicable Time, and shall notify the Representative immediately
and confirm the notice in writing: (i) of the cessation of the
effectiveness of the Registration Statement and any amendment
thereto; (ii) of the issuance by the Commission of any stop order
or of the initiation, or the threatening, of any proceeding for
that purpose; (iii) of the issuance by any state securities
commission of any proceedings for the suspension of the
qualification of the Shares for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose; (iv) of the mailing and delivery to
the Commission for filing of any amendment or supplement to the
Registration Statement or Prospectus; (v) of the receipt of any
comments or request for any additional information from the
Commission; and (vi) of the happening of any event during the
period described in this Section 3.5
that, in the judgment of the Company,
makes any statement of a material fact made in the Registration
Statement, the Pricing Disclosure Package or the Prospectus untrue
or that requires the making of any changes in (a) the Registration
Statement in order to make the statements therein not misleading,
or (b) in the Pricing Disclosure Package or the Prospectus in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. If the Commission or any
state securities commission shall enter a stop order or suspend
such qualification at any time, the Company shall make every
reasonable effort to obtain promptly the lifting of such
order.
3.6. Review
of Financial Statements. For a
period of three (3) years after the date of this Agreement, the
Company, at its expense, shall cause its regularly engaged
independent registered public accounting firm to review (but not
audit) the Company’s financial statements for each of the
three fiscal quarters immediately preceding the announcement of any
quarterly financial information.
3.7. Listing.
The Company shall use its commercially
reasonable efforts to maintain the listing of the Shares on the
Exchange for at least three years from the date of this
Agreement.
3.8. [Intentionally
omitted]
3.9. Reports
to the Representative.
3.9.1. Periodic Reports,
etc. For a period of three (3) years after the date of this
Agreement, the Company shall furnish or make available to the
Representative copies of such financial statements and other
periodic and special reports as the Company from time to time
furnishes generally to holders of any class of its securities and
also furnish or make available to the Representative: (i) a copy of
each periodic report the Company shall be required to file with the
Commission under the Exchange Act and the Exchange Act Regulations;
(ii) a copy of every press release and every news item and article
with respect to the Company or its affairs which was released by
the Company; (iii) a copy of each Form 8-K prepared and filed by
the Company; (iv) a copy of each registration statement filed by
the Company under the Securities Act; and (v) such additional
documents and information with respect to the Company and the
affairs of any future subsidiaries of the Company as the
Representative may from time to time reasonably request;
provided the Representative
shall sign, if requested by the Company, a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to the
Representative and Representative’s Counsel in connection
with the Representative’s receipt of such information.
Documents filed with the Commission pursuant to its EDGAR system
shall be deemed to have been delivered to the Representative
pursuant to this Section
3.9.1.
3.9.2. Transfer Agent;
Transfer Sheets. For a period of three (3) years after the
date of this Agreement, the Company shall retain a transfer agent
and registrar acceptable to the Representative (the
“Transfer
Agent”) and shall furnish to the Representative at the
Company’s sole cost and expense such transfer sheets of the
Company’s securities as the Representative may reasonably
request, including the daily and monthly consolidated transfer
sheets of the Transfer Agent and DTC. VStock Transfer, LLC is
acceptable to the Representative to act as Transfer Agent for the
Common Stock.
3.9.3. Trading
Reports. For a period of six months after the date hereof,
during such time as the Shares are listed on the Exchange, the
Company shall provide to the Representative, at the Company’s
expense, such reports published by the Exchange relating to price
trading of the Shares, as the Representative shall reasonably
request.
3.10. Payment
of Expenses
3.10.1. General Expenses
Related to the Offering. The Company hereby agrees to pay on
each of the Closing Date and the Option Closing Date, if any, to
the extent not paid at the Closing Date, all expenses incident to
the performance of the obligations of the Company under this
Agreement, including, but not limited to: (a) all filing fees and
communication expenses relating to the registration of the Shares
to be sold in the Offering (including the Over-allotment Option)
with the Commission; (b) all Public Filing System filing fees
associated with the review of the Offering by FINRA; (c) all fees,
expenses and disbursements relating to the registration,
qualification or exemption of the Shares under the securities laws
of such foreign jurisdictions as the Representative may reasonably
designate; (d) the costs associated with receiving commemorative
mementos and lucite tombstones; (e) fees and expenses of the
Representative’s Counsel; and (f) the Underwriters’
“road show” expenses and diligence expenses for the
Offering, with the fees and expenses of the Representative’s
Counsel under subsection 3.10.1(e) not to exceed $75,000 and all of the
Underwriters’ actual out-of-pocket expenses under subsections
3.10.1(d)-(f) not to exceed $85,000. The Representative may deduct
from the net proceeds of the Offering payable to the Company on the
Closing Date, or the Option Closing Date, if any, the expenses set
forth herein to be paid by the Company to the Underwriters;
provided, however, that in the event that the
Offering is terminated, the Company agrees to reimburse the
Underwriters pursuant to Section 8.3
hereof.
3.10.2. The Company has previously paid to or
on behalf of WestPark Capital, Inc., an Underwriter, the amount of
$50,000 upon execution of
the parties’ letter of intent and an additional $25,000 concurrent with the filing of
the Registration Statement as a refundable retainer. Such amounts
shall be deducted from the payments due under subsections
3.10.1(d)-(f) of this Agreement.
3.10.3. Non-accountable
Expenses. The Company further agrees that, in addition to
the expenses payable pursuant to Section 3.10.1, on the Closing
Date it shall pay to the Representative, by deduction from the net
proceeds of the Offering contemplated herein, a non-accountable
expense allowance equal to one and
half percent (1.5%)
of the gross proceeds received by the Company from the sale of the
Shares.
3.11. Application
of Net Proceeds. The Company shall apply the net proceeds from the
Offering received by it in a manner consistent with the application
thereof described under the caption “Use of Proceeds”
in the Registration Statement, the Pricing Disclosure Package and
the Prospectus.
3.12. Delivery
of Earnings Statements to Security Holders. The Company shall make generally available to
its security holders as soon as practicable, but not later than the
first day of the fifteenth (15th) full calendar month following the date of this
Agreement, an earnings statement (which need not be certified by
independent registered public accounting firm unless required by
the Securities Act or the Securities Act Regulations, but which
shall satisfy the provisions of Rule 158(a) under Section 11(a) of
the Securities Act) covering a period of at least twelve (12)
consecutive months beginning after the date of this
Agreement.
3.13. Stabilization.
Neither the Company nor, to its
knowledge, any of its employees, directors or shareholders has
taken or shall take, directly or indirectly, any action designed to
or that has constituted or that might reasonably be expected to
cause or result in, under Regulation M of the Exchange Act, or
otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares.
3.14. Internal
Controls. Except to the extent
disclosed in the Registration Statement, Pricing Disclosure Package
and Prospectus, the Company shall maintain a system of internal
accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with
management’s general or specific authorization; (ii)
transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with GAAP and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or
specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
3.15. Accountants.
As of the date of this Agreement, the Company has retained an
independent registered public accounting firm reasonably acceptable
to the Representative, and the Company shall continue to retain a
nationally recognized independent registered public accounting firm
for a period of at least three (3) years after the date of this
Agreement. The Representative acknowledges that the Auditor is
acceptable to the Representative.
3.16. FINRA.
For a period of 90 days from the later of the Closing Date or the
Option Closing Date, the Company shall advise the Representative
(who shall make an appropriate filing with FINRA) if it is or
becomes aware that (i) any officer or director of the Company, (ii)
any beneficial owner of 5% or more of any class of the Company's
securities or (iii) any beneficial owner of the Company's
unregistered equity securities which were acquired during the 180
days immediately preceding the filing of the original Registration
Statement is or becomes an affiliate or associated person of a
FINRA member participating in the Offering (as determined in
accordance with the rules and regulations of
FINRA).
3.17. No
Fiduciary Duties. The Company
acknowledges and agrees that the Underwriters’ responsibility
to the Company is solely contractual in nature and that none of the
Underwriters or their affiliates or any selling agent shall be
deemed to be acting in a fiduciary capacity, or otherwise owes any
fiduciary duty to the Company or any of its affiliates in
connection with the Offering and the other transactions
contemplated by this Agreement.
3.18. Company
Lock-Up. The Company, on behalf
of itself and any successor entity, agrees that, without the prior
written consent of the Representative, it will not, for a period of
six months after the date of this Agreement (the
“Lock-Up
Period”), (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer
or dispose of, directly or indirectly, any shares of capital stock
of the Company or any securities convertible into or exercisable or
exchangeable for shares of capital stock of the Company; (ii) file
or cause to be filed any registration statement with the Commission
relating to the offering of any shares of capital stock of the
Company or any securities convertible into or exercisable or
exchangeable for shares of capital stock of the Company (other than
pursuant to a registration statement on Form S-8 for employee
benefit plans); or (iii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of capital stock of the Company, whether
any such transaction described in clause (i), (ii) or (iii) above
is to be settled by delivery of shares of capital stock of the
Company or such other securities, in cash or otherwise. The
restrictions contained in this section shall not apply to (i) the
Shares and the Representative’s Securities to be sold
hereunder; and (ii) the issuance by the Company of Common Stock
upon the exercise of an outstanding option or warrant or the
conversion of a security outstanding on the date hereof and
disclosed in the Registration Statement and the Pricing Disclosure
Package.
3.19. Release
of D&O Lock-up Period. If
the Representative, in its sole discretion, agrees to release or
waive the restrictions set forth in the Lock-Up Agreements
described in Section 2.24
hereof for an officer or director of
the Company and provides the Company with notice of the impending
release or waiver at least three (3) Business Days before the
effective date of the release or waiver, the Company agrees to
announce the impending release or waiver by a press release
substantially in the form of Exhibit C
hereto through a major news service at
least two (2) Business Days before the effective date of the
release or waiver.
3.20. Blue
Sky Qualifications. The Company shall use its best efforts, in
cooperation with the Underwriters, if necessary, to qualify the
Shares for offering and sale under the applicable securities laws
of such states and other jurisdictions (domestic or foreign) as the
Representative may designate and to maintain such qualifications in
effect so long as required to complete the distribution of the
Shares; provided, however, that the Company shall not be obligated to file
any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself
to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.
3.21. Reporting
Requirements. The Company, during the period when a prospectus
relating to the Shares is (or, but for the exception afforded by
Rule 172, would be) required to be delivered under the Securities
Act, will file all documents required to be filed with the
Commission pursuant to the Exchange Act within the time periods
required by the Exchange Act and Exchange Act Regulations.
Additionally, the Company shall report the use of proceeds from the
issuance of the Shares as may be required under Rule 463 under the
Securities Act Regulations.
4. Conditions
of Underwriters’ Obligations. The obligations of the
Underwriters to purchase and pay for the Shares, as provided
herein, shall be subject to (i) the continuing accuracy of the
representations and warranties of the Company as of the date hereof
and as of each of the Closing Date and the Option Closing Date, if
any; (ii) the accuracy of the statements of officers of the Company
made pursuant to the provisions hereof; (iii) the performance by
the Company of its obligations hereunder; and (iv) the following
conditions:
4.1. Regulatory
Matters.
4.1.1. Effectiveness of
Registration Statement; Rule 430A Information. The
Registration Statement has become effective not later than 5:00
p.m., Eastern time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you, and, at
each of the Closing Date and any Option Closing Date, no stop order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto has been issued under the
Securities Act, no order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus has been issued and no
proceedings for any of those purposes have been instituted or are
pending or, to the Company’s knowledge, contemplated by the
Commission. The Company has complied with each request (if any)
from the Commission for additional information. The Prospectus
containing the Rule 430A Information shall have been filed with the
Commission in the manner and within the time frame required by Rule
424(b) (without reliance on Rule 424(b)(8)) or a post-effective
amendment providing such information shall have been filed with,
and declared effective by, the Commission in accordance with the
requirements of Rule 430A.
4.1.2. FINRA
Clearance. On or before the date of this Agreement, the
Representative shall have received clearance from FINRA as to the
amount of compensation allowable or payable to the Underwriters as
described in the Registration Statement.
4.1.3. Exchange
Clearance. On the Closing Date, the Shares shall have been
approved for listing on the Exchange, subject only to official
notice of issuance. On the first Option Closing Date (if any), the
Option Shares shall have been approved for listing on the Exchange,
subject only to official notice of issuance.
4.2. Company
Counsel Matters.
4.2.1. Closing Date Opinion
of Counsel. On the Closing Date, the Representative shall
have received the favorable opinion of Sichenzia Ross Ference LLP,
counsel for the Company, in form and substance reasonably
satisfactory to Representative’s Counsel addressed to each of
the Underwriters (including the Representative).
4.2.2. Option Closing Date
Opinion of Counsel. On the Option Closing Date, if any, the
Representative shall have received the favorable opinion of
Sichenzia Ross Ference LLP, counsel for the Company, dated the
Option Closing Date, addressed to the Representative and in form
and substance reasonably satisfactory to the Representative,
confirming as of the Option Closing Date, the statements made by
such counsel in its opinion delivered on the Closing
Date.
4.2.3. Reliance. In
rendering such opinions, such counsel may rely: (i) as to matters
involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and
substance reasonably satisfactory to the Representative) of other
counsel reasonably acceptable to the Representative, familiar with
the applicable laws; and (ii) as to matters of fact, to the extent
they deem proper, on certificates or other written statements of
officers of the Company and officers of departments of various
jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company, provided that copies of any such
statements or certificates shall be delivered to
Representative’s Counsel if requested.
4.3. Comfort
Letters.
4.3.1. Cold Comfort
Letter. At the time this Agreement is executed you shall
have received a cold comfort letter containing statements and
information of the type customarily included in accountants’
comfort letters with respect to the financial statements and
certain financial information contained in the Registration
Statement, the Pricing Disclosure Package and the Prospectus,
addressed to the Representative and in form and substance
satisfactory in all respects to you and to the Auditor, dated as of
the date of this Agreement.
4.3.2. Bring-down Comfort
Letter. At each of the Closing Date and the Option Closing
Date, if any, the Representative shall have received from the
Auditor a letter, dated as of the Closing Date or the Option
Closing Date, as applicable, to the effect that the Auditor
reaffirms the statements made in the letter furnished pursuant to
Section 4.3.1,
except that the specified date referred to shall be a date not more
than three (3) business days prior to the Closing Date or the
Option Closing Date, as applicable.
4.4. Officers’
Certificates.
4.4.1. Officers’
Certificate. The Company shall have furnished to the
Representative a certificate, dated the Closing Date and any Option
Closing Date (if such date is other than the Closing Date), of its
Chief Executive Officer, its President and its Chief Financial
Officer stating that (i) such officers have carefully examined the
Registration Statement, the Pricing Disclosure Package, any Issuer
Free Writing Prospectus and the Prospectus and, in their opinion,
the Registration Statement and each amendment thereto, as of the
Applicable Time and as of the Closing Date (or any Option Closing
Date if such date is other than the Closing Date) did not include
any untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Pricing Disclosure
Package, as of the Applicable Time and as of the Closing Date (or
any Option Closing Date if such date is other than the Closing
Date), any Issuer Free Writing Prospectus as of its date and as of
the Closing Date (or any Option Closing Date if such date is other
than the Closing Date), the Prospectus and each amendment or
supplement thereto, as of the respective date thereof and as of the
Closing Date, did not include any untrue statement of a material
fact and did not omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
in which they were made, not misleading, (ii) since the effective
date of the Registration Statement, no event has occurred which
should have been set forth in a supplement or amendment to the
Registration Statement, the Pricing Disclosure Package or the
Prospectus, (iii) to the best of their knowledge after reasonable
investigation, as of the Closing Date (or any Option Closing Date
if such date is other than the Closing Date), the representations
and warranties of the Company in this Agreement are true and
correct in all material respects (except for those representations
and warranties qualified as to materiality, which shall be true and
correct in all respects and except for those representations and
warranties which refer to facts existing at a specific date, which
shall be true and correct as of such date) and the Company has
complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the
Closing Date (or any Option Closing Date if such date is other than
the Closing Date), and (iv) there has not been, subsequent to the
date of the most recent audited financial statements included or
incorporated by reference in the Pricing Disclosure Package, a
Material Adverse Change.
4.4.2. Secretary’s
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary of the Company,
dated the Closing Date or the Option Date, as the case may be,
respectively, certifying: (i) that each of the Charter and Bylaws
is true and complete, has not been modified and is in full force
and effect; (ii) that the resolutions of the Company’s Board
of Directors (and any pricing committee thereof) relating to the
Offering are in full force and effect and have not been modified;
(iii) as to the accuracy and completeness of all correspondence
between the Company or its counsel and the Commission; and (iv) as
to the incumbency of the officers of the Company. The documents
referred to in such certificate shall be attached to such
certificate.
4.5. No
Material Changes. Prior to and
on each of the Closing Date and each Option Closing Date, if any:
(i) there shall have been no Material Adverse Change in the
condition or prospects or the business activities, financial or
otherwise, of the Company from the latest dates as of which such
condition is set forth in the Registration Statement, the Pricing
Disclosure Package and the Prospectus; (ii) no action, suit or
proceeding, at law or in equity, shall have been pending or
threatened against the Company or any Insider before or by any
court or federal or state commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may
reasonably be expected to cause a Material Adverse Change, except
as set forth in the Registration Statement, the Pricing Disclosure
Package and the Prospectus; (iii) no stop order shall have been
issued under the Securities Act and no proceedings therefor shall
have been initiated or threatened by the Commission; and (iv) the
Registration Statement, the Pricing Disclosure Package and the
Prospectus and any amendments or supplements thereto shall contain
all material statements which are required to be stated therein in
accordance with the Securities Act and the Securities Act
Regulations and shall conform in all material respects to the
requirements of the Securities Act and the Securities Act
Regulations, and neither the Registration Statement, the Pricing
Disclosure Package nor the Prospectus nor any amendment or
supplement thereto shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading.
4.6. Delivery
of Agreements.
4.6.1. Lock-Up
Agreements. On or before the date of this Agreement, the
Company shall have delivered to the Representative executed copies
of the Lock-Up Agreements from each of the persons listed in
Schedule
3 hereto.
4.7. Additional
Documents. At the Closing Date
and at each Option Closing Date (if any) Representative’s
Counsel shall have been furnished with such documents and opinions
as they may require for the purpose of enabling
Representative’s Counsel to deliver an opinion to the
Underwriters, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Shares and
the Representative’s Warrant as herein contemplated shall be
satisfactory in form and substance to the Representative and
Representative’s Counsel.
5. Indemnification.
5.1. Indemnification
of the Underwriters.
5.1.1. General.
Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Underwriter, its affiliates and
each of its and their respective directors, officers, members,
employees, representatives, partners, shareholders, affiliates,
counsel, and agents and each person, if any, who controls any such
Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (collectively the
“Underwriter
Indemnified Parties,” and each an “Underwriter Indemnified
Party”), against any and all loss, liability, claim,
damage and expense whatsoever (including but not limited to any and
all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, whether arising out of any
action between any of the Underwriter Indemnified Parties and the
Company or between any of the Underwriter Indemnified Parties and
any third party, or otherwise) to which they or any of them may
become subject under the Securities Act, the Exchange Act or any
other statute or at common law or otherwise or under the laws of
foreign countries (a “Claim”), arising
out of or based upon any untrue statement or alleged untrue
statement of a material fact contained, or the omission or alleged
omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in (A)
the Registration Statement, the Pricing Disclosure Package, any
Preliminary Prospectus, the Prospectus, or in any Issuer Free
Writing Prospectus or in any Written Testing-the-Waters
Communication (as from time to time each may be amended and
supplemented); (B) any materials or information provided to
investors by, or with the approval of, the Company in connection
with the marketing of the Offering, including any “road
show” or investor presentations made to investors by the
Company (whether in person or electronically); or (C) any
application or other document or written communication (in this
Section 5,
collectively called “application”) executed by the
Company or based upon written information furnished by the Company
in any jurisdiction in order to qualify the Shares and
Representative’s Warrant under the securities laws thereof or
filed with the Commission, any state securities commission or
agency, the Exchange or any other national securities exchange;
unless such statement or omission was made in reliance upon, and in
conformity with, the Underwriters’ Information. With respect
to any untrue statement or omission or alleged untrue statement or
omission made in the Registration Statement, Pricing Disclosure
Package or Prospectus, the indemnity agreement contained in this
Section 5.1.1 shall
not inure to the benefit of any Underwriter Indemnified Party to
the extent that any loss, liability, claim, damage or expense of
such Underwriter Indemnified Party results from the fact that a
copy of the Prospectus was not given or sent to the person
asserting any such loss, liability, claim or damage at or prior to
the written confirmation of sale of the Shares to such person as
required by the Securities Act and the Securities Act Regulations,
and if the untrue statement or omission has been corrected in the
Prospectus, unless such failure to deliver the Prospectus was a
result of non-compliance by the Company with its obligations under
Section 3.3 hereof.
The Company also agrees that it will reimburse each Underwriter
Indemnified Party for all fees and expenses (including but not
limited to any and all legal or other expenses reasonably incurred
in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, whether arising
out of any action between any of the Underwriter Indemnified
Parties and the Company or between any of the Underwriter
Indemnified Parties and any third party, or otherwise)
(collectively, the “Expenses”), and further agrees
wherever and whenever possible to advance payment of Expenses as
they are incurred by an Underwriter Indemnified Party in
investigating, preparing, pursuing or defending any
Claim.
5.1.2. Procedure. If
any action is brought against an Underwriter Indemnified Party in
respect of which indemnity may be sought against the Company
pursuant to Section
5.1.1, such Underwriter Indemnified Party shall promptly
notify the Company in writing of the institution of such action and
the Company shall assume the defense of such action, including the
employment and fees of counsel (subject to the approval of such
Underwriter Indemnified Party) and payment of actual expenses if an
Underwriter Indemnified Party requests that the Company do so. Such
Underwriter Indemnified Party shall have the right to employ its or
their own counsel in any such case, and the fees and expenses of
such counsel shall be at the expense of the Company and shall be
advanced by the Company; provided, however, that the Company shall not be
obligated to bear the reasonable fees and expenses of more than one
firm of attorneys selected by the Underwriter Indemnified Party (in
addition to local counsel). Notwithstanding anything to the
contrary contained herein, and provided that the Company has timely
honored its obligations under Section 5, the Company shall
have the right to approve the terms of any settlement of such
action, which approval shall not be unreasonably withheld. The
Company shall not be liable for any settlement of any action
effected without its consent (which shall not be unreasonably
withheld). In addition, the Company shall not, without the prior
written consent of the Underwriters (which consent shall not be
unreasonably withheld), settle, compromise or consent to the entry
of any judgment in or otherwise seek to terminate any pending or
threatened action in respect of which advancement, reimbursement,
indemnification or contribution may be sought hereunder (whether or
not such Underwriter Indemnified Party is a party thereto) unless
such settlement, compromise, consent or termination (i) includes an
unconditional release of each Underwriter Indemnified Party,
acceptable to such Underwriter Indemnified Party, from all
liabilities, expenses and claims arising out of such action for
which indemnification or contribution may be sought and (ii) does
not include a statement as to or an admission of fault, culpability
or a failure to act, by or on behalf of any Underwriter Indemnified
Party.
5.2. Indemnification
of the Company. Each
Underwriter, severally and not jointly, agrees to indemnify and
hold harmless the Company, its directors, its officers who signed
the Registration Statement and persons who control the Company
within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act against any and all loss, liability, claim,
damage and expense described in the foregoing indemnity from the
Company to the several Underwriters, as incurred, but only with
respect to such losses, liabilities, claims, damages and expenses
(or actions in respect thereof) which arise out of or are based
upon untrue statements or omissions, or alleged untrue statements
or omissions made in the Registration Statement, any Preliminary
Prospectus, the Pricing Disclosure Package or Prospectus or any
amendment or supplement thereto or in any application, in reliance
upon, and in conformity with, the Underwriters’ Information.
In case any action shall be brought against the Company or any
other person so indemnified based on any Preliminary Prospectus,
the Registration Statement, the Pricing Disclosure Package or
Prospectus or any amendment or supplement thereto or any
application, and in respect of which indemnity may be sought
against any Underwriter, such Underwriter shall have the rights and
duties given to the Company, and the Company and each other person
so indemnified shall have the rights and duties given to the
several Underwriters by the provisions of Section
5.1.2. The Company agrees
promptly to notify the Representative of the commencement of any
litigation or proceedings against the Company or any of its
officers, directors or any person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, in connection with the issuance and sale of
the Shares or in connection with the Registration Statement, the
Pricing Disclosure Package, the Prospectus, or any Issuer Free
Writing Prospectus or any Written Testing-the-Waters
Communication.
5.3. Contribution.
If the indemnification provided for in
this Section 5 shall for any reason be unavailable to or
insufficient to hold harmless an indemnified party under Section
5(a) or 5(c) in respect of any Liabilities and Expenses referred to
therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid
or payable by such indemnified party as a result of such
Liabilities and Expenses, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the
Company, on the one hand, and each of the Underwriters, on the
other hand, from the Offering, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the Underwriters, on the
other hand, in connection with the matters as to which such
Liabilities or Expenses relate, as well as any other relevant
equitable considerations. The relative benefits received by the
Company, on the one hand, and the Underwriters, on the other, with
respect to such Offering shall be deemed to be in the same
proportion as the total net proceeds actually received by the
Company from the Offering of the Firm Shares purchased under this
Agreement (before deducting expenses) received by the Company bear
to the total underwriting discounts and commissions actually
received by the Underwriters in connection with the Offering, in
each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company, on the one hand, and
the Underwriters, on the other, shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the
Company, on the one hand, or the Underwriters, on the other, and
the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue
statement, omission, act or failure to act; provided that the
parties hereto agree that the written information furnished to the
Company through the Representative by or on behalf of any
Underwriter for use in any Preliminary Prospectus, any Registration
Statement or the Prospectus, or in any amendment or supplement
thereto, consists solely of the Underwriters’ Information.
The Company and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable
considerations referred to above in this subsection (d).
Notwithstanding the above, no person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the
Securities Act shall be entitled to contribution from a party who
was not guilty of such fraudulent
misrepresentation.
5.4. Limitation.
The Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or
otherwise) to the Company for or in connection with advice or
services rendered or to be rendered by any Indemnified Person
pursuant to this Agreement, the transactions contemplated thereby
or any Indemnified Person’s actions or inactions in
connection with any such advice, services or transactions, except
to the extent that a court of competent jurisdiction has made a
finding that Liabilities (and related Expenses) of the Company have
resulted from such Indemnified Person’s fraud, bad faith,
gross negligence or willful misconduct in connection with any such
advice, actions, inactions or services or such Indemnified
Person’s breach of this Agreement or any obligations of
confidentiality owed to the Company.
5.5. Survival &
Third-Party Beneficiaries. The
advancement, reimbursement, indemnity and contribution obligations
set forth in this Section 5 shall remain in full force and effect
regardless of any termination of, or the completion of any
Indemnified Person’s services under or in connection with,
this Agreement. Each Indemnified Person is an intended third-party
beneficiary of this Section 5, and has the right to enforce the
provisions of Section 5 as if he/she/it was a party to this
Agreement.
6. Default
by an Underwriter.
6.1. Default
Not Exceeding 10% of Firm Shares or Option
Shares.
If any Underwriter or Underwriters
shall default in its or their obligations to purchase the Firm
Shares or the Option Shares, if the Over-allotment Option is
exercised hereunder, and if the number of the Firm Shares or Option
Shares with respect to which such default relates does not exceed
in the aggregate 10% of the number of Firm Shares or Option Shares
that all Underwriters have agreed to purchase hereunder, then such
Firm Shares or Option Shares to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to their
respective commitments hereunder.
6.2. Default
Exceeding 10% of Firm Shares or Option Shares. In the event that the default addressed
in Section 6.1
relates to more than 10% of the Firm
Shares or Option Shares, you may in your discretion arrange for
yourself or for another party or parties to purchase such Firm
Shares or Option Shares to which such default relates on the terms
contained herein. If, within one (1) Business Day after such
default relating to more than 10% of the Firm Shares or Option
Shares, you do not arrange for the purchase of such Firm Shares or
Option Shares, then the Company shall be entitled to a further
period of one (1) Business Day within which to procure another
party or parties satisfactory to you to purchase said Firm Shares
or Option Shares on such terms. In the event that neither you nor
the Company arrange for the purchase of the Firm Shares or Option
Shares to which a default relates as provided in this
Section
6, this Agreement will
automatically be terminated by you or the Company without liability
on the part of the Company (except as provided in Sections
8.3
and 5 hereof) or the several Underwriters (except as
provided in Section 5
hereof); provided, however, that if such default occurs with respect to the
Option Shares, this Agreement will not terminate as to the Firm
Shares; and provided, further, that nothing herein shall relieve a defaulting
Underwriter of its liability, if any, to the other Underwriters and
to the Company for damages occasioned by its default
hereunder.
6.3. Postponement
of Closing Date. In the event
that the Firm Shares or Option Shares to which the default relates
are to be purchased by the non-defaulting Underwriters, or are to
be purchased by another party or parties as aforesaid, you or the
Company shall have the right to postpone the Closing Date or Option
Closing Date for a reasonable period, but not in any event
exceeding five (5) Business Days, in order to effect whatever
changes may thereby be made necessary in the Registration
Statement, the Pricing Disclosure Package or the Prospectus or in
any other documents and arrangements, and the Company agrees to
file promptly any amendment to the Registration Statement, the
Pricing Disclosure Package or the Prospectus that in the opinion of
counsel for the Underwriter may thereby be made necessary. The term
“Underwriter” as used in this Agreement shall include
any party substituted under this Section 6
with like effect as if it had
originally been a party to this Agreement with respect to such Firm
Shares or Option Shares.
7. Right
of First Refusal. During the
period ending 12 months after the Closing Date, the Company shall
notify the Representative in writing at least thirty (30) days
prior to a proposed U.S. public offering of any debt or equity
securities (other than bank debt or similar financing) by the
Company that the Representative or, at its option, a group of
associated investment bankers shall have the right of first refusal
to effect the offering on terms as favorable as theretofore offered
in writing by a reputable investment banker. The Representative
agrees to notify the Company, within ten (10) days of its exercise
of the right of first refusal. If the Representative fails to
exercise the right of first refusal within the ten (10) day period
and the principal terms of the proposed subsequent financings
thereafter are altered in any material respect, the Company shall
again offer to the Representative the right of first refusal.
Notwithstanding the foregoing, if the Representative declines to
exercise its right of first refusal for any specific offering, and
the Company completes such offering with another investment banking
firm, then the Representative shall not have the right of first
refusal for any future Company financings, and if the Company
receives a proposal from a “bulge bracket” underwriter
to undertake such a financing, the Representative shall not have
the right of first refusal set forth in the paragraph
provided, however, that the Company shall use commercially
reasonable efforts to cause such underwriter to allow the
Representative’s participation in such financing under
agreeable terms and if that is not possible then buy out the
Representative’s right for an agreed upon amount not to be
less than $150,000.
8. Effective
Date of this Agreement and Termination Thereof.
8.1. Effective
Date. This Agreement shall
become effective when both the Company and the Representative have
executed the same and delivered counterparts of such signatures to
the other party.
8.2. Termination.
The Representative shall have the
right to terminate this Agreement at any time prior to any Closing
Date, (i) if any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, general securities markets in
the United States; or (ii) if trading on the New York Stock
Exchange or the Nasdaq Stock Market LLC shall have been suspended
or materially limited, or minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities
shall have been required by FINRA or by order of the Commission or
any other government authority having jurisdiction; or (iii) if the
United States shall have become involved in a new war or an
increase in major hostilities; or (iv) if a banking moratorium has
been declared by a New York State or federal authority; or (v) if a
moratorium on foreign exchange trading has been declared which
materially adversely impacts the United States securities markets;
or (vi) if the Company shall have sustained a material loss by
fire, flood, accident, hurricane, earthquake, theft, sabotage or
other calamity or malicious act which, whether or not such loss
shall have been insured, will, in your opinion, make it inadvisable
to proceed with the delivery of the Firm Shares or Option Shares;
or (vii) if the Company is in material breach of any of its
representations, warranties or covenants hereunder; or (viii) if
the Representative shall have become aware after the date hereof of
such a Material Adverse Change, or such adverse material change in
general market conditions as in the Representative’s judgment
would make it impracticable to proceed with the offering, sale
and/or delivery of the Shares or to enforce contracts made by the
Underwriters for the sale of the Shares.
8.3. Expenses.
Notwithstanding anything to the
contrary in this Agreement, except in the case of a default by the
Underwriters, pursuant to Section 6.2
above, in the event that this
Agreement shall not be carried out for any reason whatsoever,
within the time specified herein or any extensions thereof pursuant
to the terms herein, the Company shall be obligated to pay to the
Underwriters their actual and accountable out-of-pocket expenses
related to the transactions contemplated herein then due and
payable up to the amounts set forth in Section 3.10.1
(inclusive of the $75,000 already paid
to or on behalf of the Underwriters as of the date hereof)
and upon demand the Company shall pay
such amount thereof to the Representative on behalf of the
Underwriters; provided, however, that such expense cap in no way limits or
impairs the indemnification and contribution provisions of this
Agreement. Notwithstanding the foregoing, any advance received by
the Representative will be reimbursed to the Company to the extent
not actually incurred in compliance with FINRA Rule
5110(f)(2)(C).
8.4. Indemnification.
Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the
provisions of Section 5
shall remain in full force and effect
and shall not be in any way affected by, such election or
termination or failure to carry out the terms of this Agreement or
any part hereof.
8.5. Representations,
Warranties, Agreements to Survive. All representations, warranties and agreements
contained in this Agreement or in certificates of officers of the
Company submitted pursuant hereto, shall remain operative and in
full force and effect regardless of (i) any investigation made by
or on behalf of any Underwriter or its Affiliates or selling
agents, any person controlling any Underwriter, its officers or
directors or any person controlling the Company or (ii) delivery of
and payment for the Shares.
9. Miscellaneous.
9.1. Notices.
All communications hereunder, except
as herein otherwise specifically provided, shall be in writing and
shall be mailed (registered or certified mail, return receipt
requested), personally delivered or sent by facsimile transmission
and confirmed and shall be deemed given when so delivered or faxed
and confirmed or if mailed, two (2) days after such
mailing.
If to
the Representative:
Aegis
Capital Corp.
As
Representative of the Underwriters named on Schedule 1 attached
hereto
Aegis
Capital Corp.
810 Seventh Avenue
18th Floor
New York, NY 10019
Attention: Fax No:
[●]
With a copy (which shall not constitute notice) to:
Manatt,
Phelps & Phillips, LLP
695
Town Center Drive, 14th Floor
Costa
Mesa, California 92626
Attn:
Thomas J. Poletti, Esq.
Fax No:
(714) 371-2550
If to
the Company:
HF
Enterprises Inc.
4800
Montgomery Lane, Suite 210
Bethesda, Maryland
20814
Fax No:
[●]
With a copy (which shall not constitute
notice) to:
Sichenzia
Ross Ference LLP
1185
Avenue of Americas, 37th Floor
New
York, New York 10036
Attn.:
Darrin M. Ocasio, Esq.
Fax
No: (212)
930-9725
9.2. Headings.
The headings contained herein are for
the sole purpose of convenience of reference, and shall not in any
way limit or affect the meaning or interpretation of any of the
terms or provisions of this Agreement.
9.3. Amendment.
This Agreement may only be amended by
a written instrument executed by each of the parties
hereto.
9.4. Entire
Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with
this Agreement) constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof, and
supersedes all prior agreements and understandings of the parties,
oral and written, with respect to the subject matter
hereof.
9.5. Binding
Effect. This Agreement shall inure solely to the benefit
of and shall be binding upon the Representative, the Underwriters,
the Company and the controlling persons, directors and officers
referred to in Section 5
hereof, and their respective
successors, legal representatives, heirs and assigns, and no other
person shall have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained. The term
“successors and assigns” shall not include a purchaser,
in its capacity as such, of securities from any of the
Underwriters.
9.6. Governing
Law; Consent to Jurisdiction; Trial by Jury. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of
New York, without giving effect to
conflict of laws principles thereof. The Company hereby agrees that
any action, proceeding or claim against it arising out of, or
relating in any way to this Agreement shall be brought and enforced
in the New York Supreme Court, County of New York, or in the United
States District Court for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall
be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an
inconvenient forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in
Section
9.1 hereof. Such mailing shall
be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The Company agrees that
the prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable
attorneys’ fees and expenses relating to such action or
proceeding and/or incurred in connection with the preparation
therefor. The Company (on its behalf and, to the extent permitted
by applicable law, on behalf of its shareholders and affiliates)
and each of the Underwriters hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated
hereby.
9.7. Execution
in Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but
all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts
has been signed by each of the parties hereto and delivered to each
of the other parties hereto. Delivery of a signed counterpart of
this Agreement by facsimile or email/pdf transmission shall
constitute valid and sufficient delivery
thereof.
9.8. Waiver,
etc. The failure of any of the
parties hereto to at any time enforce any of the provisions of this
Agreement shall not be deemed or construed to be a waiver of any
such provision, nor to in any way effect the validity of this
Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of
this Agreement. No waiver of any breach, non-compliance or
non-fulfillment of any of the provisions of this Agreement shall be
effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver
is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any
other or subsequent breach, non-compliance or
non-fulfillment.
[Signature Page Follows]
If
the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
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Very truly yours,
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HF Enterprises Inc.
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By:
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/s/ Chan Heng Fai
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Name: Chan Heng Fai
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Title: Chairman/ CEO/ Director
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Confirmed
as of the date first written above mentioned, on behalf of itself
and as Representative of the several Underwriters named on
Schedule
1 hereto:
Aegis Capital Corp.
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By:
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/s/ Victor Halpert
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Name: Victor Halpert
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Title: Managing director – Investment banking
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Exhibit 4.1
THE
REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE
HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS
PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED
HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL,
TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A
PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING NOVEMBER 27, 2020 (THE
“EFFECTIVE
DATE”) TO ANYONE OTHER THAN (I) AEGIS CAPITAL CORP. OR
A SELECTED DEALER IN CONNECTION WITH THE OFFERING FOR WHICH THIS
PURCHASE WARRANT WAS ISSUED TO THE UNDERWRITER AS CONSIDERATION
(THE “OFFERING”), OR (II) A BONA FIDE OFFICER OR
PARTNER OF AEGIS CAPITAL CORP.
THIS
PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO MAY 26, 2021. VOID
AFTER 5:00 P.M., EASTERN TIME, NOVEMBER 27, 2023.
COMMON STOCK PURCHASE WARRANT
For the Purchase of 108,000 Shares of Common Stock
of
HF
Enterprises Inc.
1.
Purchase Warrant.
THIS CERTIFIES THAT, in consideration of funds duly paid by or on
behalf of [●] (“Holder”), as registered owner of
this Purchase Warrant, to HF Enterprises Inc., a Delaware
corporation (the “Company”), Holder is entitled, at
any time or from time to time beginning November 27, 2020 (the
“Commencement
Date”), and at or before 5:00 p.m., Eastern time,
November 27, 2023 (the “Expiration Date”),
but not thereafter, to subscribe for, purchase and receive, in
whole or in part, up to [●] shares of common stock of the
Company, par value $0.001 per share (the “Shares”), subject to adjustment as
provided in Section 6 hereof. If the Expiration Date is a day on
which banking institutions are authorized by law to close, then
this Purchase Warrant may be exercised on the next succeeding day
which is not such a day in accordance with the terms herein. During
the period ending on the Expiration Date, the Company agrees not to
take any action that would terminate this Purchase Warrant. This
Purchase Warrant is initially exercisable at $9.80 per Share; provided, however, that upon the
occurrence of any of the events specified in Section 6 hereof, the
rights granted by this Purchase Warrant, including the exercise
price per Share and the number of Shares to be received upon such
exercise, shall be adjusted as therein specified. The term
“Exercise Price”
shall mean the initial exercise price or the adjusted exercise
price, depending on the context.
2.1 Exercise
Form. In order to exercise this Purchase Warrant, the
exercise form attached hereto must be duly executed and completed
and delivered to the Company, together with this Purchase Warrant
and payment of the Exercise Price for the Shares being purchased
payable in cash by wire transfer of immediately available funds to
an account designated by the Company or by certified check or
official bank check. If the subscription rights represented hereby
shall not be exercised at or before 5:00 p.m., Eastern time, on the
Expiration Date, this Purchase Warrant shall become and be void
without further force or effect, and all rights represented hereby
shall cease and expire. Each exercise hereof shall be
irrevocable.
2.2 Cashless
Exercise. In lieu of
exercising this Purchase Warrant by payment of cash or check
payable to the order of the Company pursuant to Section 2.1 above,
Holder may elect to receive the number of Shares equal to the value
of this Purchase Warrant (or the portion thereof being exercised),
by surrender of this Purchase Warrant to the Company, together with
the exercise form attached hereto, in which event the Company
will
issue to Holder Shares in accordance with the
following formula:
|
X
|
=
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Y(A-B)
|
|
|
A
|
|
|
Where,
|
|
|
|
|
|
X
|
=
|
The number of Shares to be issued to Holder;
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|
|
Y
|
=
|
The number of Shares for which the Purchase Warrant is being
exercised;
|
|
|
A
|
=
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The fair market value of one Share; and
|
|
|
B
|
=
|
The Exercise Price.
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For
purposes of this Section 2.2, the fair market value of a Share is
defined as follows:
(i)
if
the Company’s common stock is traded on a national securities
exchange, the OTCQB or OTCQX, the value shall be deemed to be the
closing price on such exchange, the OTCQB or OTCQX, as the case may
be, on the Business Day immediately preceding the date that the
exercise form is delivered pursuant to Section 8.4 in connection
with the exercise of the Purchase Warrant; or
(ii)
if the Company’s common stock is not then
traded on a securities exchange, the OTCQB or OTCQX and if prices
for the Company’s common stock are then reported on the
“Pink Sheets” published by OTC Markets Group, Inc., the
value shall be deemed to be the closing bid prior to the exercise
form being submitted in connection with the exercise of the
Purchase Warrant so reported; provided, however, if there is no
active public market, the value shall be the fair market value
thereof, as determined in good faith by the Company’s Board
of Directors.
2.3 Legend.
Each certificate for the securities purchased under this Purchase
Warrant shall bear a legend as follows unless such securities have
been registered under the Securities Act of 1933, as amended (the
“Act”):
“The
securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the
“Act”), or
applicable state law. Neither the securities nor any interest
therein may be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the
Act, or pursuant to an exemption from registration under the Act
and applicable state law which, in the opinion of counsel to the
Company, is available.”
2.4 Resale
of Shares. Holder and the Company acknowledge that as of the
date hereof the Staff of the Division of Corporation Finance of the
SEC has published Compliance & Disclosure Interpretation 528.04
in the Securities Act Rules section thereof, stating that the
holder of securities issued in connection with a public offering
may not rely upon Rule 144 promulgated under the Act to establish
an exemption from registration requirements under Section 4(a)(1)
under the Act, but may nonetheless apply Rule 144 constructively
for the resale of such shares in the following manner: (a) provided
that six months has elapsed since the last sale under the
registration statement, an underwriter or finder may resell the
securities in accordance with the provisions of Rule 144(c), (e),
and (f), except for the notice requirement; (b) a purchaser of the
shares from an underwriter receives restricted securities unless
the sale is made with an appropriate, current prospectus, or unless
the sale is made pursuant to the conditions contained in (a) above;
(c) a purchaser of the shares from an underwriter who receives
restricted securities may include the underwriter’s holding
period, provided that the underwriter or finder is not an affiliate
of the issuer; and (d) if an underwriter transfers the shares to
its employees, the employees may tack the firm’s holding
period for purposes of Rule 144(d), but they must aggregate sales
of the distributed shares with those of other employees, as well as
those of the underwriter or finder, for a six-month period from the
date of the transfer to the employees. Holder and the Company also
acknowledge that the Staff of the Division of Corporation Finance
of the SEC has advised in various no-action letters that the
holding period associated with securities issued without
registration to a service provider commences upon the completion of
the services, which the Company agrees and acknowledges shall be
the final closing of the Offering, and that Rule 144(d)(3)(ii)
provides that securities acquired from the issuer solely in
exchange for other securities of the same issuer shall be deemed to
have been acquired at the same time as the securities surrendered
for conversion (which the Company agrees is the date of the initial
issuance of this Purchase Warrant). In the event that following a
reasonably-timed written request by Holder to transfer the Shares
in accordance with Compliance & Disclosure Interpretation
528.04 counsel for the Company in good faith concludes that
Compliance & Disclosure Interpretation 528.04 no longer may be
relied upon as a result of changes in applicable laws, regulations,
or interpretations of the SEC Division of Corporation Finance, or
as a result of judicial interpretations not known by the Company or
its counsel on the date hereof (either, a “Registration
Trigger Event”), then the Company shall promptly, and in any
event within five (5) business days following the request, provide
written notice to Holder of such determination. As a condition to
giving such notice, the parties shall negotiate in good faith a
single demand registration right pursuant to an agreement in
customary form reasonably acceptable to the parties; provided that
notwithstanding anything to the contrary, the obligations of the
Company pursuant to this Section 2 shall terminate on the fifth
anniversary of the Effective Date. In the absence of such
conclusion by counsel for the Company, the Company shall, upon such
a request of Holder given no earlier than six months after the
final closing of the Offering, instruct its transfer agent to
permit the transfer of such shares in accordance with Compliance
& Disclosure Interpretation 528.04, provided that Holder has
provided such documentation as shall be reasonably be requested by
the Company to establish compliance with the conditions of
Compliance & Disclosure Interpretation 528.04. Notwithstanding
anything to the contrary, pursuant to FINRA Rule 5110(f)(2)(G)(iv),
the Holder shall not be entitled to more than one demand
registration right hereunder and the duration of the registration
rights hereunder shall not exceed four years from the Effective
Date.
3.1 General
Restrictions. The registered Holder of this Purchase Warrant
agrees by his, her or its acceptance hereof, that such Holder will
not: (a) sell, transfer, assign, pledge or hypothecate this
Purchase Warrant for a period of one hundred eighty (180) days
following the Effective Date to anyone other than: (i) Aegis
Captital Corp (“Aegis”) or an underwriter,
placement agent, or a selected dealer participating in the
Offering, or (ii) a bona fide officer or partner of Aegis or of any
such underwriter, placement agent or selected dealer, in each case
in accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this
Purchase Warrant or the securities issuable hereunder to be the
subject of any hedging, short sale, derivative, put or call
transaction that would result in the effective economic disposition
of this Purchase Warrant or the securities hereunder, except as
provided for in FINRA Rule 5110(g)(2). After 180 days after the
Effective Date, transfers to others may be made subject to
compliance with or exemptions from applicable securities laws. In
order to make any permitted assignment, the Holder must deliver to
the Company the assignment form attached hereto duly executed and
completed, together with the Purchase Warrant and payment of all
transfer taxes, if any, payable in connection therewith. The
Company shall within five (5) Business Days transfer this Purchase
Warrant on the books of the Company and shall execute and deliver a
new Purchase Warrant or Purchase Warrants of like tenor to the
appropriate assignee(s) expressly evidencing the right to purchase
the aggregate number of Shares purchasable hereunder or such
portion of such number as shall be contemplated by any such
assignment.
3.2 Restrictions
Imposed by the Act. The securities evidenced by this
Purchase Warrant shall not be transferred unless and until: (i) if
required by applicable law, the Company has received the opinion of
counsel for the Company that the securities may be transferred
pursuant to an exemption from registration under the Act and
applicable state securities laws, or (ii) a registration statement
or a post-effective amendment to the Registration Statement
relating to the offer and sale of such securities has been filed by
the Company and declared effective by the U.S. Securities and
Exchange Commission (the ”Commission”) and compliance with
applicable state securities law has been established.
4.
Piggyback Registration
Rights.
4.1
Grant of Right. Whenever the
Company proposes to register any shares of its common stock under
the Act (other than (i) a registration effected solely to implement
an employee benefit plan or a transaction to which Rule 145 of the
Act is applicable, or (ii) a registration statement on Form S-4,
S-8 or any successor form thereto or another form not available for
registering the Shares issuable upon exercise of this Purchase
Warrant for sale to the public, whether for its own account or for
the account of one or more stockholders of the Company (a
“Piggyback Registration”), the Company shall give
prompt written notice (in any event no later than ten (10) Business
Days prior to the filing of such registration statement) to the
Holder of the Company’s intention to effect such a
registration and, subject to the remaining provisions of this
Section 4.1, shall include in such registration such number of
Shares underlying this Purchase Warrant (the “Registrable Securities”) that the
Holders have (within ten (10) Business Days of the respective
Holder’s receipt of such notice) requested in writing
(including such number) to be included within such registration. If
a Piggyback Registration is an underwritten offering and the
managing underwriter advises the Company that it has determined in
good faith that marketing factors require a limit on the number of
shares of common stock to be included in such registration,
including all Shares issuable upon exercise of this Purchase
Warrant (if the Holder has elected to include such shares in such
Piggyback Registration) and all other shares of common stock
proposed to be included in such underwritten offering, the Company
shall include in such registration (i) first, the number of shares
of common stock that the Company proposes to sell and (ii) second,
the number of shares of common stock, if any, requested to be
included therein by selling stockholders (including the Holder)
allocated pro rata among all such persons on the basis of the
number of shares of common stock then owned by each such person. If
any Piggyback Registration is initiated as a primary underwritten
offering on behalf of the Company, the Company shall select the
investment banking firm or firms to act as the managing underwriter
or underwriters in connection with such offering. Notwithstanding
anything to the contrary, the obligations of the Company pursuant
to this Section 4.1 shall terminate on the earlier of (i) the third
anniversary of the Effective Date and (ii) the date that Rule 144
would allow the Holder to sell its Registrable Securities during
any ninety (90) day period, and shall not be applicable so long as
the Company’s Registration Statement on Form S-1 (No.
333-235693 covering the Registable Securities remains effective at
such time.
4.2 Indemnification.
The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such Holders 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 reasonable
attorneys’ fees and other out-of-pocket 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 but only to the same extent and with the same effect as
the provisions pursuant to which the Company has agreed to
indemnify Aegis contained in the Underwriting Agreement between
Aegis and the Company, dated as of [●], 2019. The Holder(s)
of the Registrable Securities to be sold pursuant to such
registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, against all
loss, claim, damage, expense or liability (including all reasonable
attorneys’ fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of
such Holders, or their successors or assigns, in writing, for
specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in the
Underwriting Agreement pursuant to which Aegis has agreed to
indemnify the Company.
4.3 Exercise
of Purchase Warrants. Nothing contained in this Purchase
Warrant shall be construed as requiring the Holder(s) to exercise
their Purchase Warrants prior to or after the initial filing of any
registration statement or the effectiveness thereof.
4.4 Documents
Delivered to Holders. The Company shall deliver promptly to
each Holder participating in the offering requesting the
correspondence and memoranda described below, copies of all
correspondence between the Commission and the Company, its counsel
or auditors and all memoranda relating to discussions with the
Commission or its staff with respect to the registration statement
and permit each Holder and underwriter to do such 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 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, during normal
business hours, as any such Holder shall reasonably
request.
4.5 Underwriting
Agreement. The Holders shall be parties to any underwriting
agreement relating to a Piggyback Registration. Such Holders shall
not be required to make any representations or warranties to or
agreements with the Company or the underwriters except as they may
relate to such Holders, their Shares and the amount and nature of
their ownership thereof and their intended methods of
distribution.
4.6 Documents
to be Delivered by Holder(s). Each of the Holder(s)
participating in any of the foregoing offerings shall furnish to
the Company a completed and executed questionnaire provided by the
Company requesting information customarily sought of selling
security holders.
4.7 Damages.
Should the Company fail to comply with such provisions, the
Holder(s) shall, in addition to any other legal or other relief
available to the Holder(s), be entitled to obtain specific
performance or other equitable (including injunctive) relief
against the threatened breach of such provisions or the
continuation of any such breach, without the necessity of proving
actual damages and without the necessity of posting bond or other
security.
5.
New Purchase Warrants to be
Issued.
5.1 Partial
Exercise or Transfer. Subject to the restrictions in Section
3 hereof, this Purchase Warrant may be exercised or assigned in
whole or in part. In the event of the exercise or assignment hereof
in part only, upon surrender of this Purchase Warrant for
cancellation, together with the duly executed exercise or
assignment form and funds sufficient to pay any Exercise Price
and/or transfer tax if exercised pursuant to Section 2.1 hereto,
the Company shall cause to be delivered to the Holder without
charge a new Purchase Warrant of like tenor to this Purchase
Warrant in the name of the Holder evidencing the right of the
Holder to purchase the number of Shares purchasable hereunder as to
which this Purchase Warrant has not been exercised or
assigned.
5.2 Lost
Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of
this Purchase Warrant and of reasonably satisfactory
indemnification or the posting of a bond, determined in the sole
discretion of the Company, the Company shall execute and deliver a
new Purchase Warrant of like tenor and date. Any such new Purchase
Warrant executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute a substitute contractual
obligation on the part of the Company.
6.1 Adjustments
to Exercise Price and Number of Securities. The Exercise
Price and the number of Shares underlying the Purchase Warrant
shall be subject to adjustment from time to time as hereinafter set
forth:
6.1.1 Share
Dividends; Split Ups. If, after the date hereof, and subject
to the provisions of Section 6.3 below, the number of outstanding
Shares is increased by a stock dividend payable in Shares or by a
split up of Shares or other similar event, then, on the effective
day thereof, the number of Shares purchasable hereunder shall be
increased in proportion to such increase in outstanding Shares, and
the Exercise Price shall be proportionately decreased.
6.1.2 Aggregation
of Shares. If, after the date hereof, and subject to the
provisions of Section 6.3 below, the number of outstanding Shares
is decreased by a consolidation, combination or reclassification of
Shares or other similar event, then, on the effective date thereof,
the number of Shares purchasable hereunder shall be decreased in
proportion to such decrease in outstanding Shares, and the Exercise
Price shall be proportionately increased.
6.1.3 Replacement
of Securities upon Reorganization, etc. In case of any
reclassification or reorganization of the outstanding Shares other
than a change covered by Section 6.1.1 or 6.1.2 hereof or that
solely affects the par value of such Shares, or in the case of any
share reconstruction or amalgamation or consolidation or merger of
the Company with or into another corporation (other than a
consolidation or share reconstruction or amalgamation or merger in
which the Company is the continuing corporation and that does not
result in any reclassification or reorganization of the outstanding
Shares), or in the case of any sale or conveyance to another
corporation or entity of the property of the Company as an entirety
or substantially as an entirety in connection with which the
Company is dissolved, the Holder of this Purchase Warrant shall
have the right thereafter (until the expiration of the right of
exercise of this Purchase Warrant) to receive upon the exercise
hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of
stock or other securities or property (including cash) receivable
upon such reclassification, reorganization, share reconstruction or
amalgamation, or consolidation, or upon a dissolution following any
such sale or transfer, by a Holder of the number of Shares of the
Company obtainable upon exercise of this Purchase Warrant
immediately prior to such event; and if any reclassification also
results in a change in Shares covered by Section 6.1.1 or 6.1.2,
then such adjustment shall be made pursuant to Sections 6.1.1,
6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3
shall similarly apply to successive reclassifications,
reorganizations, share reconstructions or amalgamations, or
consolidations, sales or other transfers.
6.1.4 Changes
in Form of Purchase Warrant. This form of Purchase Warrant
need not be changed because of any change pursuant to this Section
6.1, and Purchase Warrants issued after such change may state the
same Exercise Price and the same number of Shares as are stated in
the Purchase Warrants initially issued pursuant to this Agreement.
The acceptance by any Holder of the issuance of new Purchase
Warrants reflecting a required or permissive change shall not be
deemed to waive any rights to an adjustment occurring after the
Commencement Date or the computation thereof.
6.2
Substitute Purchase
Warrant. In case of any consolidation of the Company with,
or share reconstruction or amalgamation or merger of the Company
with or into, another corporation (other than a consolidation or
share reconstruction or amalgamation or merger which does not
result in any reclassification or change of the outstanding
Shares), the corporation formed by such consolidation or share
reconstruction or amalgamation shall execute and deliver to the
Holder a supplemental Purchase Warrant providing that the holder of
each Purchase Warrant then outstanding or to be outstanding shall
have the right thereafter (until the stated expiration of such
Purchase Warrant) to receive, upon exercise of such Purchase
Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or share
reconstruction or amalgamation, by a holder of the number of Shares
of the Company for which such Purchase Warrant might have been
exercised immediately prior to such consolidation, share
reconstruction or amalgamation or merger, sale or transfer. Such
supplemental Purchase Warrant shall provide for adjustments which
shall be identical to the adjustments provided for in this Section
6. The above provision of this Section shall similarly apply to
successive consolidations or share reconstructions or amalgamations
or mergers.
6.3
Elimination of Fractional
Interests. The Company shall not be required to issue
certificates representing fractions of Shares upon the exercise of
the Purchase Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any fractional interests, it being the intent
of the parties that all fractional interests shall be eliminated by
rounding any fraction up or down, as the case may be, to the
nearest whole number of Shares or other securities, properties or
rights.
7.
Reservation. The
Company shall at all times reserve and keep available out of its
authorized Shares, solely for the purpose of issuance upon exercise
of the Purchase Warrants, such number of Shares or other
securities, properties or rights as shall be issuable upon the
exercise thereof. The Company covenants and agrees that, upon
exercise of the Purchase Warrants and payment of the Exercise Price
therefor, in accordance with the terms hereby, all Shares and other
securities issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable and not subject to preemptive
rights of any shareholder.
8.
Certain Notice
Requirements.
8.1 Holder’s
Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to
receive notice as a shareholder 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 Purchase Warrants and their exercise, any of the
events described in Section 8.2 shall occur, then, in one or more
of said events, the Company shall deliver to each Holder a copy of
each notice relating to such events given to the other shareholders
of the Company at the same time and in the same manner that such
notice is given to the shareholders.
8.2 Events
Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the
following events: (i) if the Company shall take a record of the
holders of its Shares for the purpose of entitling them to receive
a dividend or distribution payable otherwise than in cash, or a
cash dividend or distribution payable otherwise than out of
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the
Company shall offer to all the holders of its Shares 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 therefor.
8.3 Notice
of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to
Section 6 hereof, send notice to the Holders of such event and
change (“Price
Notice”). The Price Notice shall describe the event
causing the change and the method of calculating same.
8.4 Transmittal
of Notices. All notices, requests, consents and other
communications under this Purchase Warrant shall be in writing and
shall be deemed to have been duly made when hand delivered, or
mailed by express mail or private courier service: (i) if to the
registered Holder of the Purchase Warrant, to the address of such
Holder as shown on the books of the Company, or (ii) if to the
Company, to following address or to such other address as the
Company may designate by notice to the Holders:
If to
the Holder:
Aegis
Capital Corp.,
810
Seventh Avenue, 18th Floor,
New
York, NY 10019,
Attention: Global
Equity Markets
with a
copy (which shall not constitute notice) to:
Manatt,
Phelps & Phillips, LLP
695
Town Center Drive, 14th Floor
Costa
Mesa, CA 92646
Attn:Thomas J.
Poletti, Esq.
Fax
No.: (714) 371-2550
If to
the Company:
HF
Enterprises Inc.
4800 Montgomery Lane, Suite
210
Bethesda, Maryland
20814
Attention: Chief
Executive Officer
with a
copy (which shall not constitute notice) to:
Sichenzia Ross
Ference LLP
1185
Avenue of the Americas, 37th Floor
New
York, New York 10036
Attn:
Darrin M. Ocasio, Esq.
Fax
No.: (212) 930-9700
9.1 Amendments.
The Company and Aegis may from time to time supplement or amend
this Purchase Warrant without the approval of any of the Holders in
order to cure any ambiguity, to correct or supplement any provision
contained herein that may be defective or inconsistent with any
other provisions herein, or to make any other provisions in regard
to matters or questions arising hereunder that the Company and
Aegus may deem necessary or desirable and that the Company and
Aegis deem shall not adversely affect the interest of the Holders.
All other modifications or amendments shall require the written
consent of and be signed by (i) the Company and (ii) the Holder(s)
of Purchase Warrants then-exercisable for at least a majority of
the Shares then-exercisable pursuant to all then-outstanding
Purchase Warrants.
9.2 Headings.
The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of
this Purchase Warrant.
9.3. Entire
Agreement. This Purchase Warrant (together with the other
agreements and documents being delivered pursuant to or in
connection with this Purchase Warrant) constitutes the entire
agreement of the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter
hereof.
9.4 Binding
Effect. This Purchase Warrant shall inure solely to the
benefit of and shall be binding upon, the Holder and the Company
and their permitted assignees, respective successors, legal
representative and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Purchase Warrant or any
provisions herein contained.
9.5 Governing
Law; Submission to Jurisdiction; Trial by Jury. This
Purchase Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of California, without giving
effect to conflict of laws principles thereof. The Company hereby
agrees that any action, proceeding or claim against it arising out
of, or relating in any way to this Purchase Warrant shall be
brought and enforced in the courts located in Los Angeles,
California, or in the United States District Court located in Los
Angeles, California, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives
any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum. Any process or summons to be
served upon the Company may be served by transmitting a copy
thereof by registered or certified mail, return receipt requested,
postage prepaid, addressed to it at the address set forth in
Section 8 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the Company in any action,
proceeding or claim. The Company and the Holder agree that the
prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable
attorneys’ fees and expenses relating to such action or
proceeding and/or incurred in connection with the preparation
therefor. The Company (on its behalf and, to the extent permitted
by applicable law, on behalf of its stockholders and affiliates)
and the Holder hereby irrevocably waive, to the fullest extent
permitted by applicable law, any and all right to trial by jury in
any legal proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby.
9.6 Waiver,
etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Purchase Warrant shall not be
deemed or construed to be a waiver of any such provision, nor to in
any way affect the validity of this Purchase Warrant or any
provision hereof or the right of the Company or any Holder to
thereafter enforce each and every provision of this Purchase
Warrant. No waiver of any breach, non-compliance or non-fulfillment
of any of the provisions of this Purchase Warrant shall be
effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver
is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any
other or subsequent breach, non-compliance or
non-fulfillment.
9.7 Exchange
Agreement. As a condition of the Holder’s receipt and
acceptance of this Purchase Warrant, Holder agrees that, at any
time prior to the complete exercise of this Purchase Warrant by
Holder, if the Company and Aegis enter into an agreement
(“Exchange
Agreement”) pursuant to which they agree that all
outstanding Purchase Warrants will be exchanged for securities or
cash or a combination of both, then Holder shall agree to such
exchange and become a party to the Exchange Agreement.
[Signature Page
Follows]
IN
WITNESS WHEREOF, the Company has caused this Purchase Warrant to be
signed by its duly authorized officer as of the 27th day of
November 2020.
HF
Enterprises Inc.
By:
_________________________________
Name:
Title:
[Form
to be used to exercise Purchase Warrant]
Date:
__________, 20___
The
undersigned hereby elects irrevocably to exercise the Purchase
Warrant for ______ shares of common stock, par value $0.001 per
share (the “Shares”), of HF Enterprises Inc.,
a Delaware corporation (the “Company”), and hereby makes
payment of $____ (at the rate of $____ per Share) in payment of the
Exercise Price pursuant thereto. Please issue the Shares as to
which this Purchase Warrant is exercised in accordance with the
instructions given below and, if applicable, a new Purchase Warrant
representing the number of Shares for which this Purchase Warrant
has not been exercised.
or
The
undersigned hereby elects irrevocably to convert its right to
purchase ___ Shares of the Company under the Purchase Warrant for
______ Shares, as determined in accordance with the following
formula:
|
|
X
|
=
|
Y(A-B)
|
|
|
A
|
|
|
Where,
|
|
|
|
|
|
X
|
=
|
The
number of Shares to be issued to Holder;
|
|
|
Y
|
=
|
The
number of Shares for which the Purchase Warrant is being
exercised;
|
|
|
A
|
=
|
The
fair market value of one Share which is equal to $_____;
and
|
|
|
B
|
=
|
The
Exercise Price which is equal to $______ per share
|
The
undersigned agrees and acknowledges that the calculation set forth
above is subject to confirmation by the Company and any
disagreement with respect to the calculation shall be resolved by
the Company in its sole discretion.
Please
issue the Shares as to which this Purchase Warrant is exercised in
accordance with the instructions given below and, if applicable, a
new Purchase Warrant representing the number of Shares for which
this Purchase Warrant has not been converted.
Signature
Signature
Guaranteed
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name:
(Print
in Block Letters)
Address:
NOTICE:
The signature to this form must correspond with the name as written
upon the face of the Purchase Warrant without alteration or
enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm
having membership on a registered national securities
exchange.
[Form
to be used to assign Purchase Warrant]
ASSIGNMENT
(To be
executed by the registered Holder to effect a transfer of the
within Purchase Warrant):
FOR
VALUE RECEIVED, __________________ does hereby sell, assign and
transfer unto the right to purchase shares of Common Stock, par
value $0.001 per share, of HF Enterprises Inc., a Delaware
corporation (the “Company”), evidenced by the
Purchase Warrant and does hereby authorize the Company to transfer
such right on the books of the Company.
Dated:
__________, 20__
NOTICE:
The signature to this form must correspond with the name as written
upon the face of the within Purchase Warrant without alteration or
enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm
having membership on a registered national securities
exchange.