ENERJEX RESOURCES, INC. PlacementAgency Agreement CommonStock, Preferred Stock, and Warrants
Exhibit 10.2
Execution Version
ENERJEX RESOURCES, INC.
Placement Agency Agreement
Common Stock, Preferred Stock, and Warrants
March 11, 2015
Northland Securities, Inc.
45 South Seventh Street, Suite 2000
Minneapolis, Minnesota 55402
Euro Pacific Capital, Inc.
1201 Dove Street, Suite 200
Newport Beach, CA 92660
Ladies and Gentlemen:
EnerJex Resources, Inc., a Nevada corporation (the “Company”), proposes, subject to the terms and conditions stated in this Placement Agency Agreement (this “Agreement”) and the Securities Purchase Agreement in the form of Exhibit A attached hereto (the “Securities Purchase Agreement”) entered into with the investors identified therein (each, an “Investor” and collectively, the “Investors”), to issue and sell up to an aggregate of $3,100,000 of (i) shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (the “Common Shares”), (ii) shares of the Company’s Series B Convertible Preferred Stock, par value $0.001 per share (the “B Preferred Stock” (the “Public Preferred Shares” and together with the Common Shares, the “Public Shares”), which are convertible into shares of Common Stock (the “Public Conversion Shares”), (iii) shares of the Company’s B Preferred Stock (the “Private Preferred Shares”), which are convertible into shares of Common Stock (the “Private Conversion Shares”) and (iv) warrants (the “Warrants”), which are exercisable for shares of the Common Stock (the “Warrant Shares” and together with the Public Shares, the Private Preferred Shares, the Public Conversion Shares, and Private Conversion Shares and the Warrants, the “Securities”). The Company hereby confirms its agreement with Northland Securities, Inc. (“Northland” and Euro Pacific Capital, Inc. (“Euro Pacific”, and together with Northland the “Placement Agents”) as set forth below. The Public Shares are more fully described in the Prospectus (as defined below).
Execution Version
The Company has prepared and filed, in accordance with the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations thereunder, with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (file number 333-199030), including a prospectus, relating to the Public Shares, which registration statement and prospectus incorporate or are deemed to incorporate by reference documents that the Company has filed, or will file, with the Commission in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder. The registration statement as amended at the time it became or becomes effective for purposes of Section 11 of the Securities Act, including the documents filed as part thereof and information contained or incorporated by reference in the prospectus or otherwise deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A or Rule 430B under the Securities Act, is hereinafter referred to as the “Registration Statement.” If the Company files an abbreviated registration statement to register additional shares of Common Stock or Preferred Stock pursuant to Rule 462(b) under the Securities Act (the “Rule 462 Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement. The Company has also filed with, or transmitted for filing to, or shall promptly after the date of this Agreement file with or transmit for filing to, the Commission a final prospectus supplement (in the form first used to confirm sales of the Shares, the “Prospectus Supplement”) pursuant to Rule 424 under the Securities Act. The term “Base Prospectus” means the prospectus dated February 20, 2015, relating to the Public Shares, in the form in which it has most recently been filed with the Commission as part of the Registration Statement on or prior to the date of this Agreement. The term “Prospectus” means the Base Prospectus as supplemented by the Prospectus Supplement. The term “Preliminary Prospectus” means any preliminary form of Prospectus.
For purposes of this Agreement, “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act; “Time of Sale Prospectus” means the Base Prospectus and the Preliminary Prospectus, and other information conveyed to Investors at or prior to the Time of Sale as set forth in Schedule I hereto; “Time of Sale” means the time the Shares are sold to the Investors on the date of the Securities Purchase Agreement for the Shares; and “road show” has the meaning set forth in Rule 433(h)(4) under the Securities Act. As used herein, the terms “Registration Statement,” “Base Prospectus,” “Preliminary Prospectus,” “Time of Sale Prospectus” and “Prospectus” shall include the documents, if any, deemed to be incorporated by reference therein, including, unless the context otherwise requires, the documents, if any, filed as exhibits to such incorporated documents. The terms “supplement,” “amendment” and “amend” as used herein with respect to the Registration Statement, the Base Prospectus, the Time of Sale Prospectus, any Preliminary Prospectus, the Prospectus or any free writing prospectus shall include all documents subsequently filed by the Company with the Commission pursuant to the Exchange Act that are deemed to be incorporated by reference therein.
1. Agreement to Act as Placement Agents; Delivery and Payment. On the basis of the representations, warranties and agreements of the Company herein contained, and subject to the terms and conditions set forth in this Agreement:
(a) The Company hereby engages the Placement Agents, as the exclusive agents of the Company, to, on a reasonable best efforts basis, solicit offers to purchase Securities from the Company on the terms and subject to the conditions set forth in the Securities Purchase Agreement and Prospectus (as defined below). The Placement Agents shall use reasonable best efforts to assist the Company in obtaining performance by each Investor whose offer to purchase the Securities was solicited by such Placement Agents and accepted by the Company, but the Placement Agents shall not, except as otherwise provided in this Agreement, have any liability to the Company in the event any such purchase is not consummated for any reason. In connection with its reasonable best efforts to solicit offers to purchase the Securities, the Placement Agents shall only communicate information regarding the Company to potential purchasers of the Securities that is consistent with the information contained in the Prospectus. Under no circumstances will the Placement Agents or any of their affiliates be obligated to underwrite or purchase any of the Securities for its own account or otherwise provide any financing. The Placement Agents shall act solely as the Company’s agent and not as principal. The Placement Agents have no authority to bind the Company with respect to any prospective offer to purchase Securities, and the Company shall have the sole right to accept offers to purchase Securities and may reject any such offer, in whole or in part.
Execution Version
(b) As compensation for services rendered by the Placement Agents hereunder, on the Closing Date (as defined below), the Company shall pay or cause to be paid to the Placement Agents by wire transfer of immediately available funds to an account or accounts designated by the Placement Agents, an aggregate amount equal to 8.0% of the gross proceeds received by the Company from the sale of the Securities to Investors (the “Agency Fees”). Such amount may be deducted from the payment made by the Investor(s) to the Company and paid directly to the Placement Agents on the Closing Date. In addition, for the consideration of $50 at the Closing Date, the Company will sell to the Placement Agents, a warrant to purchase an aggregate number of shares of the Common Stock in an amount equal to 6.0% of the gross proceeds from the sale of the Securities on the Closing Date divided by $1.75 (the “Agent Warrants”). The Agent Warrants will be in the form attached hereto as Exhibit C.
(c) (i)The Common Shares are being sold to the Investors at a price of $1.75 per share as set forth in the Prospectus (defined below); (ii) the Public Preferred Shares are being sold to the Investors at a price of $1.75 per share as set forth in the Prospectus (defined below); and (iii) the Private Preferred Shares and Warrants are being sold together to the Investors at a price of $1.75 per share of the Private Preferred Shares (together, the “Purchase Price”). The purchases of Securities by the Investors shall be evidenced by the execution of the Securities Purchase Agreement by each of the parties thereto in the form attached hereto as Exhibit A.
(d) Prior to the earlier of (i) the date on which this Agreement is terminated and (ii) the Closing Date, the Company shall not, without the prior written consent of the Placement Agents, solicit or accept offers to purchase shares of the Common Stock (other than pursuant to the exercise of options or warrants to purchase shares of Common Stock that are outstanding at the date hereof or are granted in the ordinary course to directors, officers or employees of the Company under the Company’s equity incentive plans) or Preferred Stock otherwise than through the Placement Agents in accordance herewith or any other agreements with the Placement Agents.
(e) No Securities which the Company has agreed to sell pursuant to this Agreement and the Securities Purchase Agreement shall be deemed to have been purchased and paid for, or sold by the Company, until such Securities shall have been delivered to the Investor purchasing such Securities against payment therefor by such Investor. If the Company shall default in its obligations to deliver Securities to an Investor whose offer it has accepted, the Company shall indemnify and hold the Placement Agents harmless against any loss, claim, damage or liability directly or indirectly arising from or as a result of the default by the Company in accordance with the procedures set forth in Section 7(c) hereof.
Execution Version
(f) Payment of the purchase price for, and delivery of the Securities shall be made at a closing (the “Closing”) at the location, time and date as the Placement Agents and the Company determine pursuant to Rule 15c6-1(a) under the Exchange Act (such date of payment and delivery being herein referred to as the “Closing Date”). Unless otherwise specified in the Securities Purchase Agreement, the Securities will be settled through the facilities of The Depository Trust Company’s DWAC system. Subject to the terms hereof, payment of the purchase price for the Securities shall be made to the Company in the manner set forth below by Federal Funds wire transfer, against delivery of the Securities to such persons and shall be registered in the name or names and shall be in such denominations as the Placement Agents may request at least one business day before the Closing Date. Payment of the purchase price for the Securities to be purchased by Investors shall be made by such Investors directly to the Company. Subject to the terms and conditions hereof, on the Closing Date, the Company shall pay to Placement Agents the amount of expenses for which the Placement Agents are entitled to reimbursement pursuant hereto. At least one day prior to the Closing Date, the Placement Agents shall submit to the Company its bona fide estimate of the amount of expenses for which it is entitled to reimbursement pursuant hereto. As soon as reasonably practicable after the Closing Date, the Placement Agents shall submit to the Company its expense reimbursement invoice and the Company or the Placement Agents, as applicable, shall make any necessary reconciling payment(s) within 10 days of receipt of such invoices.
2. Representations and Warranties of the Company. The Company represents and warrants to the Placement Agents as of the date hereof and as of the Closing Date, and agrees with the Placement Agents, as follows:
(a) The Registration Statement has become effective under the Securities Act; and no stop order suspending the effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus or the Prospectus is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. The shares of Common Stock and Preferred Stock outstanding prior to the issuance of the Securities to be sold by the Company have been duly authorized, are validly issued, fully paid and non-assessable, have been issued in compliance with applicable securities laws and were not issued in violation of any preemptive or similar rights. All prior offers and sales of securities by the Company were made in compliance in all material respects with the Securities Act and all other applicable laws and regulations.
(b) The Base Prospectus and any Preliminary Prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the rules and regulations thereunder (including, without limitation, Rule 430B(a) or 430A(b)).
Execution Version
(c) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Time of Sale Prospectus or the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder; (ii) each part of the Registration Statement, when such part became effective, did not contain and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) the Registration Statement, as of the date hereof, does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) the Registration Statement complies and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act; the conditions to the use of Form S-3 in connection with the offering and sale of the Public Shares as contemplated hereby have been satisfied; the Registration Statement meets, and the offering and sale of the Public Shares as contemplated hereby complies with, the requirements of Rule 415 under the Securities Act (including without limitation Rule 415(a)(5)); (v) at no time during the period that begins on February 20, 2015, and ends immediately prior to the execution of this Agreement did the Base Prospectus or any Preliminary Prospectus contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (vi) the Time of Sale Prospectus does not, and at the Time of Sale and at the Closing Date, the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (vii) each free writing prospectus, if any, does not conflict with the information contained in the Registration Statement, the Time of Sale Prospectus or the Prospectus; (viii) each road show, when considered together with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (ix) the Prospectus, as of the date it is filed with the Commission pursuant to Rule 424 and at the Closing Date, will comply in all material respects with the Securities Act (including without limitation Section 10(a) of the Securities Act) and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties set forth in this Section 2(c) do not apply to statements or omissions in the Registration Statement, the Time of Sale Prospectus, any Preliminary Prospectus, any free writing prospectus, any road show or the Prospectus or any amendments or supplements thereto based upon information relating to the Placement Agents furnished to the Company in writing by the Placement Agents expressly for use therein, it being agreed that the only information furnished by the Placement Agents to the Company expressly for use therein is the “Placement Agent Information” described in Section 8 below.
(d) The Company has not and will not utilize any Issuer General Free Writing Prospectus(es) nor any individual Issuer Limited-Use Free Writing Prospectus in connection with the offer and sale of the Securities. “Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 under the Act, relating to the Securities that (A) is required to be filed with the Commission by the Company, or (B) is exempt from filing pursuant to Rule 433(d)(5)(i) under the Securities Act because it contains a description of the Securities or of the offering that does not reflect the final terms or is a “bona fide electronic roadshow,” as defined in Rule 433 under the Securities Act, 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) under the Act. “Issuer General Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors. “Issuer Limited-Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Free Writing Prospectus.
Execution Version
(e) The Company was, at the time the Registration Statement was initially filed and when it became effective, and is, eligible to use Form S-3 to register the offering of the Public Shares contemplated hereby. The Company was not an “ineligible issuer” (as defined in Rule 405 under the Securities Act) nor an “excluded issuer” (as defined in Rule 164 under the Securities Act) as of the eligibility determination date for purposes of Rules 164 and 433 under the Securities Act with respect to the offering of the Public Shares contemplated by the Registration Statement. The conditions for use of Form S-3, set forth in the General Instructions thereto, have been satisfied.
(f) Shares of Common Stock are (and the Common Shares, the Public Conversion Shares, the Private Conversion Shares, the Warrant Shares, and the Agent Warrant Shares (as defined below) will be) listed for quotation and admitted for trading on the NYSE MKT LLC (“NYSE”), and the Company has not received any notice from NYSE regarding the delisting of such shares from NYSE (except for such notices as have been fully resolved). Notice of issuance of the Public Shares has been duly submitted to NYSE. To the Company’s knowledge, there are no affiliations or associations between (i) any member of the Financial Industry Regulatory Authority (“FINRA”) and (ii) the Company or any of the Company’s officers, directors or 5% or greater security holders or any beneficial owner of the Company’s unregistered equity securities that were acquired at any time on or after the 180th day immediately preceding the date the Registration Statement was initially filed with the Commission, except as disclosed in the Registration Statement (excluding the exhibits thereto), the Time of Sale Prospectus and the Prospectus.
(g) All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement has been taken. The Company has the requisite corporate power to enter into this Agreement and carry out and perform its obligations under the terms of this Agreement. At the closing of the offering contemplated hereby (the “Closing”), the Company will have the requisite corporate power to issue and sell the Securities, the Agent Warrants, and the Common Stock issuable upon the exercise of the Agent Warrants (the “Agent Warrant Shares”). This Agreement has been duly authorized, executed and delivered by the Company and, upon due execution and delivery by the Placement Agents, this Agreement will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by equitable principles or to the extent the indemnification and contribution provisions may be limited by applicable federal or state securities laws.
Execution Version
(h) The execution, delivery and performance of this Agreement, the issuance and sale of the Securities to be sold by the Company in the offering contemplated hereby, the issuance of the Agent Warrants, the issuance of the Agent Warrant Shares, and the consummation of the actions contemplated by this Agreement (which for all purposes herein shall include the offering contemplated hereby, the sale of the Agent Warrants and the issuance of the Agent Warrant Shares) will not (a) result in any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice: (i) any provision of the Company’s or its subsidiaries certificate of incorporation or bylaws (or similar governing documents) as in effect on the date hereof or the date of the Closing (the “Closing Date”); (ii) any provision of any judgment, arbitration ruling, decree or order to which either of the Company or its subsidiaries are a party or by which any of them is bound; (iii) any bond, debenture, note or other evidence of indebtedness, or any lease, contract, mortgage, indenture, deed of trust, loan agreement, joint venture or other agreement, instrument or commitment to which the Company or its subsidiaries are a party or by which any of them or their respective properties are bound; or (iv) any statute, rule, law or governmental regulation applicable to the Company or its subsidiaries; or (b) result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the properties or assets of the Company or its subsidiaries or any acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or any indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or its subsidiaries are a party or by which either of them is bound or to which any of the property or assets of the Company or its subsidiaries are subject. No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental body is required for the execution and delivery of this Agreement by the Company and the valid issuance or sale of the Securities by the Company pursuant to this Agreement, other than such as have been made or obtained and that remain in full force and effect.
(i) The form of certificate of incorporation and bylaws of the Company attached as an exhibit to the Company’s filings with the Securities and Exchange Commission (the “SEC”), are true, correct and complete copies of the certificate of incorporation and bylaws of the Company, as in effect on the date hereof.
(j) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to carry on its business as now conducted. Each of the Company and its subsidiaries has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted, as presently proposed to be conducted, and is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on the Company’s and its subsidiaries’ business, financial condition, properties, operations, prospects or assets or its ability to perform its obligations under this Agreement (a “Material Adverse Effect”).
Execution Version
(k) The consolidated financial statements contained in each report, registration statement and definitive proxy statement filed by the Company with the SEC (all documents filed with the SEC, the “Company SEC Documents”): (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) the information contained therein as of the respective dates thereof was accurate and complete and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading; (iii) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered, except as may be indicated in the notes to such financial statements and (in the case of unaudited statements) as permitted by Form 10-Q of the SEC, and except that unaudited financial statements may not contain footnotes and are subject to year-end audit adjustments; and (iv) fairly present the consolidated financial position of the Company and its subsidiaries as of the respective dates thereof and the consolidated results of operations, cash flows and the changes in stockholders’ equity of the Company and its subsidiaries for the periods covered thereby. Except as set forth in the financial statements included in the Company SEC Documents, neither the Company nor its subsidiaries has any liabilities, contingent or otherwise, other than liabilities incurred in the ordinary course of business subsequent to September 30, 2014, and liabilities of the type not required under generally accepted accounting principles to be reflected in such financial statements. Such liabilities incurred subsequent to September 30, 2014, are not, in the aggregate, material to the financial condition or operating results of the Company and its subsidiaries, taken as a whole. The financial statements included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus and the Prospectus, together with the related notes and schedules, have been prepared in compliance with the requirements of the Securities Act and Exchange Act; all pro forma financial statements or data included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus and the Prospectus, if any, comply with the requirements of the Securities Act and the Exchange Act, and the assumptions used in the preparation of such pro forma financial statements and data are reasonable, the pro forma adjustments used therein are appropriate to give effect to the transactions or circumstances described therein and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements and data; the other financial and statistical data contained or incorporated by reference in the Registration Statement, the Time of Sale Prospectus and the Prospectus are accurately and fairly presented and prepared on a basis consistent with the financial statements and books and records of the Company; there are no financial statements (historical or pro forma) that are required to be included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus or the Prospectus that are not included or incorporated by reference as required; the Company does not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not described in the Time of Sale Prospectus and the Prospectus or in documents incorporated therein by reference, other than trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice; and all disclosures contained or incorporated by reference in the Time of Sale Prospectus and the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G under the Exchange Act and Item 10 of Regulation S-K under the Securities Act, to the extent applicable. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto.
(l) All statistical or market-related data included or incorporated by reference in the Time of Sale Prospectus, the Prospectus and any free writing prospectus are based on or derived from sources that the Company reasonably believes to be reliable and accurate, and the Company has obtained the written consent to the use of such data from such sources to the extent required. Each “forward-looking statement” (within the meaning of Section 27A of the Securities Act or Section 21E of the Exchange Act) contained or incorporated by reference in the Registration Statement, the Time of Sale Prospectus, the Prospectus and any free writing prospectus has been made or reaffirmed with a reasonable basis and in good faith.
Execution Version
(m) The authorized capital stock of the Company consists of (i) 250,000,000 shares of Common Stock, of which (A) 7,643,114 shares were issued and outstanding as of the date of this Agreement, and (B) 715,488 were reserved for issuance upon the exercise or conversion, as the case may be, of outstanding options, warrants or other convertible securities as of the date of this Agreement; and (ii) 25,000,000 shares of preferred stock, of which (A) 2,000,000 were designated as "10% Series A Cumulative Redeemable Perpetual Preferred Stock," of which 751,815 shares are issued and outstanding as of the date of this Agreement, and none are reserved for issuance upon the exercise or conversion, as the case may be, of outstanding options, warrants or other convertible securities, and (B) 1,764 will be designated as "Series B Convertible Preferred Stock," at the Closing Date, none of which are issued or outstanding or reserved for issuance upon the exercise or conversion, as the case may be, of outstanding options, warrants or other convertible securities. All issued and outstanding shares of Common Stock and Preferred Stock have been duly authorized and validly issued, are fully paid and nonassessable, were not issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities, and, except as disclosed in the Company SEC Documents, have been issued and sold in compliance with the registration requirements of federal and state securities laws or the applicable statutes of limitation have expired. Except as set forth in the Securities Purchase Agreement or in the Company SEC Documents, there are no (i) outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any unissued shares of capital stock or other equity interest in the Company, or any contract, commitment, agreement, understanding or arrangement of any kind to which the Company or its subsidiaries is a party and relating to the issuance or sale of any capital stock or convertible or exchangeable security of the Company or its subsidiaries; or (ii) obligations of the Company to purchase, redeem or otherwise acquire any of its outstanding capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof. There are no anti-dilution or price adjustment provisions, co-sale rights, registration rights, rights of first refusal or other similar rights contained in the terms governing any outstanding security of the Company that will be triggered by the issuance of the Securities.
(n) Except as set forth in the Company SEC Documents, the Company does not presently own or control, directly or indirectly, and has no stock or other interest as owner or principal in, any other corporation or partnership, joint venture, association or other business venture or entity (each a “subsidiary”). The Company’s subsidiaries are duly incorporated or organized, validly existing and in good standing under the laws of their jurisdiction of incorporation or organization and have all requisite power and authority to carry on their business as now conducted. Such subsidiaries are duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on their respective business or properties. All of the outstanding capital stock or other voting securities of such subsidiaries are owned by the Company, directly or indirectly, free and clear of any liens, claims, or encumbrances.
Execution Version
(o) The Public Shares, the Private Preferred Shares, the Warrants, and the Agent Warrants are duly authorized and, when issued, sold, delivered and paid for in accordance with the terms of the Securities Purchase Agreement, such securities will be duly and validly authorized and issued, fully paid and nonassessable, free from all taxes, liens, claims, encumbrances and charges with respect to the issue thereof; provided, however, that the Securities may be subject to restrictions on transfer under state and/or federal securities laws or as otherwise set forth herein. The issuance, sale and delivery of the Securities in accordance with the terms hereof or of the Securities Purchase Agreement or the Agent Warrants (as the case may be) will not be subject to preemptive rights of stockholders of the Company. The Agent Warrant Shares, the Warrant Shares, the Public Conversion Shares and the Private Conversion Shares have been duly reserved for issuance upon exercise of the Agent Warrants, the Warrants, the Public Preferred Shares and the Private Preferred Shares, respectively, and when issued in accordance therewith will be validly issued, fully paid and nonassessable, free from all taxes, liens, claims, encumbrances and charges with respect to the issue thereof; provided, however, that the Securities may be subject to restrictions on transfer under state and/or federal securities laws or as otherwise set forth herein.
(p) The issuance of the Agent Warrants and the Agent Warrant Shares upon exercise of the Agent Warrants (assuming no change in applicable law prior to the date the Agent Warrant Shares are issued), are and will be exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 (the “Securities Act”) and have been or will be registered or qualified (or are or will be exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Agent Warrants. Upon the exercise of the Agent Warrants pursuant to their terms, the Agent Warrant Shares will be listed on the NYSE (the “Principal Market”). Other than the Company SEC Documents, the Company has not distributed and will not distribute prior to the Closing any offering material in connection with the offering and sale of the Securities, unless such offering materials are provided to the Agent prior to or simultaneously with such delivery to the offerees of the Securities.
(q) Except as set forth in the Company SEC Documents, there is no action, suit, proceeding nor investigation pending or, to the Company’s knowledge, currently threatened against the Company or its subsidiaries that (a) if adversely determined would reasonably be expected to have a Material Adverse Effect on the Company or its subsidiaries or (b) would be required to be disclosed in the Company’s Annual Report on Form 10-K under the requirements of Item 103 of Regulation S-K. The foregoing includes, without limitation, any action, suit, proceeding or investigation, pending or threatened, that questions the validity of this Agreement or the right of the Company to enter into such Agreement and perform its obligations hereunder. Neither the Company nor its subsidiaries are subject to any injunction, judgment, decree or order of any court, regulatory body, arbitral panel, administrative agency or other government body.
(r) No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, local or provincial governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreements.
Execution Version
(s) Except for any fees payable to the Placement Agents, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based on arrangements made by the Company.
(t) Neither the Company nor its subsidiaries are in violation of its certificate of incorporation or bylaws (or similar governing documents). Neither the Company nor its subsidiaries have been advised or have reason to believe, that it is not conducting its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, including, without limitation, all applicable local, state and federal environmental laws and regulations; except where failure to be so in compliance would not have a Material Adverse Effect. Each of the Company and its subsidiaries has all necessary franchises, licenses, certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department or body that are currently necessary for the operation of the business of the Company and its subsidiaries as currently conducted, except where the failure to currently possess such franchises, licenses, certificates and other authorizations would not reasonably be expected to have a Material Adverse Effect.
(u) Except as disclosed in the Company SEC Documents, since September 30, 2014, there has not been any change that has had a Material Adverse Effect. Since September 30, 2014, the Company has not declared or paid any dividend or distribution on its capital stock.
(v) Except for matters which are not reasonably likely to have a Material Adverse Effect and those contracts that are substantially or fully performed or expired by their terms, the contracts listed as exhibits to or described in the Company SEC Documents that are material to the Company or its subsidiaries and all amendments thereto, are in full force and effect on the date hereof, and neither the Company nor, to the Company’s knowledge, any other party to such contracts is in breach of or default under any of such contracts. Neither the Company nor its subsidiaries has any contracts or agreements that would constitute a material contract as such term is defined in Item 601(b)(10) of Regulation S-K, except for such contracts or agreements that are filed as exhibits to or described in the Company SEC Documents.
(w) (i) The Company has ownership or license or legal right to use all patents, copyrights, trade secrets, know-how, trademarks, trade names, customer lists, designs, manufacturing or other processes, computer software, systems, data compilation, research results or other proprietary rights used in the business of the Company or its subsidiaries (collectively “Intellectual Property”). All of such patents, registered trademarks and registered copyrights have been duly registered in, filed in or issued by the United States Patent and Trademark Office, the United States Register of Copyrights or the corresponding offices of other jurisdictions and have been maintained and renewed in accordance with all applicable provisions of law and administrative regulations in the United States and all such jurisdictions.
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(ii) The Company believes it has taken all reasonable steps required in accordance with sound business practice and business judgment to establish and preserve its and its subsidiaries’ ownership of all material Intellectual Property with respect to their products and technology. To the knowledge of the Company, there is no infringement of the Intellectual Property by any third party.
(iii) To the knowledge of the Company, the present business, activities and products of the Company and its subsidiaries do not infringe any intellectual property of any other person. No proceeding charging the Company or its subsidiaries with infringement of any adversely held Intellectual Property has been filed and the Company is unaware of any facts which are reasonably likely to form a basis for any such proceeding.
(iv) No proceedings have been instituted or pending or, to the knowledge of the Company, threatened, which challenge the rights of the Company or its subsidiaries to the use of the Intellectual Property. The Intellectual Property owned by the Company and its subsidiaries, and to the knowledge of the Company, the Intellectual Property licensed to the Company and its subsidiaries, has not been adjudged invalid or unenforceable, in whole or in part. There is no pending or, to the knowledge of the Company, threatened proceeding by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which are reasonably likely to form a basis for any such claim. Each of the Company and its subsidiaries has the right to use, free and clear of material claims or rights of other persons, all of its customer lists, designs, computer software, systems, data compilations, and other information that are required for its products or its business as presently conducted. Neither the Company nor its subsidiaries is making unauthorized use of any confidential information or trade secrets of any person.
(v) The activities of any of the employees on behalf of the Company or of its subsidiaries do not violate any agreements or arrangements between such employees and third parties are related to confidential information or trade secrets of third parties or that restrict any such employee’s engagement in business activity of any nature. Each former and current employee or consultant of the Company or its subsidiaries is a party to a written contract with the Company or its subsidiaries that assigns to the Company or its subsidiaries all rights to all inventions, improvements, discoveries and information relating to the Company or its subsidiaries, except for any failure to so do as would not reasonably be expected to result in a Material Adverse Effect.
(vi) All licenses or other agreements under which (i) the Company or its subsidiaries employs rights in Intellectual Property, or (ii) the Company or its subsidiaries has granted rights to others in Intellectual Property owned or licensed by the Company or its subsidiaries are in full force and effect, and there is no default (and there exists no condition which, with the passage of time or otherwise, would constitute a default by the Company or such subsidiary) by the Company or its subsidiaries with respect thereto.
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(x) The Company has taken no action designed to, or likely to have the effect of, terminating the listing of the Common Stock (including the Common Shares, the Warrant Shares, the Public Conversion Shares, the Private Conversion Shares and the Agent Warrant Shares) on the Principal Market. The Company is and on the Closing Date will be in compliance with all of the then-applicable requirements for continued listing of the Common Stock on the Principal Market.
(y) Each of L.L. Bradford & Company, LLC and Weaver Martin & Samyn, LLC, who each expressed its opinion with respect to certain consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, have advised the Company that they are, and to the knowledge of the Company they are, independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder.
(z) The Company and its subsidiaries have filed all necessary federal, state, local and foreign income and franchise tax returns and have paid or accrued all taxes shown as due thereon, and the Company and its subsidiaries have no knowledge of a tax deficiency which has been or might be asserted or threatened against it by any taxing jurisdiction, other than any deficiency which the Company or its subsidiaries are contesting in good faith and with respect to which adequate reserves for payment have been established.
(aa) The Company and its subsidiaries maintain and will continue to maintain insurance of the types and in the amounts that the Company reasonably believes are adequate for its and its subsidiaries’ business, including, but not limited to, insurance covering all real and personal property owned or leased by the Company or its subsidiaries against theft, damage, destruction, acts of vandalism and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect.
(bb) On the Closing Date, all stock transfer or other taxes (other than income taxes) that are required to be paid in connection with the sale and transfer of the Securities and the Agent Warrants will be, or will have been, fully paid or provided for by the Company and the Company will have complied with all laws imposing such taxes.
(cc) The Company (including its subsidiaries) is not an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for an investment company, within the meaning of the Investment Company Act of 1940 and will not be deemed an “investment company” as a result of the transactions contemplated by the Securities Purchase Agreement.
(dd) To the knowledge of the Company, no transaction has occurred between or among the Company or any of its affiliates (including, without limitation, its subsidiaries), officers or directors or any affiliate or affiliates of any such affiliate officer or director that with the passage of time will be required to be disclosed pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (assuming the Company’s Common Stock and Preferred Stock was registered under the Exchange Act) other than those transactions that have already been so disclosed.
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(dd) The books, records and accounts of the Company and its subsidiaries accurately and fairly reflect, in reasonable detail, the transactions in, and dispositions of, the assets of, and the operations of, the Company and its subsidiaries.
(ee) The Company and its subsidiaries have established and maintain disclosure controls and procedures (as such term is defined in Rule 13a-15 under the Exchange Act), which (i) are designed to ensure that material information relating to the Company or its subsidiaries is made known to the Company’s principal executive officer and its principal financial officer by others within those entities particularly during the periods in which the periodic reports required under the Exchange Act are being prepared; and (ii) provide for the periodic evaluation of the effectiveness of such disclosure controls and procedures as of the end of the period covered by the Company’s most recent annual or quarterly report filed with the SEC.
Except as described in the Company SEC Documents, the Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. The Company and its subsidiaries maintain disclosure controls and procedures (as such term is defined in Rule 13a-15 under the Exchange Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files with or submits to the SEC is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed in to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. Except as described in the Company SEC Documents, the Company is not aware of (i) any significant deficiency in the design or operation of internal controls which could adversely affect the Company’s or its subsidiaries’ ability to record, process, summarize and report financial data or any material weaknesses in internal controls; or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s or its subsidiaries’ internal controls.
Since the date of the most recent evaluation of such disclosure controls and procedures, there have been no changes that have materially affected, or are reasonably likely to materially affect, the Company’s or its subsidiaries’ internal control over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses.
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Except as described in the Company SEC Documents, there are no material off-balance sheet arrangements (as defined in Item 303 of Regulation S-K), or any other relationships with unconsolidated entities (in which the Company or its control persons have an equity interest) that may have a material current or future effect on the Company’s or its subsidiaries’ financial condition, revenues or expenses, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
To the knowledge of the Company, except as described in the Company SEC Documents, the board of directors has not been informed, nor is any director of the Company aware, of (1) any significant deficiencies in the design or operation of the internal controls of the Company or its subsidiaries which could adversely affect the Company’s or its subsidiaries’ ability to record, process, summarize and report financial data or any material weakness in the Company’s or its subsidiaries’ internal controls; or (2) any fraud, whether or not material, that involves management or other employees of the Company or its subsidiaries who have a significant role in the Company’s or its subsidiaries’ internal controls.
(ff) Each of the Company, its subsidiaries, its affiliates and any of their respective officers, directors, supervisors, managers, agents, or employees, has not violated, its participation in the offering will not violate, and the Company has instituted and maintains policies and procedures designed to ensure continued compliance with, each of the following laws: (a) anti-bribery laws, including but not limited to, any applicable law, rule, or regulation of any locality, including but not limited to any law, rule, or regulation promulgated to implement the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed December 17, 1997, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other law, rule or regulation of similar purposes and scope, (b) anti-money laundering laws, including but not limited to, applicable federal, state, international, foreign or other laws, regulations or government guidance regarding anti-money laundering, including, without limitation, Title 18 US. Code section 1956 and 1957, the Patriot Act, the Bank Secrecy Act, and international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur, all as amended, and any Executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any orders or licenses issued thereunder or (c) laws and regulations imposing U.S. economic sanctions measures, including, but not limited to, the International Emergency Economic Powers Act, the Trading with the Enemy Act, the United Nations Participation Act and the Syria Accountability and Lebanese Sovereignty Act, all as amended, and any Executive Order, directive, or regulation pursuant to the authority of any of the foregoing, including the regulations of the United States Treasury Department set forth under 31 CFR, Subtitle B, Chapter V, as amended, or any orders or licenses issued thereunder. Neither the Company nor any director, officer, agent, employee or other person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or (iii) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
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(gg) The Company is in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.
(hh) Neither the Company nor its subsidiaries is a party to any collective bargaining agreement or employs any member of a union. The Company believes that its relations with its employees are good. No executive officer of the Company (as defined in Rule 501(f) of Regulation D under the Securities Act) has notified the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company. No executive officer of the Company, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters. The Company and its subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(ii) Each of the Company and its subsidiaries (i) is in compliance with any and all Environmental Laws (as hereinafter defined), (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business and (iii) is in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
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(jj) None of the Company, its subsidiaries or any executive officer of the Company (as defined in Rule 501(f) of Regulation D under the Securities Act) has taken and they will not take any action designed to or that might reasonably be expected to cause or result in an unlawful manipulation of the price of the Common Stock or Preferred Stock to facilitate the sale or resale of the Securities. The Company confirms that, to its knowledge, with the exception of the proposed sale of Securities contemplated in the Securities Purchase Agreement (as to which the Company makes no representation), neither it nor any other person acting on its behalf has provided any of the Potential Investors or their agent or counsel with any information that constitutes or might constitute material, non-public information. The Company understands and confirms that the Potential Investors shall be relying on the foregoing representations in effecting transactions in securities of the Company. All disclosures provided to the Potential Investors regarding the Company, its business and the transactions contemplated by the Securities Purchase Agreement, including the exhibits to the Securities Purchase Agreement and the Company SEC Documents, furnished by the Company are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) made by the Company or any of its officers or directors contained in any Company SEC Document or made available to the public generally since January 1, 2012, has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. Statistical, industry-related and market-related data included in the Company SEC Documents are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate in all material respects.
(kk) The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation or the laws of the jurisdiction of its formation which is or could become applicable to any Potential Investor as a result of the transactions contemplated by the Securities Purchase Agreement, including, without limitation, the Company’s issuance of the Securities and any Potential Investor’s ownership of the Securities. The Company has not adopted a stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or Preferred Stock or a change in control of the Company.
(ll) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Public Shares registered pursuant to the Registration Statement.
(mm) Subsequent to the respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) there has not occurred any material adverse change in or affecting the business, assets, general affairs, management, financial position, prospects, stockholders’ equity or results of operations of the Company (a “material adverse change”), or any development involving a prospective material adverse change, in the assets, business, condition (financial or otherwise), management, operations or earnings of the Company; (ii) the Company has not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction, other than trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice; (iii) the Company has not purchased any of its outstanding capital stock (except in connection with the payment of the exercise price of, or withholding taxes for, awards under the Company’s equity incentive plans), nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iv) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company, except in each case as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, respectively.
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(nn) The Company has good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by it that is material to the business of the Company, in each case free and clear of all liens, encumbrances and defects except such as are described in the Registration Statement, the Time of Sale Prospectus and the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company; and any real property and buildings held under lease by the Company are held by it under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company, in each case except as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus.
(oo) The Company possesses all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct its businesses, and the Company has not received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect.
(pp) Neither the Company nor any of its directors, officers, affiliates or controlling persons has taken, directly or indirectly, any action designed, or which has constituted or might reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
(qq) Except as described in the Company SEC Documents, there are no options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company or any subsidiary of the Company any shares of the capital stock of the Company or any subsidiary of the Company. The description of the Company’s stock option, stock bonus and other stock plans or arrangements (the “Company Stock Plans”), and the options (the “Options”) or other rights granted thereunder, set forth in the Company SEC Documents accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. Each grant of an Option (A) was duly authorized no later than the date on which the grant of such Option was by its terms to be effective by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto and (B) was made in accordance with the terms of the applicable Company Stock Plan, and all applicable laws and regulatory rules or requirements, including all applicable federal securities laws.
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(rr) The information underlying the estimates of the reserves of the Company, which was supplied by the Company to MHA Petroleum Consultants LLC (“MHA”), independent petroleum engineers, for purposes of preparing the reserve reports from which the information appearing in the Registration Statement, Time of Sale Prospectus and Prospectus relating to the Company’s estimated quantities of oil and gas reserves as of December 31, 2012 and 2013 was derived (the “Reserve Reports”), including, without limitation, production, volumes, sales prices for production, contractual pricing provisions under oil or gas sales or marketing contracts under hedging arrangements, costs of operations and development, and working interest and net revenue interest information relating to the Company’s ownership interests in properties, was true and correct in all material respects on the dates of such Reserve Reports; the estimates of future capital expenditures and other future exploration and development costs supplied to MHA were prepared in good faith and with a reasonable basis; the information provided to MHA by the Company for purposes of preparing the Reserve Reports was prepared in accordance with customary industry practices; MHA was, as of the dates of the Reserve Reports, and is, as of the date hereof, independent petroleum engineers with respect to the Company; except for the known pending reductions in the Company's reserves as disclosed in the Time of Sale Prospectus and the Prospectus, other than any decrease in reserves resulting from normal production of the reserves and intervening spot market product price fluctuations disclosed in the Registration Statement, Time of Sale Prospectus and Prospectus, to the knowledge of the Company, there are not any facts or circumstances that would adversely affect the reserves in the aggregate, or the aggregate present value of future net cash flows therefrom, as disclosed in the Registration Statement, Time of Sale Prospectus and Prospectus and reflected in the Reserve Reports such as to cause a material adverse change; estimates of such reserves and the present value of the future net cash flows therefrom as disclosed in the Registration Statement, Time of Sale Prospectus and Prospectus and reflected in the Reserve Reports comply in all material respects to the applicable requirements of Regulation S-X and Industry Guide 2 under the Securities Act.
(ss) Assuming the accuracy of the representations of the Investors in the Securities Purchase Agreement, on the Closing Date and solely as this Section relates to the issue and sale of the Warrant Shares on the date(s) of exercise of the Warrants, the offer, issue and sale of the Private Preferred Stock and the Warrants, and the issuance of the Warrant Shares upon exercise of the Warrants (assuming no change in applicable law prior to the date the Shares and Agent Warrant Shares are issued), are and will be exempt from the registration and prospectus delivery requirements of the Securities Act and have been or will be registered or qualified (or are or will be exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Private Preferred Stock or the Warrants to the Investors or the Agent Warrants. Other than the Company SEC Documents, the Company has not distributed and will not distribute prior to the Closing Date any offering material in connection with the offering and sale of the Private Preferred Stock and the Warrants, unless such offering materials are provided to the Placement Agents prior to or simultaneously with such delivery to the offerees of these Securities. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D promulgated under the Securities Act) in connection with the offer or sale of the Private Preferred Stock, the Warrants or the Agent Warrants.
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(tt) With respect to Private Preferred Stock, the Warrants and the Agent Warrants to be offered and sold hereunder in reliance on Rule 506 under the Securities Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the private placement, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities (calculated on the basis of voting power), nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of such sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i)–(viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Placement Agents and the Potential Investors a copy of any disclosures provided thereunder. The Company is not aware of any person (other than any Issuer Covered Person or Dealer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Regulation D Securities. For the purposes of this subsection, “Dealer Covered Person” shall mean the Placement Agents or any of their directors, executive officers, general partners, managing members or other officers participating in the private placement. The Company will notify the Placement Agents in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.
(uu) The Company hereby makes all of the representations and warranties contained in the Securities Purchase Agreement (subject to the exceptions and disclosures in the Company Disclosure Schedule attached thereto as Annex B) to the Placement Agents and the Placement Agents are entitled to rely on those representations and warranties as if they were made to the Placement Agents directly.
2A. Certain Covenants. The Company covenants and agrees as follows:
(a) On the Closing Date, the Company will permit the Placement Agents to rely on any representations and warranties made by the Company to the Investors and will cause its counsel to permit the Placement Agents to rely upon any opinion furnished to the Investors.
(b) The Company will comply with all of its obligations and covenants set forth in its agreements with the Investors. The Company will promptly deliver to the Placement Agents and its counsel copies of any and all filings with the SEC and each amendment or supplement thereto, as well as all prospectuses and free writing prospectuses, prior to the closing of the offering and six months thereafter (if they are not filed on EDGAR). The Placement Agents are authorized on behalf of the Company to use and distribute copies of any documents provided to the Placement Agents or Investors in connection with the offering, including Company SEC Documents in connection with the sale of the Securities as, and to the extent, permitted by federal and applicable state securities laws.
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(c) Neither the Company nor any of its affiliates has distributed, and none of them will distribute, any prospectus or other offering material in connection with the sale of the Securities other than any materials permitted by the Securities Act to be distributed by the Company.
(d) The Company will apply the net proceeds from the sale of the Public Shares substantially in the manner set forth in the Prospectus.
(e) The Company will make available to the Placement Agents on a confidential basis all information concerning the business, assets, operations and financial condition of the Company, which the Placement Agents reasonably request in connection with the performance of its obligations hereunder and the due diligence investigation deemed appropriate by the Placement Agents. The Company shall make members of management and other employees available to the Placement Agents for purposes of satisfying such parties’ due diligence requirements, and shall commit such time and other resources as are necessary or appropriate to secure reasonable and timely success of a transaction. The Company shall inform the Placement Agents of any material events or developments concerning prospective material events that may come to the attention of the Company at any point prior to the Closing Date. The Placement Agents will be relying, without independent verification, on the accuracy and completeness of all financial and other information that is and will be furnished to it by the Company.
(f) On the Closing Date, the Company shall deliver to the Placement Agents a certificate duly executed by an officer of the Company, stating on behalf of the Company that the representations and warranties contained in this Agreement are true and correct in all material respects as of the Closing Date as if they had been made on and as of said date and that the Company has performed and complied with all obligations and conditions herein required to be performed or complied with by it on or prior to the Closing and that the Company SEC Documents, as of the Closing Date, contain all material statements that are required to be made therein, do not include 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 not misleading. On the Closing Date, the Company will also deliver to the Placement Agents any additional documents or instruments reasonably requested by the Placement Agents.
(g) If in connection with the offering, the Placement Agents determine that they or the Company would be required to make a filing with FINRA, the Company will do the following:
(i) The Company will cooperate with the Placement Agents with respect to all FINRA filings that the Company or the Placement Agents may be required to make and provide all information and documentation necessary to make the filings in a timely manner.
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(ii) The Company will pay all expenses related to all FINRA filings that the Company or Placement Agents may be required to make, including, but not limited to, all printing costs related to all documents required or that the Placement Agents may reasonably deem necessary, to comply with FINRA rules; any FINRA filing fees; postage and express charges; and all other expenses incurred in making the FINRA filings.
(iii) The Company agrees and understands that this Agreement in no way constitute a guarantee that the offering will be successful. Management acknowledges that the Company is ultimately responsible for the successful completion of a transaction.
(h) The Company will not, for a period beginning on the Closing Date and ending six months following the final Closing Date, offer for sale or sell any securities, unless, in the opinion of the Company’s counsel, concurred in by the Placement Agents’ counsel, such offer or sale does not jeopardize the availability of exemptions from the registration and qualification requirements under the applicable securities laws with respect to the regulation D Securities. The foregoing shall not apply to securities issued in connection with any acquisition, including by way of merger, or purchase of stock or all or substantially all of the assets of any third party or the issuance of securities upon exercise of outstanding options and warrants.
3. Intentionally Omitted.
4. Covenants. The Company covenants and agrees with the Placement Agents as follows:
(a) To furnish to the Placement Agents, without charge, upon request, two signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Placement Agent a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to the Placement Agents in Minneapolis, Minnesota, without charge, prior to 10:00 a.m. Central Time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 4(f) or 4(g) below, as many copies of the Time of Sale Prospectus, the Prospectus and any supplements and amendments thereto or to the Registration Statement as the Placement Agents may request.
(b) Before amending or supplementing the Registration Statement, the Time of Sale Prospectus or the Prospectus, to furnish to the Placement Agents a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which the Placement Agents object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.
(c) To furnish to the Placement Agents a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company and not to use or refer to any proposed free writing prospectus to which the Placement Agents object.
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(d) Not to take any action that would result in the Placement Agents or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Placement Agents that the Placement Agents otherwise would not have been required to file thereunder.
(e) To advise the Placement Agents promptly of any request by the Commission for amendments or supplements to the Registration Statement, the Base Prospectus, any Preliminary Prospectus, any free writing prospectus, any Prospectus Supplement or any Prospectus or for additional information with respect thereto, or of notice of institution of proceedings for, or the entry of a stop order, suspending the effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus, the Time of Sale Prospectus or the Prospectus; and if the Commission should enter such a stop order, to use its best efforts to obtain the lifting or removal of such order as soon as possible.
(f) If the Time of Sale Prospectus is being used to solicit offers to buy the Public Shares at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Placement Agents, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Placement Agents and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances when delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.
(g) If, during such period after the first date of the public offering of the Public Shares as in the opinion of counsel for the Placement Agents the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is required by law to be delivered in connection with the sales contemplated by this Agreement and the Securities Purchase Agreement, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Placement Agents, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Placement Agents, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with applicable law.
Execution Version
(h) If, at the time this Agreement is executed and delivered, it is necessary or appropriate for a post-effective amendment to the Registration Statement, or a Registration Statement under Rule 462(b) under the Securities Act, to be filed with the Commission and become effective before the Public Shares may be sold, the Company will use its best efforts to cause such post-effective amendment or such Registration Statement to be filed and become effective, and will pay any applicable fees in accordance with the Securities Act, as soon as possible; and the Company will advise the Placement Agents promptly and, if requested by the Placement Agents, will confirm such advice in writing, (i) when such post-effective amendment or such Registration Statement has become effective, and (ii) if Rule 430A under the Securities Act is used, when the Prospectus is filed with the Commission pursuant to Rule 424(b) under the Securities Act (which the Company agrees to file in a timely manner in accordance with such Rules).
(i) If, at any time during the period when a prospectus is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) in connection with any sale of Public Shares, the Registration Statement shall cease to comply with the requirements of the Securities Act with respect to eligibility for the use of the form on which the Registration Statement was filed with the Commission, to (i) promptly notify the Placement Agents, (ii) promptly file with the Commission a new registration statement under the Securities Act, relating to the Public Shares, or a post-effective amendment to the Registration Statement, which new registration statement or post-effective amendment shall comply with the requirements of the Securities Act and shall be in a form satisfactory to the Placement Agents, (iii) use its best efforts to cause such new registration statement or post-effective amendment to become effective under the Securities Act as soon as practicable, (iv) promptly notify the Placement Agents of such effectiveness and (v) take all other action necessary or appropriate to permit the public offering and sale of the Public Shares to continue as contemplated in the Prospectus; all references herein to the Registration Statement shall be deemed to include each such new registration statement or post-effective amendment, if any.
(j) If the third anniversary of the initial effective date of the Registration Statement occurs before all the Public Shares have been sold as contemplated in this Agreement and the Securities Purchase Agreement, prior to the third anniversary to file a new shelf registration statement and to take any other action necessary to permit the public offering of the Public Shares to continue without interruption; references herein to the Registration Statement shall include the new registration statement declared effective by the Commission.
(k) To file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required in connection with the offering or sale of the Public Shares.
Execution Version
(l) Promptly to furnish such information or to take such action as the Placement Agents may reasonably request and otherwise to qualify the Public Shares for offer and sale under the securities or “blue sky” laws of such jurisdictions as the Placement Agents shall reasonably request, and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Public Shares; provided, however, that the Company shall not be required to qualify as a foreign corporation or to file a consent to service of process in any jurisdiction (excluding service of process with respect to the offer and sale of the Public Shares); and to promptly advise the Placement Agents of the receipt by the Company of any notification with respect to the suspension of the qualification of the Public Shares for offer or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.
(m) To make generally available to the Company’s security holders and to the Placement Agents as soon as practicable an earnings statement covering a period of at least twelve months beginning after the effective date of the Registration Statement (as defined in Rule 158(c) under the Securities Act), which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
(n) To use its best efforts to cause the Common Shares (and upon exercise of the Warrants, the Public Preferred Shares, the Private Preferred Shares and Agent Warrants, the Public Conversion Shares, the Private Conversion Shares, the Warrant Shares and Agent Warrant Shares, respectively) to be listed on the Principal Market (to the extent such shares are not so listed) and to maintain the listing of the Common Stock, including such shares, on the Principal Market.
(o) During the period beginning on the date of this Agreement and continuing to and including 90 days after the date of the Prospectus, and without the prior written consent of the Placement Agents, not to (i) issue, 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 Common Stock or Preferred Stock or any securities convertible into or exercisable or exchangeable for Common Stock or Preferred Stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock or Preferred Stock, whether such transaction described in clause (i) or (ii) above is to be settled by delivery of the Common Stock, Preferred Stock or such other securities, in cash or otherwise, (iii) file any registration statement with the Commission relating to the offering of any shares of Common Stock, Preferred Stock or any securities convertible into or exercisable or exchangeable for Common Stock or Preferred Stock, or (iv) publicly announce an intention to effect any transaction specified in clause (i), (ii) or (iii). The restrictions contained in the preceding sentence shall not apply to (i) the Securities to be sold hereunder, (ii) the grant of awards pursuant to the Company’s equity incentive plans under the terms of such plans in effect on the date hereof, provided that any such awards are granted at fair market value and in amounts and with exercise terms consistent with the Company’s past practice, or the sale of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans (or the filing of a registration statement on Form S-8 to register shares of Common Stock issuable under such plans), (iii) the issuance by the Company of shares of Common Stock or Preferred Stock upon the exercise of, or the vesting or conversion of, a security outstanding on the date of this Agreement which is disclosed in the Registration Statement or of which the Placement Agents have been advised in writing, (iv) the issuance by the Company of any such securities required pursuant to agreements providing for anti-dilution or other stock purchase or share issuance rights existing on the date of this Agreement, or (v) the issuance by the Company of any such securities as in-kind consideration as required pursuant to any agreement relating to any technology license, strategic alliance or joint venture. Notwithstanding the foregoing, if (1) during the last 17 days of the 90-day restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the 90-day restricted period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the 90-day period, the restrictions imposed by this Agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, unless the Placement Agents waive, in writing, such extension; provided, that such extension of the 90-day period shall not apply if, (x) the Company’s securities are “actively-traded securities” as defined in Rule 101(c)(1) of Regulation M under the Exchange Act and (y) the Company meets the applicable requirements of Rule 139 under the Securities Act in the manner contemplated by NASD Rule 2711(f)(4) of the FINRA Manual. The Company shall promptly notify the Placement Agents of any earnings release, news or event that may give rise to an extension of the initial 90-day restricted period.
Execution Version
(p) To prepare, if the Placement Agents so request, a final term sheet relating to the offering of the Public Shares, containing only information that describes the final terms of the Public Shares or the offering in a form consented to by the Placement Agents, and to file such final term sheet within the period required by Rule 433(d)(5)(ii) under the Securities Act following the date the final terms have been established for the offering of the Public Shares.
(q) To comply with Rule 433(d) under the Securities Act (without reliance on Rule 164(b) under the Securities Act) and with Rule 433(g) under the Securities Act.
(r) Not to take, directly or indirectly, any action designed, or which will constitute, or has constituted, or might reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Shares.
(s) Not, at any time at or after the execution of this Agreement, to offer or sell any Public Shares by means of any “prospectus” (within the meaning of the Securities Act) or use any “prospectus” (within the meaning of the Securities Act) in connection with the offer or sale of the Public Shares, in each case other than the Time of Sale Prospectus or the Prospectus.
(t) To maintain a transfer agent and, if necessary under the jurisdiction of incorporation of the Company, a registrar for the Common Stock.
Execution Version
(u) On the earlier of the next annual meeting of shareholders or May 31, 2015, the Company shall hold a meeting of shareholders (which may also be at the annual meeting of shareholders) for the purpose of obtaining Shareholder Approval, with the recommendation of the Company’s Board of Directors that such proposal be approved, and the Company shall solicit proxies from its shareholders in connection therewith in the same manner as all other management proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of such proposal. The Company shall use its reasonable best efforts to obtain such Shareholder Approval. If the Company does not obtain Shareholder Approval at the first meeting, the Company shall call a meeting every four months thereafter to seek Shareholder Approval until the earlier of the date Shareholder Approval is obtained or the Agent Warrants are no longer outstanding. “Shareholder Approval” means such approval as may be required by the applicable rules and regulations of the Principal Market (or any successor entity) from the shareholders of the Company with respect to the transactions contemplated by this Agreement and the Securities Purchase Agreement, including the issuance of all of the Agent Warrant Shares in excess of 19.999999% of the issued and outstanding Common Stock on the Closing Date.
(u) Neither the Company nor any of its affiliates has distributed, and none of them will distribute, any prospectus or other offering material in connection with the sale of the Private Preferred Shares and Warrants, other than any materials permitted by the Securities Act to be distributed by the Company.
(v) The Company will make available to the Placement Agents on a confidential basis all information concerning the business, assets, operations and financial condition of the Company, which the Placement Agents reasonably request in connection with the performance of its obligations hereunder and the due diligence investigation deemed appropriate by the Placement Agents. The Company shall make members of management and other employees available to the Placement Agents and Potential Investors for purposes of satisfying such parties’ due diligence requirements and consummating the Private Placement, and shall commit such time and other resources as are necessary or appropriate to secure reasonable and timely success of a transaction. The Company shall inform the Placement Agents of any material events or developments concerning prospective material events that may come to the attention of the Company at any point prior to the Closing Date. The Placement Agents will be relying, without independent verification, on the accuracy and completeness of all financial and other information that is and will be furnished to it by the Company.
(w) The Company represents and agrees that it has not made and will not make any offer relating to the Securities that would constitute an issuer free writing prospectus or that would otherwise constitute a free writing prospectus required to be filed with the Commission.
5. Costs and Expenses. The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay or reimburse the Placement Agents for all reasonable, actual and accountable expenses incident to the performance of the obligations of the Company under this Agreement and in connection with the transactions contemplated hereby, including without limitation the reasonable legal fees and expenses of counsel to the Placement Agents and reasonable out-of-pocket accountable travel and related expenses, provided, however, such reimbursable costs and expenses shall not exceed $35,000.
6. Conditions of Placement Agents’ Obligations. The obligations of the Placement Agents hereunder re subject to the following conditions:
Execution Version
(a) Filings with the Commission. Each issuer free writing prospectus as defined in Rule 433(h) under the Securities Act (each, an “Issuer Free Writing Prospectus”), if any, and the Prospectus shall have been filed with the Commission within the applicable time period prescribed for such filing by, and in compliance with, the Rules and Regulations and in accordance with Section 4 hereof.
(b) No Stop Orders. Prior to the Closing: (i) no stop order suspending the effectiveness of the Registration Statement or any part thereof, preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus or any part thereof shall have been issued under the Securities Act and no proceedings for that purpose or pursuant to Section 8A under the Securities Act shall have been initiated or threatened by the Commission, (ii) no order suspending the qualification or registration of the Public Shares under the securities or blue sky laws of any jurisdiction shall be in effect and (iii) all requests for additional information on the part of the Commission (to be included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus, the Prospectus or any Issuer Free Writing Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the Placement Agents. On or prior to the Closing Date, the Registration Statement or any amendment thereof or supplement thereto shall not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and neither the Time of Sale Prospectus, nor any Issuer Free Writing Prospectus nor the Prospectus nor any amendment thereof or supplement thereto shall contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.
(c) Action Preventing Issuance. No action shall have been taken and no law, statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would prevent the issuance or sale of the Securities or materially and adversely affect or potentially materially and adversely affect the business or operations of the Company; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued which would prevent the issuance or sale of the Securities or materially and adversely affect or potentially materially and adversely affect the business or operations of the Company.
(d) Material Adverse Change. Subsequent to the date of the latest audited financial statements included or incorporated by reference in the Time of Sale Prospectus, (i) the Company has not sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth in the Time of Sale Prospectus, or (ii) there has not been any change in the capital stock (other than a change in the number of outstanding shares of Common Stock or Preferred Stock due to the issuance of shares upon the exercise of outstanding options or warrants or the conversion of convertible indebtedness or the exercise or vesting of options or restricted stock units under the Company’s equity incentive plans), or material change in the short-term debt or long-term debt of the Company (other than upon conversion of convertible indebtedness) or any material adverse change, in each case otherwise than as set forth in the Time of Sale Prospectus, the effect of which, in any such case described in clause (i) or (ii) of this subsection (d), is, in the reasonable judgment of the Placement Agents, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated in the Time of Sale Prospectus.
Execution Version
(e) Representations and Warranties. Each of the representations and warranties of the Company contained herein shall be true and correct in all material respects when made and on and as of the Closing Date, as if made on such date (except that those representations and warranties that address matters only as of a particular date shall remain true and correct as of such date), and all covenants and agreements herein contained to be performed on the part of the Company and all conditions herein contained to be fulfilled or complied with by the Company at or prior to the Closing Date shall have been duly performed, fulfilled or complied with.
(f) Opinions of Counsel to the Company. The Placement Agents shall have received, in each case in form and substance reasonably satisfactory to the Placement Agents and their counsel from Reicker, Pfau, Pyle & McRoy LLP, counsel to the Company, such counsels’ written opinion substantially in the form attached as Exhibit D, addressed to the Placement Agents and the Investors and dated the Closing Date and a written statement (“Negative Assurances”), addressed to the Placement Agent and dated the Closing Date.
(g) Accountant’s Comfort Letters. On the date of pricing of the offering contemplated hereby, the Placement Agents shall have received a letter dated the date hereof (the “Comfort Letters”), addressed to the Placement Agents and in form and substance reasonably satisfactory to the Placement Agents and its counsel, from each of Weaver Martin & Samyn, LLC and L.L. Bradford & Company, LLC (i) confirming that they are independent public accountants with respect to the Company within the meaning of the Securities Act and the Rules and Regulations and (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Time of Sale Prospectus, as of a date not more than three days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to underwriters, delivered according to Statement of Auditing Standards No. 72 and Statement of Auditing Standard No. 100 (or successor bulletins), in connection with registered public offerings.
(h) Bring-Down Letters. On the Closing Date, the Placement Agents shall have received from each of Weaver Martin & Samyn, LLC and L.L. Bradford & Company, LLC a letter (the “Bring-Down Letter”), dated the Closing Date, addressed to the Placement Agents and in form and substance reasonably satisfactory to the Placement Agents and their counsel, (i) confirming that they are or were, as applicable, independent public accountants with respect to the Company within the meaning of the Securities Act and the Rules and Regulations, and (ii) confirming in all material respects the conclusions and findings set forth in the Comfort Letter.
Execution Version
(i) Officer’s Certificate. The Placement Agents shall have received on the Closing Date a certificate, addressed to the Placement Agents and dated the Closing Date, of the chief executive or chief operating officer and the chief financial officer or chief accounting officer of the Company to the effect that:
(i) each of the representations, warranties and agreements of the Company contained in this Agreement were true and correct when originally made and are true and correct in all material respects as of the Time of Sale and the Closing Date as if made on each such date (except that those representations and warranties that address matters only as of a particular date remain true and correct as of each such date); and the Company has complied with all agreements and satisfied all the conditions on its part required under this Agreement to be performed or satisfied at or prior to the Closing Date;
(ii) there has not been, subsequent to the date of the most recent audited financial statements included or incorporated by reference in the Time of Sale Prospectus, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a material adverse change or a prospective material adverse change except as set forth in the Prospectus;
(iii) no stop order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereof or the qualification of the Public Shares for offering or sale, nor suspending or preventing the use of the Time of Sale Prospectus, the Prospectus or any Issuer Free Writing Prospectus shall have been issued, and no proceedings for that purpose or pursuant to Section 8A under the Securities Act shall be pending or to its knowledge, threatened by the Commission or any state or regulatory body;
(iv) the Registration Statement and each amendment thereto, at the Time of Sale and as of the date of this Agreement 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 required to be stated therein or necessary to make the statements therein not misleading, and the Time of Sale Prospectus, as of the Time of Sale and as of the Closing Date, any Issuer Free Writing Prospectus as of its date and as of 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; and
(v) no event has occurred as a result of which it is necessary to amend or supplement the Registration Statement, the Prospectus or the Time of Sale Prospectus in order to make the statements therein not untrue or misleading in any material respect.
(j) NYSE. The Common Shares shall have been listed and authorized for trading on the Principal Market.
(k) No FINRA Objection. The Placement Agents shall not have received any unresolved objection from the FINRA as to the fairness and reasonableness of the amount of compensation allowable or payable to the Placement Agents in connection with the issuance and sale of the Securities.
Execution Version
(l) Securities Purchase Agreement. The Company shall have entered into the Securities Purchase Agreement with the Investors, and such agreement shall be in full force and effect on the Closing Date.
(m) Lock-Up Letters. The Placement Agents shall have received the written agreements, substantially in the form of Exhibit B hereto, of all of the executive officers and directors of the Company and their affiliates set forth on Schedule II.
(n) CFO’s Certificate. On the Closing Date, there shall have been furnished to the Placement Agents, in a form acceptable to the Placement Agents, a certificate, dated such Closing Date and addressed to the Placement Agents, signed by the chief financial officer of the Company, regarding specified financial information contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus relating to periods ended December 31, 2014.
(o) Letter of Independent Petroleum Engineers. On the date hereof, there shall have been furnished to the Placement Agents, a letter from MHA Petroleum Consultants LLC (“MHA”), independent petroleum engineers of the Company, dated such date, in form and substance satisfactory to counsel for the Placement Agents with respect to the reserve reports of the Company prepared by MHA and any oil and gas reserve information of the Company included in the Prospectus.
(p) Additional Documents. Prior to the Closing Date, the Company shall have furnished to the Placement Agents such further information, certificates or documents as the Placement Agents shall have reasonably requested.
All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Placement Agents.
If any condition specified in this Section 6 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Placement Agents by notice to the Company at any time prior to the Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 5, Section 7 and Section 9 hereof shall at all times be effective and shall survive such termination.
Execution Version
7. Indemnification and Contribution.
(a) Indemnification of the Placement Agents. The Company agrees to indemnify and hold harmless the Placement Agents, each person, if any, who controls the Placement Agents within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of any Placement Agent within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by, arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Time of Sale Prospectus, any Issuer Free Writing Prospectus, any issuer information that the Company has filed, or is required to file, pursuant to Rule 433(d) of the Securities Act, any road show not constituting a free writing prospectus, or the Prospectus or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which there were made, not misleading or (iii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein or in whole or in part upon any failure of the Company to perform its obligations hereunder or under law; provided, however, that the Company shall not be liable under this Section 7(a) to the extent that such losses, claims, damages or liabilities are caused by, arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made therein in reliance upon and in conformity with information relating to any Placement Agents furnished to the Company in writing by such Placement Agent expressly for use therein.
(b) Indemnification of the Company. The Placement Agents agree to indemnify and hold harmless the Company, the directors of the Company, the officers of the Company who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by, arising from or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Time of Sale Prospectus, any Issuer Free Writing Prospectus, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) of the Securities Act, any road show not constituting a free writing prospectus, or the Prospectus or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which there were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission or alleged untrue statement or omission was made therein in reliance upon and in conformity with information relating to the Placement Agents furnished to the Company in writing expressly for use therein.
Execution Version
(c) Notice and Procedures. In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) such person (the “indemnified party”) shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (i) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Placement Agents and all persons, if any, who control the Placement Agents within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or who are affiliates of the Placement Agents within the meaning of Rule 405 under the Securities Act, and (ii) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Placement Agents and such control persons and affiliates of the Placement Agents, such firm shall be designated in writing by the Placement Agents. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.
Execution Version
(d) Contribution. To the extent the indemnification provided for in Section 7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Placement Agents on the other hand in connection with the offering of the Securities shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Securities (before deducting expenses) received by the Company and the total commissions received by the Placement Agents bear to the aggregate price of the Securities. The relative fault of the Company on the one hand and the Placement Agents on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Placement Agents and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(e) Allocation. The Company and the Placement Agents agree that it would not be just or equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 7(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in Section 7(d) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, the Placement Agents shall not be required to contribute any amount in excess of the total commissions received by it in accordance with Section 1(b) less the amount of any damages that the Placement Agents have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
(f) Representations and Agreements to Survive Delivery. The indemnity and contribution provisions contained in this Section 7 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Placement Agents, any person controlling the Placement Agents or any affiliate of the Placement Agents, or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Securities.
8. Information Furnished by Placement Agents. The Company acknowledges that the statements set forth in under the heading “Plan of Distribution” under the subheading “Additional Information” in the Prospectus (the “Placement Agent Information”) constitute the only information relating to the Placement Agents furnished in writing to the Company by the Placement Agents as such information is referred to in Sections 2 and 7 hereof.
Execution Version
9. Termination. The Placement Agents shall have the right to terminate this Agreement by giving notice as hereinafter specified at any time at or prior to the Closing Date, without liability on the part of the Placement Agents to the Company, if (i) prior to delivery and payment for the Securities (A) trading in securities generally shall have been suspended on or by the New York Stock Exchange, the NASDAQ Global Market, the NASDAQ Capital Market or in the over the counter market (each, a “Trading Market”), (B) trading in the Common Stock of the Company shall have been suspended on any exchange, in the over-the-counter market or by the Commission, or (C) a general moratorium on commercial banking activities shall have been declared by federal or New York state authorities or a material disruption shall have occurred in commercial banking or securities settlement or clearance services in the United States, (ii) since the time of execution of this Agreement or the earlier respective dates as of which information is given in the Time of Sale Prospectus or incorporated by reference therein, there has been any material adverse effect, (iii) the Company shall have failed, refused or been unable to comply with the material terms or perform any material agreement or obligation of this Agreement or the Securities Purchase Agreement, other than by reason of a default by the Placement Agents, or (iv) any condition of the Placement Agents’ obligations hereunder is not fulfilled. This Agreement may be terminated by any party on or after March 31, 2015. Any such termination shall be without liability of any party to any other party except that the provisions of Section 5, Section 6, Section 12 and Section 13 hereof shall at all times be effective notwithstanding such termination.
10. Notices. All statements, requests, notices and agreements hereunder shall be in writing or by facsimile, and:
(a) if to the Placement Agents, shall be delivered or sent by mail, telex or e-mail transmission as follows:
Northland Securities, Inc.
45 South Seventh Street, Suite 2000
Minneapolis, MN 55402
Attention: Shawn Messner
And
Euro Pacific Capital, Inc.
1201 Dove Street, Suite 200
Newport Beach, CA 92660
Attention: Gordon McBeam
with a copy (which shall not constitute notice) to:
Faegre Baker Daniels LLP
2200 Wells Fargo Center
Minneapolis, MN ###-###-####
Attention: Jonathan R. Zimmerman
Fax: (612) 766-1600
Execution Version
(b) if to the Company shall be delivered or sent by mail, telex or facsimile transmission to:
EnerJex Resources, Inc.
ATTN: Robert G. Watson, Jr.
4040 Broadway, Suite 508
San Antonio, TX 78209
Fax: (210) 829-1224
Email: ***@***
with a copy (which shall not constitute notice) to:
Reicker, Pfau, Pyle & McRoy LLP
ATTN: Michael E. Pfau, Esq.
1421 State Street, Suite B
Santa Barbara, CA 93101
Fax: (805) 966-3320
Email: ***@***
Any such statements, requests, notices or agreements shall be effective only upon receipt. Any party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose.
11. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and shall be binding upon the Placement Agents, the Company, and their respective successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person, except that the representations, warranties, covenants, agreements and indemnities of the Company contained in this Agreement shall also be for the benefit of the controlling persons, officers and directors referred to in Section 7(a) hereof and the indemnities of the Placement Agents shall also be for the benefit of the controlling persons, officers and directors referred to in Section 7(b) hereof.
12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflicts of laws provisions thereof.
Execution Version
13. No Fiduciary Relationship. The Company hereby acknowledges and agrees that:
(a) No Other Relationship. The Placement has Agents have been retained solely to act as the exclusive placement agents in connection with the offering of the Company’s securities. The Company further acknowledges that the Placement Agents are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis and in no event do the parties intend that the Placement Agents act or be responsible as a fiduciary to the Company, its management, stockholders, creditors or any other person in connection with any activity that the Placement Agents may undertake or has undertaken in furtherance of the offering of the Company’s securities, either before or after the date hereof, irrespective of whether the Placement Agents have advised or is advising the Company on other matters. The Placement Agents hereby expressly disclaim any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect.
(b) Arm’s-Length Negotiations. The price of the Securities set forth in this Agreement was established by the Company following discussions and arms-length negotiations with the Investors, and the Company is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions of the transactions contemplated by this Agreement.
(c) Absence of Obligation to Disclose. The Company has been advised that the Placement Agents and its affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company and that the Placement Agents have no obligation to disclose such interests or transactions to the Company by virtue of any fiduciary, advisory or agency relationship.
(d) Waiver. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Placement Agents with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions and agrees that the Placement Agents shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim to any person asserting a fiduciary duty claim on behalf of the Company, including stockholders, employees or creditors of the Company.
14. Headings. The Section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement.
15. Amendments and Waivers. No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. The failure of a party to exercise any right or remedy shall not be deemed or constitute a waiver of such right or remedy in the future. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.
Execution Version
16. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original and all such counterparts shall together constitute one and the same instrument. Delivery of an executed counterpart by facsimile or portable document format (.pdf) shall be effective as delivery of a manually executed counterpart thereof.
17. Research Analyst Independence. The Company acknowledges that the Placement Agents’ research analysts and research departments are required to be independent from its investment banking division and are subject to certain regulations and internal policies, and that such Placement Agent’s research analysts may hold views and make statements or investment recommendations and/or publish research reports with respect to the Company and/or the offering that differ from the views of their investment banking division. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Placement Agents with respect to any conflict of interest that may arise from the fact that the views expressed by its independent research analysts and research department may be different from or inconsistent with the views or advice communicated to the Company by the Placement Agents’ investment banking division. The Company acknowledges that the Placement Agents are full service securities firms and as such from time to time, subject to applicable securities laws, rules and regulations, may effect transactions for its own account or the account of its customers and hold long or short positions in debt or equity securities of the Company; provided, however, that nothing in this Section 17 shall relieve any Placement Agent of any responsibility or liability it may otherwise bear in connection with activities in violation of applicable securities laws, rules or regulations.
18. Entire Agreement. This Agreement constitutes the entire agreement of the parties to this Agreement with respect to the Company’s offering, issuance and sale of the Securities and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.
19. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph, clause or provision of this Agreement shall not affect the validity or enforceability of any other section, paragraph, clause or provision hereof. If any section, paragraph, clause or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
20. Effectiveness. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.
[Signature page follows.]
Execution Version
If the foregoing is in accordance with your understanding of the agreement between the Company and the Placement Agents, kindly indicate your acceptance in the space provided for that purpose below.
| Very truly yours, | |||
| EnerJex Resources, Inc. | |||
| By: | |||
| Name: | |||
| Title: | |||
| Accepted as of the date hereof | ||
| Northland Securities, Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||
| Euro Pacific Capital, Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||
Execution Version
Schedules and Exhibits
| Schedule I | Issuer Free Writing Prospectus |
| Schedule II | List of Directors, Officers for Lock-Up Letter |
| Exhibit A: | Securities Purchase Agreement |
| Exhibit B: | Form of Lock-Up Letter |
| Exhibit C: | Form of Agent Warrants |
| Exhibit D: | Form of Legal Opinion |
Execution Version
Schedule I
Issuer Free Writing Prospectus
None.
Execution Version
Schedule II
List of Directors, Officers, and other Holders For Lock-Up Letter
| · | Robert Watson |
| · | Douglas Wright |
| · | Richard Menchaca |
| · | Lance Helfert |
| · | David Kunovic |
| · | Atticus Lowe |
| · | James Miller |
Execution Version
Exhibit A
Form of Securities Purchase Agreement
[See Attached]
Execution Version
Exhibit B
Form of Lock Up Agreement
____________________, 2015
Northland Securities, Inc.
45 South 7th Street, Suite 2000
Minneapolis, MN 55402
Dear Ladies and Gentlemen:
As an inducement to Northland Securities, Inc., the placement agent (the “Placement Agent”) to execute a placement agency agreement (the “Placement Agency Agreement”) pursuant to which the Placement Agent agrees to act as the Placement Agent for the offering and sale (the “Offering”) of common stock (the “Common Stock”), or any other securities of EnerJex Resources, Inc. and any successor (by merger or otherwise) thereto (the “Company”), the undersigned hereby agrees that without, in each case, the prior written consent of the Placement Agent during the period specified in the second succeeding paragraph (the “Lock-Up Period”), the undersigned will not: (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into, exercisable or exchangeable for or that represent the right to receive Common Stock (including without limitation, Common Stock which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and securities which may be issued upon exercise of a stock option or warrant) whether now owned or hereafter acquired (the “Undersigned’s Securities”); (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Undersigned’s Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to, the registration of any Common Stock or any security convertible into or exercisable or exchangeable for Common Stock; or (4) publicly disclose the intention to do any of the foregoing.
The undersigned agrees that the foregoing restrictions preclude the undersigned from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Undersigned’s Securities even if such Securities would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Undersigned’s Securities or with respect to any security that includes, relates to, or derives any significant part of its value from such Securities.
The initial Lock-Up Period will commence on the date of this Agreement and continue and include the date 90 days after the date of the Placement Agency Agreement, to which you are or expect to become parties; provided, however, that if (1) during the last 17 days of the initial Lock-Up Period, the Company releases earnings results or material news or a material event relating to the Company occurs or (2) prior to the expiration of the initial Lock-Up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the initial Lock-Up Period, then in each case the initial Lock-Up Period will be extended until the expiration of the 18-day period beginning on the date of release of such earnings results or material news, or the occurrence of such material event, as applicable, unless the Placement Agent, waives, in writing, such extension.
The undersigned hereby acknowledges that the Company will be requested to agree in the Placement Agency Agreement to provide written notice to the undersigned of any event that would result in an extension of the Lock-Up Period pursuant to the previous paragraph and agrees that any such notice properly delivered will be deemed to have been given to, and received by, the undersigned. The undersigned further agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this Agreement during the period from the date of this Agreement to and including the 34th day following the expiration of the initial Lock-Up Period, it will give notice thereof to the Company and will not consummate such transaction or take any such action unless it has received written confirmation from the Company that the Lock-Up Period (as may have been extended pursuant to the previous paragraph) has expired.
Execution Version
If the undersigned is an officer or director of the Company, (i) the Placement Agent agrees that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, the Placement Agent will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Placement Agency Agreement to announce the impending release or waiver by issuing a press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by the Placement Agent hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if both (a) the release or waiver is effected solely to permit a transfer not for consideration, and (b) the transferee has agreed in writing to be bound by the same terms described in this letter that are applicable to the transferor, to the extent and for the duration that such terms remain in effect at the time of the transfer. The undersigned further agrees that the foregoing provisions shall be equally applicable to any issuer-directed Common Stock that the undersigned may purchase in the offering.
Notwithstanding the foregoing, the undersigned may transfer the Undersigned’s Securities (i) as a bona fide gift or gifts, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, (iii) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity (1) transfers to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned or (2) distributions of shares of Common Stock or any security convertible into or exercisable for Common Stock to limited partners, limited liability company members or stockholders of the undersigned, (iv) if the undersigned is a trust, transfers to the beneficiary of such trust, (v) transfers by testate succession or intestate succession or (vi) pursuant to the Securities Purchase Agreement entered into between the Company and each investor in connection with this Offering; provided, in the case of clauses (i)-(v), that (x) such transfer shall not involve a disposition for value, (y) the transferee agrees in writing with the Placement Agent to be bound by the terms of this Lock-Up Agreement, and (z) no filing by any party under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall be required or shall be made voluntarily in connection with such transfer. For purposes of this Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, nor more remote than first cousin.
In addition, the foregoing restrictions shall not apply (i) the exercise of stock options granted pursuant to the Company’s equity incentive plans; provided that it shall apply to any of the Undersigned’s Securities issued upon such exercise, or (ii) the establishment of any contract, instruction or plan (a “Plan”) that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act; provided that no sales of the Undersigned’s Securities shall be made pursuant to such a Plan prior to the expiration of the Lock-Up Period (as such may have been extended pursuant to the provisions hereof), and such a Plan may only be established if no public announcement of the establishment or existence thereof and no filing with the Securities and Exchange Commission or other regulatory authority in respect thereof or transactions thereunder or contemplated thereby, by the undersigned, the Company or any other person, shall be required, and no such announcement or filing is made voluntarily, by the undersigned, the Company or any other person, prior to the expiration of the Lock-Up Period (as such may have been extended pursuant to the provisions hereof).
In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of Common Stock if such transfer would constitute a violation or breach of this Agreement.
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that upon request, the undersigned will execute and additional documents necessary to ensure the validity or enforcement of this Agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or personal representatives of the undersigned.
Execution Version
The undersigned understands that the undersigned shall be released from all obligations under this Agreement if (i) the Company notifies the Placement Agent that it does not intend to proceed with the Offering, (ii) the Placement Agency Agreement does not become effective, or if the Placement Agency Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Company’s securities to be sold in the Offering, or (iii) the Offering is not completed by June 30, 2015.
The undersigned understands that the Placement Agent is entering into the Placement Agency Agreement and proceeding with the Offering in reliance upon this Agreement.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
[remainder of page left blank intentionally – signature page follows]
| Very truly yours, | ||
| Printed Name of Holder | ||
| By: | ||
| Signature | ||
| Printed Name of Person Signing | ||
| (and indicate capacity of person signing if signing as custodian, trustee, or on behalf of an entity) | ||
Execution Version
Exhibit C
Form of Agent Warrants
See attached
Execution Version
Exhibit D
Form of Legal Opinion
1. The Company is a corporation duly organized, validly existing and in good standing under the laws of Nevada. The Company has all requisite power and authority, and all material governmental licenses, authorizations, consents and approvals, that are required to own and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted (all as described in the Prospectus). The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification.
2. The Company has the corporate power and authority to execute and deliver, and incur and perform all of its obligations under the Securities Purchase Agreement and the Placement Agency Agreement and to own its property and to conduct its business as described in the Time of Sale Prospectus and the Prospectus.
3. As of the date hereof, the Company is authorized to issue 250,000,000 shares of Common Stock and 25,000,000 shares of its preferred stock. Immediately prior to the issuance of the Securities, there are (a) 7,643,114 shares of Common Stock outstanding, which have been duly authorized and are validly issued, and non-assessable, and, to our knowledge, fully paid, (b) 2,000,000 shares of preferred stock designated as "10% Series A Cumulative Redeemable Perpetual Preferred Stock," of which 751,815 shares have been duly authorized and are validly issued, non-assessable, and, to our knowledge, are fully paid, and (c) 1,764 shares of preferred stock designated as "Series B Convertible Preferred Stock," of which no shares are issued or outstanding. The Company has issued options that, upon exercise of same will result in the issuance of 236,000 shares (the “Conversion Shares”) of our common stock. Of the total number of Conversion Shares, 236,000 shares are represented by options which have been issued to employees, officers and directors and the remaining Conversion Shares. The Company’s authorized capitalization is as set forth in the Time of Sale Prospectus and the Prospectus and the capital stock of the Company conforms as to legal matters to the description therefor contained in the Time of Sale Prospectus and the Prospectus.
4. The Common Shares, the Public Preferred Shares, the Private Preferred Shares, and the Warrants to be sold by the Company have been duly authorized and, when issued and delivered and paid for in accordance with the terms of the Purchase Agreement will be validly issued, fully paid and nonassessable, and the issuance of such shares will not be subject to any preemptive rights contained in the certificate of incorporation or bylaws of the Company, or, to our knowledge, any agreement or instrument binding upon the Company.
5. The Warrant Shares, the Private Conversion Shares, and the Public Conversion Shares have been duly authorized for issuance and sale by the Company and, when executed, issued and delivered by the Company pursuant to the Purchase Agreement will constitute the legal, valid and binding obligations of the Company, enforceable in accordance with their terms.
Execution Version
6. The Agent Warrants have been duly authorized for issuance and sale by the Company and, when executed, issued and delivered by the Company pursuant to the Placement Agency Agreement will constitute the legal, valid and binding obligations of the Company, enforceable in accordance with their terms.
7. The Agent Warrant Shares, the Warrant Shares, the Public Conversion Shares and the Private Conversion Shares have been duly authorized and validly reserved for issuance upon exercise of the Agent Warrants, the Warrant, the Public Preferred Shares and the Private Preferred Shares, respectively, in a number sufficient to meet the current exercise requirements. Upon exercise of the Agent Warrants in accordance with their terms including the payment of same in accordance with the terms of the Agent Warrants, the Agent Warrant Shares issuable thereupon will be validly issued, fully paid and nonassessable. The issuance of such Agent Warrant Shares, Warrant Shares, Public Conversion Shares and Private Conversion Shares will not be subject to any preemptive rights contained in the certificate of incorporation or bylaws of the Company, or, to our knowledge, any preemptive or similar rights contained in any other agreement or instrument binding upon the Company.
8. The Placement Agency Agreement and the Securities Purchase Agreement have been duly authorized by all requisite corporate action, executed and delivered by the Company and are valid and binding agreements of the Company, enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity).
9. Neither the execution or delivery by the Company of, nor the performance by the Company of its obligations under, the Placement Agency Agreement or the Securities Purchase Agreement will (i) contravene the provision of any applicable law or any applicable rule or regulation of any governmental authority or regulatory body (other than state securities and “Blue Sky” laws, as to which we express no opinion) or the certificate of incorporation or bylaws of the Company, (ii) to our knowledge, result in a breach of or default under any agreement or other instrument binding upon the Company filed as an exhibit to the Registration Statement or any document incorporated by reference therein (other than any violation of or conflict with any financial tests and financial covenants set forth in such agreements as to which we express no opinion), or (iii) to our knowledge contravene any court or administrative judgments, orders or decrees of any governmental body, regulatory or administrative agency or court having jurisdiction over the Company.
10. No approval, authorization, consent or order of or filing with any governmental or regulatory body, agency, self-regulatory organization, other non-governmental regulatory authority, or the stockholders of the Company, is required in connection with the issuance and sale of the Securities, the Agent Warrants or the Agent Warrant Shares or the consummation by the Company of the transactions contemplated by the Placement Agency Agreement or the Purchase Agreement, except such as have been obtained or made and such as may be required under the Act, the rules of the NYSE, FINRA, or state securities or Blue Sky laws.
Execution Version
11. To our knowledge, the statements relating to legal matters, documents or proceedings included in the Preliminary Prospectus, the Time of Sale Prospectus and the Prospectus, as well as in the Registration Statement, in each case, insofar as such statements constitute a summary of documents or proceedings referred to therein or matters of law, fairly summarize in all material respects the information responsive to those captions with respect to such matters, documents or proceedings.
12. The Registration Statement has been declared effective by the Commission. We have reviewed the portion of the Commission website which identifies stop orders issued by the Commission and there is no indication that a stop order suspending the effectiveness of the Registration Statement has been issued and, to our knowledge, no proceedings for that purpose have been instituted or overtly threatened by the Commission. Any required filing of the Prospectus Supplement, or any other amendment or supplement to the Base Prospectus, pursuant to Rule 424(b) under the Securities Act, has been made in the manner and within the time period required by Rule 424(b).
13. To our knowledge, there are no legal or governmental proceedings pending or overtly threatened to which the Company is a party or to which any of the properties of the Company is subject that are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus and are not so described, or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus or to be filed as exhibits to the Registration Statement that are not so described or filed as required.
14. The Company is not, and after giving effect to the sale of the Public Shares and Private Preferred Shares and shares issuable upon exercise of the Agent Warrants, Public Preferred Shares, Private Preferred Shares, and Warrants, and the application of the proceeds thereof as described in the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.
15. Each of the following documents appeared on their face as of its filing date, to be appropriately responsive as to form, in all material respects, to the Exchange Act and the applicable rules and regulations of the Commission thereunder: (i) each document filed pursuant to the Exchange Act and incorporated by reference in the Registration Statement and the Prospectus (except for the financial statements and financial schedules and other financial and statistical data derived from the financial statements or schedules contained or incorporated by reference therein or omitted therefrom, as to which we express no opinion or belief); (ii) each of the Registration Statement, the Time of Sale Prospectus and the Prospectus (except for the financial statements and financial schedules and other financial and statistical data derived from the financial statements or schedules contained or incorporated by reference therein or omitted therefrom, as to which we express no opinion or belief).
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16. Assuming (a) the accuracy of the Investors’ representations and covenants contained in the Securities Purchase Agreement and (b) the accuracy of the Company’s representations and covenants contained in the Securities Purchase Agreement and the Placement Agency Agreement, it is not necessary in connection with the sale of the Private Preferred Shares, the Private Conversion Shares, the Warrants, the Agent Warrants, the Warrant Shares and the Agent Warrant Shares under the circumstances contemplated by the Securities Purchase Agreement or the Placement Agency Agreement to register the offer or sale of these securities under Section 5 of the Securities Act. We express no opinion as to the securities laws of any state.
In addition, we hereby confirm that on the basis of conferences with officers and other representatives of the Company, representatives of the Placement Agents and representatives of the independent accountants and independent petroleum engineers for the Company, examination of documents referred to in the Registration Statement, the Prospectus and the Time of Sale Prospectus and such other procedures as we have deemed appropriate, but without independent review or verification and without assuming responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus (except as set forth in paragraphs (ii) and (vii) above), nothing has come to our attention that causes us to believe that (a) any part of the Registration Statement or any amendment thereof (including any 430A and 430B Information omitted from the Registration Statement at the time it became effective but that is deemed to be part of and included in the Registration Statement pursuant to Rule 430A and Rule 430B) when such part became effective (including each deemed effective date with respect to the Placement Agents pursuant to the Rules and Regulations) contained or contains any untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (b) that the Time of Sale Prospectus as of the Time of Sale, included or includes any untrue statement of material fact or omitted or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (c) that the Prospectus (as of its issue date and as of such Closing Date) included or includes any untrue statement of material fact or omitted or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that the foregoing is not intended to include (and we hereby expressly disclaim) the expression of any belief as to the financial statements or other financial data included in any of the documents mentioned in this paragraph.
