Exhibit 10.9 

 

Nxt-ID, Inc.
Placement Agency Agreement
Common Stock and Warrants

 

July 30, 2015

 

Northland Securities, Inc.

45 South Seventh Street, Suite 2000 

Minneapolis, Minnesota 55402

  

Ladies and Gentlemen:

  

Nxt-ID, Inc., a Delaware corporation (the “Company”), proposes, subject to the
terms and conditions stated in this Placement Agency Agreement (this
“Agreement”), the Securities Purchase Agreement (the “Securities Purchase
Agreement”), dated July 30, 2015, between the Company and the investors
identified therein (each, an “Investor” and collectively, the “Investors”), and
the Warrant Purchase Agreement (the “Warrant Purchase Agreement” and together
with the Securities Purchase Agreement, the “Purchase Agreements”), dated July
30, 2015, between the Company and the Investors, to (i) issue and sell up to an
aggregate of 1,721,429 of shares (the “Shares”) of the Company’s common stock,
par value $0.0001 per share (the “Common Stock”) in a public offering and (ii)
issue and sell warrants (the “Warrants”), which are exercisable for shares of
Common Stock (the “Warrant Shares” and together with the Shares and the
Warrants, the “Securities”) in a private placement. The Company hereby confirms
its several agreements with Northland Securities, Inc. (“Northland” or the
“Placement Agent”) as set forth below. The Shares are more fully described in
the Prospectus (as defined below).

 

1.                  Agreement to Act as Placement Agent; 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 Agent, as the
exclusive agent of the Company, to, on a commercially reasonable efforts basis,
solicit offers to purchase the Securities from the Company on the terms and
subject to the conditions set forth in the Purchase Agreements and Prospectus
(as defined below). The Placement Agent shall use commercially reasonable
efforts to assist the Company in obtaining performance by each Investor whose
offer to purchase the Securities was solicited by the Placement Agent and
accepted by the Company, but the Placement Agent 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
commercially reasonable efforts to solicit offers to purchase the Securities,
the Placement Agent 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 Agent or
any of its affiliates be obligated to underwrite or purchase any of the
Securities for its own account or otherwise provide any financing. The Placement
Agent shall act solely as the Company’s agent and not as principal. No Placement
Agent shall have any 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. The Placement Agent has the right, in its discretion, without
notice to the Company, to reject any offer to purchase Securities received by
it, in whole or in part, and any such rejection shall not be deemed a breach of
this Agreement.

 

  

 

 

(b)               As compensation for services rendered by the Placement Agent
hereunder, on the Closing Date (as defined below), the Company shall pay or
cause to be paid to the Placement Agent by wire transfer of immediately
available funds to an account or accounts designated by the Placement Agent, an
aggregate amount equal to 6% of the gross proceeds received by the Company from
the sale of the Securities to Investors (the “Agency Fee”). Such amounts may be
deducted from the payment made by the Investor(s) to the Company and paid
directly to the Placement Agent on the Closing Date. As compensation for
services rendered by the Placement Agent hereunder, on the Closing Date, the
Company shall sell to the Placement Agent, for an aggregate purchase price of
$50, warrants (the “Agent’s Warrants”) to purchase 86,071.45 shares of Common
Stock in substantially the form attached hereto as Exhibit A. The Agent’s
Warrants and the shares acquirable upon exercise thereof will be subject to the
restrictions provided for under FINRA Rule 5110(g)(1). The Placement Agent may
allow concessions, or pay commissions, to other dealers participating in the
offering of the Securities.

 

(c)                 The Shares are being sold to the Investors at a price of
$1.75 per share as set forth on the cover page of the Prospectus (as defined
below) and the Warrants are being sold to the Investors at a price of $0.0000001
per warrant. The purchases of Shares and Warrants by the Investors shall be
evidenced by the execution of the Purchase Agreements by each of the parties
thereto in the form attached hereto as Exhibit B.

 

(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 Agent, 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) otherwise
than through the Placement Agent in accordance herewith.

 

(e)                No Securities which the Company has agreed to sell pursuant
to this Agreement and the Purchase Agreements 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 Agent 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 6(c)
hereof.

 

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(f)                 Payment of the purchase price for, and delivery of the
Securities shall be made at a closing (the “Closing”) at a time and date as the
Placement Agent and the Company determine pursuant to Rule 15c6-1(a) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) (such date of
payment and delivery being herein referred to as the “Closing Date”). Unless
otherwise specified in the Purchase Agreements, 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 Agent 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 the Placement Agent the
amount of expenses for which each such Placement Agent is entitled to
reimbursement pursuant hereto. At least one day prior to the Closing Date, the
Placement Agent 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 Agent shall
submit to the Company its expense reimbursement invoice and the Company or such
Placement Agent, as applicable, shall make any necessary reconciling payment(s)
within thirty days of receipt of such invoices. The Warrants will be physically
delivered to the Investors.

 

2.                  Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent as of the date hereof and as of
the Closing Date, and agrees with the Placement Agent, as follows:

 

(a)                Filing of Registration Statement. The Company has prepared
and filed, in conformity with the requirements of the Securities Act of 1933, as
amended (the “Securities Act”), and the published rules and regulations
thereunder (the “Rules and Regulations”) adopted by the Securities and Exchange
Commission (the “Commission”), a registration statement, including a prospectus,
on Form S-3 (File No. 333-203637), which became effective as of May 14, 2015,
relating to the Shares and the offering thereof (the “Offering”) from time to
time in accordance with Rule 415(a)(1)(x) of the Rules and Regulations, and such
amendments thereof as may have been required to the date of this Agreement. The
term “Registration Statement” as used in this Agreement means the aforementioned
registration statement, as amended at the time of such registration statement’s
effectiveness for purposes of Section 11 of the Securities Act, (the “Effective
Time”), including (i) all documents filed as a part thereof or incorporated or
deemed to be incorporated by reference therein and (ii) any information in the
corresponding Base Prospectus (as defined below) or a prospectus supplement
filed with the Commission pursuant to Rule 424(b) under the Securities Act, to
the extent such information is deemed pursuant to Rule 430A (“Rule 430A”), 430B
(“Rule 430B”) or 430C (“Rule 430C”) under the Securities Act to be a part
thereof at the Effective Time. If the Company has filed an abbreviated
registration statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Rules and Regulations (the “Rule 462(b) Registration
Statement”), then any reference herein to the term “Registration Statement”
shall also be deemed to include such Rule 462(b) Registration Statement. For
purposes of this Agreement, all references to the Registration Statement, the
Base Prospectus, any Preliminary Prospectus (as defined below), the Prospectus
(as defined in below) or any amendment or supplement to any of the foregoing
shall be deemed to include the copy filed with the Commission pursuant to its
Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”). All
references in this Agreement to amendments or supplements to the Registration
Statement, the Base Prospectus, any Preliminary Prospectus or the Prospectus
shall be deemed to mean and include the subsequent filing of any document under
the Exchange Act prior to completion of distribution of the Shares and which is
deemed to be incorporated therein by reference therein or otherwise deemed to be
a part thereof.

 

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(b)               Effectiveness of Registration Statement; Certain Defined
Terms. The Company and the transactions contemplated by this Agreement meet the
requirements and comply with the conditions for the use of Form S-3 under the
Securities Act. The Registration Statement meets, and the offering and sale of
the Shares as contemplated hereby complies with, the requirements of Rule 415
under the Securities Act (including, without limitation, Rule 415(a)(5) of the
Rules and Regulations). The Company has complied, to the Commission’s
satisfaction, with all requests of the Commission for additional or supplemental
information. No stop order preventing or suspending use of the Registration
Statement, any Preliminary Prospectus or the Prospectus or the effectiveness of
the Registration Statement has been issued by the Commission, and no proceedings
for such purpose pursuant to Section 8A of the Securities Act against the
Company or related to the Offering have been instituted or are pending or, to
the Company’s knowledge, are contemplated or threatened by the Commission, and
any request received by the Company on the part of the Commission for additional
information has been complied with. As used in this Agreement:

 

  (1) “Base Prospectus” means the prospectus included in the Registration
Statement at the Effective Time.

 

  (2) “Disclosure Package” means (i) the Statutory Prospectus, (ii) each Issuer
Free Writing Prospectus, if any, filed or used by the Company on or before the
Time of Sale and listed on Schedule II hereto (other than a roadshow that is an
Issuer Free Writing Prospectus but is not required to be filed under Rule 433 of
the Rules and Regulations) and (iii) the pricing and other information as set
forth on Exhibit B hereto, all considered together.

 

  (3) “Issuer Free Writing Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433 of the Rules and Regulations relating to the
Shares 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) of the Rules and Regulations.

 

  (4) “Preliminary Prospectus” means any preliminary prospectus supplement,
subject to completion, relating to the Shares, filed by the Company with the
Commission pursuant to Rule 424(b) under the Securities Act for use in
connection with the offering and sale of the Shares, together with the Base
Prospectus attached to or used with such preliminary prospectus supplement.

 

  (5) “Prospectus” means the final prospectus supplement, relating to the
Shares, filed by the Company with the Commission pursuant to Rule 424(b) under
the Securities Act on or before the second business day after the date hereof
(or such earlier time as may be required under the Securities Act), in the form
furnished by the Company to the Placement Agent, for use in connection with the
offering and sale of the Shares that discloses the public offering price and
other final terms of the Shares, together with the Base Prospectus attached to
or used with such final prospectus supplement.

 

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  (6) “Statutory Prospectus” means the Preliminary Prospectus, if any, and the
Base Prospectus, each as amended and supplemented immediately prior to the Time
of Sale, including any document incorporated by reference therein and any
prospectus supplement.

 

  (7) “Time of Sale” means 4:30 p.m., New York City time, on the date of this
Agreement.

  

(c)                Contents of Registration Statement. The Registration
Statement complied when it became effective, complies, as amended or
supplemented, at the Time of Sale and at all times during which 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 Shares (the “Prospectus Delivery Period”), will
comply, in all material respects, with the requirements of the Securities Act
and the Rules and Regulations; the Registration Statement did not, as of the
Effective Time, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading; provided that the Company makes no
representation or warranty in this subsection (c) with respect to statements in
or omissions from the Registration Statement in reliance upon, and in conformity
with, written information furnished to the Company by the Placement Agent
specifically for inclusion therein, which information the parties hereto agree
is limited to the Placement Agent’s Information (as defined in Section 7
hereof).

 

(d)                Contents of Prospectus. The Prospectus will comply, as of the
date that it is filed with the Commission, the date of its delivery to Investors
and at all times during the Prospectus Delivery Period, in all material
respects, with the requirements of the Securities Act; at no time during the
period that begins on the date the Prospectus is filed with the Commission and
ends at the end of the Prospectus Delivery Period will the Prospectus, as then
amended or supplemented, include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
provided that the Company makes no representation or warranty with respect to
statements in or omissions from the Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by the Placement
Agent specifically for inclusion therein, which information the parties hereto
agree is limited to the Placement Agent’s Information. The Prospectus contains
all required information under the Securities Act with respect to the Shares and
the distribution of the Shares.

 

(e)                Incorporated Documents. Each of the documents incorporated or
deemed to be incorporated by reference in the Registration Statement, at the
time such document was filed with the Commission or at the time such document
became effective, as applicable, complied, in all material respects, with the
requirements of the Exchange Act, was filed on a timely basis with the
Commission and did not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

 

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(f)                 Disclosure Package. The Disclosure Package, as of the Time
of Sale, did not, and at the Closing Date will not, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided that the
Company makes no representations or warranties in this subsection (f) with
respect to statements in or omissions from the Disclosure Package in reliance
upon, and in conformity with, written information furnished to the Company by
the Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agent’s Information.

 

(g)                Distributed Materials. Other than the Base Prospectus, any
Preliminary Prospectus and the Prospectus, the Company has not made, used,
prepared, authorized, approved or referred to and will not make, use, prepare,
authorize, approve or refer to any “written communication” (as defined in Rule
405 under the Securities Act) that constitutes an offer to sell or a
solicitation of an offer to buy the Securities other than (i) any document not
constituting a prospectus pursuant to Section 2(a)(10)(a) of the Securities Act
or Rule 134 under the Securities Act or (ii) the documents listed on Schedule II
hereto and other written communications approved in advance by the Placement
Agent.

 

(h)               Issuer Free Writing Prospectuses. Each Issuer Free Writing
Prospectus, if any, conformed or will conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations on the date of
first use, and the Company has complied or will comply with any filing
requirements applicable to such Issuer Free Writing Prospectus pursuant to the
Rules and Regulations. Each Issuer Free Writing Prospectus, if any, when
considered together with the Disclosure Package, as of its issue date and at all
subsequent times through the completion of the Prospectus Delivery Period did
not, does not and will not include any information that conflicted, conflicts or
will conflict with the information contained in the Registration Statement, the
Statutory Prospectus or the Prospectus, including any document incorporated by
reference therein and any prospectus supplement deemed to be a part thereof that
has not been superseded or modified, or includes an untrue statement of a
material fact or omitted or would omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances prevailing at the subsequent time, not misleading;
provided that the Company makes no representation or warranty with respect to
statements in or omissions from any Issuer Free Writing Prospectus in reliance
upon, and in conformity with, written information furnished to the Company by
the Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agent’s Information.

 

(i)                  Not an Ineligible Issuer. (i) At the earliest time after
the filing of the Registration Statement that the Company or another offering
participant made a bona fide offer (within the meaning of Rule 164(h)(2) under
the Securities Act) of the Shares and (ii) at the date hereof, the Company was
not and is not an “ineligible issuer,” as defined in Rule 405 under the
Securities Act (“Rule 405”).

 

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(j)                  Due Organization; Good Standing. The Company has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of Delaware, with the corporate power and authority to own its
properties and to conduct its business as it is currently being conducted and as
described in the Registration Statement, the Prospectus and the Disclosure
Package. The Company is duly qualified to transact business and is in good
standing as a foreign corporation or other legal entity in each other
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified or in good standing or have such power or authority (i) would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect upon, the business, operations, properties, financial condition,
results of operations or prospects of the Company and its subsidiaries, taken as
a whole, or (ii) impair in any material respect the power or ability of the
Company to perform its obligations under this Agreement or to consummate any
transactions contemplated by the Agreement and the Purchase Agreements,
including the issuance and sale of the Securities (any such effect as described
in clauses (i) or (ii), a “Material Adverse Effect”). Each subsidiary of the
Company (each, a “Subsidiary” and, collectively, the “Subsidiaries”) is duly
incorporated or organized, validly existing and in good standing under the laws
of their jurisdiction of incorporation or organization, with the requisite power
and authority to own, lease and operate its properties, except where the failure
to qualify or be in good standing would not reasonably be expected to have a
Material Adverse Effect. On a consolidated basis, the Company and its
Subsidiaries conduct their business as described in the Disclosure Package and
the Prospectus and each Subsidiary is duly qualified to transact business and is
in good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to qualify or to be in good standing would
not reasonably be expected to have a Material Adverse Effect.

 

(k)               Due Authorization and Enforceability. The Company has the full
right, power and authority to enter into this Agreement and the Purchase
Agreements, and to perform and discharge its obligations hereunder and
thereunder; and each of this Agreement and the Purchase Agreements has been duly
authorized, executed and delivered by the Company, and constitutes a valid,
legal and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as rights to indemnity hereunder may be
limited by federal or state securities laws and except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity and limitations on the granting of equitable remedies.

 

(l)                 The Securities. The issuance of the Shares, the Warrants,
the Warrant Shares, the Agent’s Warrant and the shares of Common stock
underlying the Agent’s Warrants (the “Agent’s Warrants Shares”) has been duly
and validly authorized by the Company and, when issued, delivered and paid for
in accordance with the terms of this Agreement and the Purchase Agreements, will
have been duly and validly issued and will be fully paid and nonassessable, will
not be subject to any statutory or contractual preemptive rights or other rights
to subscribe for or purchase or acquire any shares of Common Stock of the
Company that have not been waived or complied with, and will conform in all
material respects to the description thereof contained in the Disclosure Package
and the Prospectus and such description conforms in all material respects to the
rights set forth in the instruments defining the same.

 

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(m)              The Warrants. The issuance of the Warrants and the Warrant
Shares upon exercise of the Warrants (assuming no change in applicable law prior
to the date the Agent’s 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 Warrants.  Upon the exercise of
the Warrants pursuant to their terms, the Warrant Shares will be quoted on the
Principal Market.  The Agent may rely on any representations and warranties made
by the Company to the purchasers of the Warrants.

 

(n)            Capitalization. The authorized capital stock of the Company
consists of (i) 100,000,000 shares of Common Stock, of which (A) 25,714,545
shares were issued and outstanding as of the date of this Agreement, and (B)
4,904,774 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) 10,000,000 shares of preferred stock,
none of which were issued and outstanding as of the date of this Agreement, and
none are 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 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 Disclosure Package and the Prospectus, there are no
(i) outstanding rights (including, without limitation, preemptive rights),
warrants or options to acquire, or instruments convertible into or exchangeable
for, any issued and 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 or other ownership interests of each Subsidiary
of the Company (i) have been duly authorized and validly issued, (ii) are fully
paid and non-assessable and (iii) are owned by the Company directly or through
Subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity except as described in the Disclosure Package and
the Prospectus and except for such security interests, mortgages, pledges,
liens, encumbrances, claims or equities that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. 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, the Agent’s Warrants or the Agent’s Warrant Shares.

 

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(o)               No Conflict. The execution, delivery and performance by the
Company of this Agreement and the Purchase Agreements, and the consummation of
the transactions contemplated hereby and thereby, including the issuance and
sale of the Securities, the Agent’s Warrants and the Agent’s Warrant Shares by
the Company, will not conflict with or result in a breach or violation of, or
constitute a default under (nor constitute any event which with or without
notice, lapse of time or both would result in any breach or violation of or
constitute a default under), give rise to any right of termination or other
right or the cancellation or acceleration of any right or obligation or loss of
a benefit under, or give rise to the creation or imposition of any lien,
encumbrance, security interest, claim or charge upon any property or assets of
the Company pursuant to (i) any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company or any of its properties may be bound or to which any of its
property or assets is subject, (ii) result in any violation of the provisions of
the charter or bylaws of the Company, or (iii) result in any violation of any
law, statute, rule, regulation, judgment, order or decree of any court or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its properties or assets, except in the case of clauses (i)
and (iii) as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

 

(p)               No Consents Required. No approval, authorization, consent or
order of or filing, qualification or registration with, any court or
governmental agency or body, foreign or domestic, which has not been made,
obtained or taken and is not in full force and effect, is required in connection
with the Company’s execution, delivery and performance of this Agreement, the
Warrants, the Agent’s Warrants or the Purchase Agreements, the consummation by
the Company of the transactions contemplated hereby or thereby or the issuance
and sale of the Securities, the Agent’s Warrants and the Agent’s Warrant Shares
other than (i) as may be required under the Securities Act (including the filing
with the Commission of a prospectus supplement), (ii) the filing of a Form 8-K
disclosing the transaction contemplated hereby, (iii) any necessary
qualification of the Securities, the Agent’s Warrants and the Agent’s Warrant
Shares under the securities or blue sky laws of the various jurisdictions in
which the Securities, the Agent’s Warrants and the Agent’s Warrant Shares are
being offered by the Placement Agent, or (iv) under the rules and regulations of
the Financial Industry Regulatory Authority (“FINRA”).

 

(q)               Preemptive Rights. There are no preemptive rights or other
rights (other than rights which have been waived in writing in connection with
the transactions contemplated by this Agreement or otherwise satisfied) to
subscribe for or to purchase any shares of Common Stock or shares of any other
capital stock or other equity interests of the Company, or any agreement or
arrangement between the Company and any of the Company’s stockholders, or to the
Company’s knowledge, between or among any of the Company’s stockholders, which
grant special rights with respect to any shares of the Company’s capital stock
or which in any way affect any stockholder’s ability or right to alienate freely
or vote such shares.

 

(r)                 Registration Rights. There are no contracts, agreements or
understandings between the Company and any person granting such person the right
(other than rights which have been waived in writing in connection with the
transactions contemplated by this Agreement or otherwise satisfied) to require
the Company to register any securities with the Commission.

 

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(s)                Independent Accountants. KPMG, LLP and Marcum LLC, whose
reports on the consolidated financial statements of the Company are incorporated
by reference in the Registration Statement, the Prospectus and the Disclosure
Package, is (i) an independent public accounting firm within the meaning of the
Securities Act, (ii) a registered public accounting firm (as defined in Section
2(a)(12) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”)), and
(iii) to the Company’s knowledge, not in violation of the auditor independence
requirements of the Sarbanes-Oxley Act. Except as disclosed in the Registration
Statement and as pre-approved in accordance with the requirements set forth in
Section 10A of the Exchange Act, KPMG, LLP and Marcum LLC have not been engaged
by the Company to perform any “prohibited activities” (as defined in Section 10A
of the Exchange Act).

 

(t)         Financial Statements. The consolidated financial statements of the
Company, together with the related schedules and notes thereto, set forth or
incorporated by reference in the Registration Statement, the Prospectus and the
Disclosure Package comply in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as applicable, and
present fairly in all material respects (i) the financial condition of the
Company as of the dates indicated and (ii) the consolidated results of
operations, stockholders’ equity and changes in cash flows of the Company for
the periods therein specified; and such financial statements and related
schedules and notes thereto have been prepared in conformity with United States
generally accepted accounting principles, consistently applied throughout the
periods involved (except as otherwise stated therein and subject, in the case of
unaudited financial statements, to the absence of footnotes and normal year-end
adjustments). There are no other financial statements (historical or pro forma)
that are required to be included or incorporated by reference in the
Registration Statement, the Prospectus or the Disclosure Package; and the
Company does not have any material liabilities or obligations, direct or
contingent (including any off-balance sheet obligations), not disclosed in the
Registration Statement, the Disclosure Package and the Prospectus; and all
disclosures contained in the Registration Statement, the Disclosure Package 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 of the
Exchange Act and Item 10(e) of Regulation S-K under the Securities Act, to the
extent applicable, and present fairly the information shown therein and the
Company’s basis for using such measures.

 

(u)               Absence of Material Changes. Subsequent to the respective
dates as of which information is given in the Registration Statement, the
Statutory Prospectus and the Disclosure Package, and except as may be otherwise
stated or incorporated by reference in the Registration Statement, the Statutory
Prospectus and the Disclosure Package, there has not been (i) any Material
Adverse Effect, (ii) any transaction which is material to the Company and out of
the ordinary course of business, (iii) any obligation, direct or contingent
(including any off-balance sheet obligations), incurred by the Company, which is
material to the Company, (iv) any dividend or distribution of any kind declared,
paid or made on the capital stock of the Company, (v) any change in the capital
stock (other than a change in the number of outstanding shares of Common Stock
due to the issuance of shares upon the exercise of outstanding options or
warrants or the conversion of convertible indebtedness), or material change in
the short-term debt or long-term debt of the Company (other than upon conversion
of convertible indebtedness) or any issuance of options, warrants, convertible
securities or other rights to purchase the capital stock (other than grants of
stock options under the Company’s stock option plans existing on the date hereof
and consistent with past practice) of the Company.

 

 10 

 

 

(v)               Legal Proceedings. There are no legal or governmental actions,
suits, claims or proceedings pending or, to the Company’s knowledge, threatened
or contemplated to which the Company or any Subsidiary is or would be a party or
of which any of their respective properties is or would be subject at law or in
equity, before or by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority or agency, or before or by any
self-regulatory organization or other non-governmental regulatory authority
which are required to be described in the Registration Statement, the Disclosure
Package or the Prospectus or a document incorporated by reference therein and
are not so described therein, or which, singularly or in the aggregate, if
resolved adversely to the Company or any Subsidiary, would reasonably be likely
to have a Material Adverse Effect or prevent or materially and adversely affect
the ability of the Company to consummate the transactions contemplated hereby.
To the Company’s knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by other third parties.

 

(w)              No Violation. Neither the Company nor any Subsidiary is in
breach or violation of or in default (nor has any event occurred which with
notice, lapse of time or both would result in any breach or violation of, or
constitute a default) (i) under the provisions of its respective charter or
bylaws (or analogous governing instrument, as applicable), (ii) in the
performance or observance of any term, covenant, obligation, agreement or
condition contained in any indenture, mortgage, deed of trust, bank loan or
credit agreement or other evidence of indebtedness, or any license, lease,
contract or other agreement or instrument to which the Company or any Subsidiary
is a party or by which any of their respective properties may be bound or
affected, or (iii) in the performance or observance of any statute, law, rule,
regulation, ordinance, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or any Subsidiary or any of their respective
properties, as applicable, except with respect to clauses (ii) and (iii) to the
extent any such breach, violation or default has been waived or would not
reasonably be expected to have a Material Adverse Effect.

 

(x)                Permits. The Company and its Subsidiaries have made all
material filings, applications and submissions required by, and owns or
possesses all material approvals, licenses, certificates, certifications,
clearances, consents, exemptions, marks, notifications, orders, permits and
other authorizations issued by, the appropriate federal, state or foreign
regulatory authorities, necessary to conduct their business as described in the
Disclosure Package (collectively, “Permits”), and is in compliance in all
material respects with the terms and conditions of all such Permits. All such
Permits are valid and in full force and effect. Neither the Company nor any
Subsidiary has received any notice of any proceedings relating to revocation or
modification of, any such Permit, which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect. Except as may be required under the Securities Act and state and
foreign Blue Sky laws and the rules and regulations of FINRA, no other Permits
are required for the Company to enter into, deliver and perform this Agreement
and to issue and sell the Securities, the Agent’s Warrants and the Agent’s
Warrant Shares to be issued and sold by the Company.

 

(y)                Not an Investment Company. Neither the Company nor any
Subsidiary is or, after giving effect to the offering and sale of the Securities
and the Agent’s Warrant Shares and the application of the proceeds thereof as
described in the Disclosure Package and the Prospectus, will be (i) required to
register as an “investment company” as defined in the Investment Company Act of
1940, as amended (the “Investment Company Act”), and the rules and regulations
of the Commission thereunder or (ii) a “business development company” (as
defined in Section 2(a)(48) of the Investment Company Act).

 

 11 

 

 

(z)                 No Price Stabilization. Neither the Company or any of the
Company’s officers or directors, has taken or will take, directly or indirectly,
any action designed to or that might be reasonably expected to cause or result
in, or which has constituted or which might reasonably be expected to constitute
the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities, the Agent’s Warrants and the
Agent’s Warrant Shares.

 

(aa)             Good Title to Property. The Company and its Subsidiaries have
good and valid title to all property (whether real or personal) described in the
Registration Statement, the Disclosure Package and the Prospectus as being owned
by the Company or any Subsidiary, in each case free and clear of all liens,
claims, security interests, other encumbrances or defects (collectively,
“Liens”), except such as are described in the Registration Statement, the
Disclosure Package and the Prospectus and those that would not, individually or
in the aggregate materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and its Subsidiaries. All of the property described in the
Registration Statement, Disclosure Package and the Prospectus as being held
under lease by the Company or any Subsidiary is held thereby under valid,
subsisting and enforceable leases, without any liens, restrictions, encumbrances
or claims, except those that, individually or in the aggregate, are not material
and do not materially interfere with the use made and proposed to be made of
such property by the Company and its Subsidiaries.

 

(bb)            Intellectual Property Rights. The Company and its Subsidiaries
own or possess the right to use all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, software, databases, know-how, Internet domain
names, trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures, and other intellectual property
(collectively, “Intellectual Property”) necessary to carry on their businesses
as currently conducted, and as proposed to be conducted as described in the
Disclosure Package and the Prospectus, and the Company is not aware of any claim
to the contrary or any challenge by any other person to the rights of the
Company or any Subsidiary with respect to the foregoing except for those that
could not have a Material Adverse Effect. The Intellectual Property licenses
described in the Disclosure Package and the Prospectus are, to the knowledge of
the Company, valid, binding upon, and enforceable by or against the parties
thereto in accordance with their terms. The Company and its Subsidiaries have
complied in all material respects with, and are not in breach nor have they
received any asserted or threatened claim of breach of, any Intellectual
Property license, and the Company has no knowledge of any breach or anticipated
breach by any other person of any Intellectual Property license. The business of
the Company and its Subsidiaries as now conducted and as proposed to be
conducted, to the knowledge of the Company, does not and will not infringe or
conflict with any patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses or other Intellectual Property or franchise right of any
person. Neither the Company nor any Subsidiary has received notice of any claim
against the Company or any Subsidiary alleging the infringement by the Company
or any Subsidiary of any patent, trademark, service mark, trade name, copyright,
trade secret, license in or other intellectual property right or franchise right
of any person. The Company and its Subsidiaries have taken all reasonable steps
to protect, maintain and safeguard their rights in all Intellectual Property,
including the execution of appropriate nondisclosure and confidentiality
agreements. The consummation of the transactions contemplated by this Agreement
will not result in the loss or impairment of or payment of any additional
amounts with respect to, nor require the consent of any other person in respect
of, the right of the Company or any Subsidiary to own, use, or hold for use any
of the Intellectual Property as owned, used or held for use in the conduct of
the businesses as currently conducted. To the Company’s knowledge, no employee
of the Company or any Subsidiary is the subject of any claim or proceeding
involving a violation of any term of any employment contract, patent disclosure
agreement, invention assignment agreement, non-competition agreement,
non-solicitation agreement, nondisclosure agreement or any restrictive covenant
to or with a former employer where the basis of such violation relates to such
employee’s employment with the Company or any Subsidiary or actions undertaken
by the employee while employed with the Company or any Subsidiary. All patent
applications owned by the Company and filed with the U.S. Patent and Trademark
Office (the “PTO”) or any foreign or international patent authority that have
resulted in patents or currently pending applications that describe inventions
necessary to conduct the business of the Company in the manner described in the
Disclosure Package (collectively, the “Company Patent Applications”) have been
or were duly and properly filed. The Company has complied with its duty of
candor and disclosure to the PTO for the Company Patent Applications. The
Company is not aware of any facts required to be disclosed to the PTO that were
not disclosed to the PTO and which would preclude the grant of a patent for the
Company Patent Applications. The Company has no knowledge of any facts which
would preclude it from having clear title to the Company Patent Applications
that have been identified by the Company as being exclusively owned by the
Company.

 

 12 

 

 

(cc)             No Labor Disputes. No labor problem or dispute with the
employees of the Company or any Subsidiary exists, or, to the Company’s
knowledge, is threatened or imminent, which would reasonably be expected to
result in a Material Adverse Effect. The Company is not aware that any key
employee or significant group of employees of the Company or any Subsidiary
plans to terminate employment with the Company or such Subsidiary. The Company
and its Subsidiaries have not engaged in any unfair labor practice that,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; except for matters which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, (i) there
is (A) no unfair labor practice complaint pending or, to the Company’s
knowledge, threatened against the Company or any Subsidiary before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under collective bargaining agreements is pending or to the Company’s
knowledge, threatened, (B) no strike, labor dispute, slowdown or stoppage
pending or, to the Company’s knowledge, threatened against the Company or any
Subsidiary and (C) no union representation dispute currently existing concerning
the employees of the Company or any Subsidiary and (ii) to the Company’s
knowledge, (A) no union organizing activities are currently taking place
concerning the employees of the Company or any Subsidiary and (B) there has been
no violation of any federal, state, local or foreign law relating to
discrimination in the hiring, promotion or pay of employees, any applicable wage
or hour laws or any provision of the Employee Retirement Income Security Act of
1974 (“ERISA”) or the rules and regulations promulgated thereunder concerning
the employees of the Company or any Subsidiary.

 

(dd)          Taxes. Each of the Company and its Subsidiaries (i) has timely
filed all necessary federal, state, local and foreign income and franchise tax
returns (or timely filed applicable extensions therefor) that have been required
to be filed and (ii) is not in default in the payment of any taxes which were
payable pursuant to such returns or any assessments with respect thereto, other
than any which the Company or such Subsidiary is contesting in good faith and
for which adequate reserves have been provided and reflected in the Company’s
financial statements included in the Registration Statement, the Disclosure
Package and the Prospectus. Neither the Company nor any Subsidiary has any tax
deficiency that has been or, to the knowledge of the Company, is reasonably
likely to be asserted or threatened against it that would result in a Material
Adverse Effect. Neither the Company nor any Subsidiary has engaged in any
transaction which is a corporate tax shelter or which could be characterized as
such by the Internal Revenue Service or any other taxing authority.

 

 13 

 

 

(ee)            ERISA. The Company and its Subsidiaries are in compliance in all
material respects with all presently applicable provisions of ERISA; no
“reportable event” (as defined in ERISA) has occurred with respect to any
“pension plan” (as defined in ERISA) for which the Company or any Subsidiary
would have any liability; the Company and its Subsidiaries have not incurred and
do not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the “Code”); and each “pension plan”
for which the Company or any Subsidiary would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.

 

(ff)                Compliance with Environmental Laws. Each of the Company and
its Subsidiaries (i) is in compliance with any and all applicable foreign,
federal, state and local laws, orders, rules, regulations, directives, decrees
and judgments relating to the use, treatment, storage and disposal of hazardous
or toxic substances or waste and protection of human health and safety or the
environment which are applicable to its business (“Environmental Laws”); (ii)
has received and is in compliance with 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, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

(gg)           Insurance. Each of the Company and its Subsidiaries maintains or
is covered by insurance provided by recognized, financially sound and reputable
institutions with insurance policies in such amounts and covering such risks as
is adequate for the conduct of its business and the value of its properties and
as is customary for companies engaged in similar businesses in similar
industries. All such insurance is fully in force on the date hereof and will be
fully in force as of the Closing Date. The Company has no reason to believe that
each of it and its Subsidiaries will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not reasonably be expected to have a Material Adverse Effect. The Company
does not insure risk of loss of the Company or any of its Subsidiaries through
any captive insurance, risk retention group, reciprocal group or by means of any
fund or pool of assets specifically set aside for contingent liabilities other
than as described in the Disclosure Package.

 

 14 

 

 

(hh)             Accounting Controls. The Company maintains a system of internal
accounting controls for the Company and its Subsidiaries sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management’s
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.

 

(ii)                Disclosure Controls. The Company has established, maintains
and evaluates “disclosure controls and procedures” (as such term is defined in
Rule 13a-15(e) and 15d-15(e) under the Exchange Act), which (i) are designed to
ensure that material information relating to the Company and 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, (ii) have been evaluated for effectiveness as of the end of the last
fiscal period covered by the Registration Statement; and (iii) such disclosure
controls and procedures are effective to perform the functions for which they
were established. There are no significant deficiencies or material weaknesses
in the design or operation of internal controls which could adversely affect the
Company’s ability to record, process, summarize, or report financial data to
management and the Board of Directors of the Company. The Company is not aware
of any fraud, whether or not material, that involves management or other
employees who have a role in the Company’s internal controls; and since the date
of the most recent evaluation of such disclosure controls and procedures, there
have been no significant changes in internal controls or in other factors that
could significantly affect internal controls, including any corrective actions
with regard to significant deficiencies and material weaknesses. Except as set
forth in the Disclosure Package, the Audit Committee of the Board of Directors
of the Company (the “Audit Committee”) is not reviewing or investigating, and
neither the Company’s independent auditors nor its internal auditors have
recommended that the Audit Committee review or investigate, (i) adding to,
deleting, changing the application of or changing the Company’s disclosure with
respect to, any of the Company’s material accounting policies, (ii) any manner
which could result in a restatement of the Company’s financial statements for
any annual or interim period during the current or prior three fiscal years, or
(iii) a significant deficiency, material weakness, change in internal control
over financial reporting or fraud involving management or other employees who
have a significant role in the internal control over financial reporting.

 

(jj)                 Minute Books. The minute books of the Company and each
Subsidiary have been made available upon request to the Placement Agent and
counsel for the Placement Agent, and such books (i) contain a complete summary
of all meetings and actions of the board of directors (including each board
committee) and stockholders of the Company and its Subsidiaries (or analogous
governing bodies and interest holders, as applicable), and (ii) accurately in
all material respects reflect all transactions referred to in such minutes.

 

 15 

 

 

(kk)           Contracts; Off-Balance Sheet Interests. There is no document,
contract, permit or instrument, or off-balance sheet transaction (including
without limitation, any “variable interests” in “variable interest entities,” as
such terms are defined in Financial Accounting Standards Board Interpretation
No. 46) of a character required by the Securities Act or the Rules and
Regulations to be described in the Registration Statement or the Disclosure
Package or to be filed as an exhibit to the Registration Statement or document
incorporated by reference therein, which is not described or filed as required.
Each description of a document, contract, permit or instrument in the
Registration Statement or the Disclosure Package accurately reflects in all
material respects the terms of the underlying document, contract, permit or
instrument. The documents, contracts, permits and instruments described in the
immediately preceding sentence to which the Company or any Subsidiary is a party
have been duly authorized, executed and delivered by the Company or such
Subsidiary, constitute valid and binding agreements of the Company or such
Subsidiary, are enforceable against and by the Company or such Subsidiary in
accordance with the terms thereof, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization or similar laws affecting
the rights of creditors generally and subject to general principles of equity,
and are in full force and effect on the date hereof. None of the Company, any
Subsidiary, or to the Company’s knowledge, any other party is in default in the
observance or performance of any term or obligation to be performed by it under
any such agreement, and no event has occurred which with notice or lapse of time
or both would constitute such a default, in any case which default or event,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. No default exists, and no event has occurred which with
notice or lapse of time or both would constitute a default, in the due
performance and observance of any term, covenant or condition, by the Company or
any Subsidiary of any agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company, any Subsidiary or their
respective properties or business may be bound or affected which default or
event, individually or in the aggregate, would have a Material Adverse Effect.

 

(ll)                 No Undisclosed Relationships. No relationship, direct or
indirect, exists between or among the Company or any Subsidiary, on the one
hand, and the directors, officers, stockholders, customers or suppliers of the
Company, any Subsidiary or any of their affiliates, on the other hand, which is
required to be described in the Registration Statement, the Disclosure Package
or the Prospectus or a document incorporated by reference therein and which has
not been so described.

 

(mm)         Brokers Fees. Except as disclosed in the Disclosure Package, there
are no contracts, agreements or understandings between the Company and any
person (other than this Agreement) that would give rise to a claim against the
Company or the Placement Agent for a brokerage commission, finder’s fee or other
like payment in connection with the offering and sale of the Securities, the
Agent’s Warrants and the Agent’s Warrant Shares.

 

(nn)             Forward-Looking Statements. No forward-looking statements
(within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act) contained in either the Disclosure Package or the Prospectus have
been made or reaffirmed without a reasonable basis therefor or have been
disclosed other than in good faith.

 

 16 

 

 

(oo)           Exchange Act Registration. The Common Stock is registered
pursuant to Section 12(g) of the Exchange Act, and the Company has taken no
action designed to, or reasonably likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act, nor has the Company
received any notification that the Commission is contemplating terminating such
registration or listing.

 

(pp)           Sarbanes-Oxley Act. The Company, and to its knowledge, each of
the Company’s directors or officers, in their capacities as such, is in
compliance in all material respects with all applicable effective provisions of
the Sarbanes-Oxley Act and any related rules and regulations promulgated by the
Commission. Each of the principal executive officer and the principal financial
officer of the Company (and each former principal executive officer of the
Company and each former principal financial officer of the Company as
applicable) has made all certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act with respect to all reports, schedules, forms, statements and
other documents required to be filed by him or her with the Commission. For
purposes of the preceding sentence, “principal executive officer” and “principal
financial officer” shall have the meanings given to such terms in the
Sarbanes-Oxley Act.

 

(qq)          Foreign Corrupt Practices. None of the Company, any Subsidiary
nor, to the Company’s knowledge, any other person associated with or acting on
behalf of the Company or any Subsidiary, including without limitation any
director, officer, agent or employee of the Company or any Subsidiary has,
directly or indirectly, while acting on behalf of the Company or any Subsidiary
(i) used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity or failed to disclose
fully any contribution in violation of law, (ii) made any payment to any federal
or state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction thereof, (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.

 

(rr)              Affiliate Transactions. There are no transactions,
arrangements or other relationships between and/or among the Company, any of its
affiliates (as such term is defined in Rule 405) and any unconsolidated entity,
including, but not limited to, any structured finance, special purpose or
limited purpose entity that could reasonably be expected to materially affect
the Company’s liquidity or the availability of or requirements for its capital
resources required to be described in the Disclosure Package and the Prospectus
or a document incorporated by reference therein which have not been described as
required. The Company does not, directly or indirectly, have any outstanding
personal loans or other credit extended to or for any of its directors or
executive officers.

 

(ss)             Statistical or Market-Related Data. Any statistical,
industry-related or market-related data included or incorporated by reference in
the Registration Statement, the Prospectus or the Disclosure Package, are based
on or derived from sources that the Company reasonably and in good faith
believes to be reliable and accurate, and such data agree with the sources from
which they are derived.

 

 17 

 

 

(tt)                Money Laundering Laws. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance in all
material respects with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the USA PATRIOT Act, the money laundering statutes of all
jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any
governmental agency (collectively, the “Money Laundering Laws”) and no action,
suit or proceeding by or before any court or governmental agency, authority or
body or any arbitrator involving the Company or any Subsidiary with respect to
the Money Laundering Laws is pending, or to the knowledge of the Company,
threatened against the Company or any Subsidiary.

 

(uu)           OFAC. Neither the Company nor any Subsidiary nor, to the
knowledge of the Company, any director, officer, agent, employee or affiliate of
the Company or any Subsidiary is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”); and the Company will not directly or indirectly use the
proceeds of the offering, or lend, contribute or otherwise make available such
proceeds to any affiliate, joint venture partner or other person or entity,
which, to the Company’s knowledge, will use such proceeds for the purpose of
financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.

 

(vv)            Margin Securities. None of the proceeds of the sale of the
Securities, the Agent’s Warrants and the Agent’s Warrant Shares will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Securities, the Agent’s Warrants or the
Agent’s Warrant Shares to be considered a “purpose credit” within the meanings
of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

 

(ww)        FINRA Affiliations. There are no affiliations or associations
between (i) any member of the FINRA and (ii) the Company, any Subsidiary or any
officers or directors of the Company or any Subsidiary, except as set forth in
the Registration Statement, the Disclosure Package and the Prospectus.

 

(xx)            Exchange Act Requirements. The Company has filed in a timely
manner all reports required to be filed pursuant to Sections 13(a), 13(e), 14
and 15(d) of the Exchange Act during the preceding 12 months.

 

(yy)            Criminal Proceedings. To the best of the Company’s knowledge,
information and belief, none of the current directors or officers of the Company
(or such stockholders’ respective principals) is or has ever been subject to
prior regulatory, criminal or bankruptcy proceedings in the U.S. or elsewhere.

 

(zz)              Non-public Information. The Company has not provided and has
not authorized any other person to act on its behalf to provide any Investor or
its respective agents or counsel with any information about the Company that
constitutes or might constitute material, non-public information which is not
otherwise disclosed in the Prospectus.

 

 18 

 

 

Any certificate signed by any officer of the Company or any Subsidiary and
delivered to the Placement Agent or to counsel for the Placement Agent in
connection with the offering of the Securities shall be deemed a representation
and warranty by the Company to the Placement Agent and the Investors as to the
matters covered thereby.

 

3.                  Covenants. The Company covenants and agrees with the
Placement Agent as follows:

 

(a)                Reporting Obligations; Exchange Act Compliance. The Company
will: (i) file each Preliminary Prospectus and the Prospectus with the
Commission within the time periods specified by Rule 424(b) and Rules 430A, 430B
or 430C under the Securities Act, as applicable, (ii) file any Issuer Free
Writing Prospectus to the extent required by Rule 433 under the Securities Act,
if applicable, (iii) file 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 during the Prospectus Delivery Period, and (iv) furnish copies of
each Issuer Free Writing Prospectus, if any, (to the extent not previously
delivered) to the Placement Agent prior to 10:00 a.m. Eastern time, on the
second business day next succeeding the date of this Agreement in such
quantities as the Placement Agent shall reasonably request.

 

(b)               Continued Compliance with Securities Law. If, at any time
prior to the filing of the Prospectus pursuant to Rule 424(b), any event occurs
as a result of which the Disclosure Package as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the Company will
(i) promptly notify the Placement Agent so that any use of the Disclosure
Package may cease until it is amended or supplemented and (ii) amend or
supplement the Disclosure Package to correct such statements or omission. If,
during the Prospectus Delivery Period, any event occurs as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Registration Statement or supplement the Prospectus to comply with the
Securities Act, the Company will (A) promptly notify the Placement Agent of such
event and (B) promptly prepare and file with the Commission and furnish, at its
own expense, to the Placement Agent and, to the extent applicable, the dealers
and any other dealers upon request of the Placement Agent, an amendment or
supplement which will correct such statement or omission or an amendment which
will effect such compliance. The Company will deliver promptly to the Placement
Agent such number of the following documents as the Placement Agent shall
reasonably request: (i) conformed copies of the Registration Statement as
originally filed with the Commission (in each case excluding exhibits),
(ii) each Preliminary Prospectus, (iii) any Issuer Free Writing Prospectus,
(iv) the Prospectus (the delivery of the documents referred to in clauses (i),
(ii),  (iii) and (iv) of this subsection (b) to be made not later than
10:00 a.m., New York time, on the business day following the execution and
delivery of this Agreement), (v) conformed copies of any amendment to the
Registration Statement (excluding exhibits), (vi) any amendment or supplement to
the Disclosure Package or the Prospectus (the delivery of the documents referred
to in clauses (v) and (vi) of this subsection (b) to be made not later than
10:00 a.m., New York City time, on the business day following the date of such
amendment or supplement), and (vii) any document incorporated by reference in
the Disclosure Package or the Prospectus (excluding exhibits thereto) (the
delivery of the documents referred to in clause (vi) of this subsection (b) to
be made not later than 10:00 a.m., New York City time, on the business day
following the date of such document).

 

 19 

 

 

(c)                Issuer Free Writing Prospectuses. The Company will (i) not
make any offer relating to the Securities, the Agent’s Warrants and the Agent’s
Warrant Shares that would constitute an Issuer Free Writing Prospectus or that
would otherwise constitute a “free writing prospectus” (as defined in Rule 405
under the Securities Act) required to be filed by the Company with the
Commission under Rule 433 under the Securities Act unless the Placement Agent
approve its use in writing prior to first use (each, a “Permitted Free Writing
Prospectus”); provided that the prior written consent of the Placement Agent
shall be deemed to have been given in respect of any electronic road show; (ii)
treat each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus; (iii) comply with the requirements of Rules 164 and 433 under the
Securities Act applicable to any Issuer Free Writing Prospectus, including the
requirements relating to filing timely with the Commission, legending and record
keeping; and (iv) not take any action that would result in the Placement Agent
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 such Placement Agent that such Placement Agent otherwise would not
have been required to file thereunder. The Company will satisfy the conditions
in Rule 433 under the Securities Act to avoid a requirement to file with the
Commission any electronic road show.

 

(d)               Conflicting Issuer Free Writing Prospectus. If at any time
following the issuance of an Issuer Free Writing Prospectus there occurred or
occurs an event or development as a result of which such Issuer Free Writing
Prospectus conflicted or would conflict with the information contained in the
Registration Statement, the Disclosure Package or the Prospectus or included or
would include an untrue statement of a material fact or omitted or would omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances prevailing at that subsequent time, not misleading,
the Company promptly will notify the Placement Agent and will promptly amend or
supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate
or correct such conflict, untrue statement or omission. The foregoing sentence
does not apply to statements in or omissions from any Issuer Free Writing
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information.

 

(e)                Blue Sky Laws. The Company will promptly take or cause to be
taken, from time to time, such actions as the Placement Agent may reasonably
request to qualify the Securities, the Agent’s Warrants and the Agent’s Warrant
Shares for offering and sale under the state securities, or blue sky, laws of
such states or other jurisdictions as the Placement Agent may reasonably request
and to maintain such qualifications in effect so long as the Placement Agent may
request for the distribution of the Securities, the Agent’s Warrants and the
Agent’s Warrant Shares, provided that in no event shall the Company be obligated
to qualify as a foreign corporation in any jurisdiction in which it is not so
qualified or to file a general consent to service of process in any jurisdiction
or subject itself to taxation as doing business in any jurisdiction. The Company
will advise the Placement Agent promptly of the suspension of the qualification
or registration of (or any exemption relating to) the Securities, the Agent’s
Warrants and the Agent’s Warrant Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such purpose,
and in the event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its best efforts to obtain the
withdrawal thereof at the earliest possible moment.

 

 20 

 

 

(f)                Earnings Statement. As soon as practicable, the Company will
make generally available to holders of its securities and deliver to the
Placement Agent, an earnings statement of the Company (which need not be
audited) covering a period of at least 12 months beginning after the date of
this Agreement that will satisfy the provisions of Section 11(a) of the
Securities Act and the Rules and Regulations (including, at the option of the
Company, Rule 158). For the purpose of the preceding sentence, “as soon as
practicable” means the 45th day after the end of the fourth fiscal quarter
following the fiscal quarter that includes the date of this Agreement, except
that if such fourth fiscal quarter is the last quarter of the Company’s fiscal
year, “as soon as practicable” means the 90th day after the end of such fourth
fiscal quarter.

 

(g)               Use of Proceeds. The Company will apply the net proceeds from
the sale of the Securities in the manner set forth in the Registration
Statement, the Disclosure Package and the Prospectus under the heading “Use of
Proceeds.”

 

(h)                Public Communications. Prior to 9:00 a.m. New York City time
on the business day immediately subsequent to the date hereof, the Company shall
issue a press release (the “Press Release”) reasonably acceptable to the
Placement Agent disclosing the execution of this Agreement, the Purchase
Agreements and the transactions contemplated hereby and thereby. Prior to the
Closing Date, the Company covenants not to issue any press release (other than
the Press Release) or other communication directly or indirectly or hold any
press conference with respect to the Company, its condition, financial or
otherwise, or earnings, business affairs or business prospects (except for
routine oral marketing communications in the ordinary course of business and
consistent with the past practices of the Company and of which the Placement
Agent are notified), without the prior written consent of the Placement Agent,
unless in the judgment of the Company and its counsel, and after notification to
the Placement Agent, such press release or communication is required by law.

 

(i)                  Stabilization. The Company will not take directly or
indirectly any action designed, or that would reasonably be expected to cause or
result in, or that will constitute, stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, the Agent’s Warrants and the Agent’s Warrant Shares.

 

(j)                 Transfer Agent. The Company shall engage and maintain, at
its expense, a transfer agent and, if necessary under the jurisdiction of
incorporation of the Company, a registrar for the Securities and the Agent’s
Warrant Shares.

 

 21 

 

 

(k)               Investment Company Act. The Company shall not invest or
otherwise use the proceeds received by the Company from its sale of the
Securities in such a manner as would require the Company or any Subsidiary to
register as an investment company under the Investment Company Act.

 

(l)                  Sarbanes-Oxley Act. During the Prospectus Delivery Period,
the Company will comply with all effective applicable provisions of the Sarbanes
Oxley Act.

 

(m)              Periodic Reports. During the Prospectus Delivery Period, the
Company will file with the Commission such periodic and special reports as
required by the Securities Act.

 

(n)                Lock-Up Period. That the Company will not, for a period of 90
days from the date of this Agreement, (the “Lock-Up Period”) without the prior
written consent of the Placement Agent, directly or indirectly offer, sell,
assign, transfer, pledge, contract to sell, grant any option to purchase, make
any short sale or otherwise dispose of, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock,
other than (i) the Company’s sale of the Securities, the Agent’s Warrants and
the Agent’s Warrant Shares hereunder, (ii) the issuance of Common Stock or
options to acquire Common Stock pursuant to the Company’s employee benefit
plans, qualified stock option plans or other director or employee compensation
plans as such plans are in existence on the date hereof and described in the
Prospectus and consistent with past practice, and (iii) the issuance of Common
Stock pursuant to the valid exercises of options, warrants or rights outstanding
on the date hereof and the Agent’s Warrants. The Company will cause each
executive officer and director listed in Schedule III to furnish to the
Placement Agent, prior to the date of this Agreement, a letter, substantially in
the form of Exhibit  hereto. The Company also agrees that during the Lock-Up
Period, without prior written consent of the Placement Agent, the Company will
not file any registration statement, preliminary prospectus or prospectus, or
any amendment or supplement thereto (collectively, “Filings”), under the
Securities Act for any such transaction or which registers, or offers for sale,
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, except for (i) registration statements on Form S-8 relating to
employee benefit plans and (ii) any amendments or prospectuses or supplements
relating to previously filed registration statements (provided that no
additional shares of common stock are issued pursuant to such amendments,
prospectuses or supplements).

 

4.                Costs and Expenses. In addition to the Agency Fee, the
Company, whether or not the transactions contemplated hereunder are consummated
or this Agreement is terminated, will reimburse the Placement Agent for (a) all
reasonable fees and disbursements of counsel retained by the Placement Agent
with the Company’s consent, (b) all of the Placement Agent’s reasonable travel
and related expenses, and (c) any other reasonable out-of-pocket expenses
incurred by the Placement Agent in connection with the performance of their
services hereunder; provided that, in any event, reimbursement of expenses
pursuant to this Section 4 will not exceed $100,000 in the aggregate without the
Company’s approval.

 

 22 

 

 

5.                Conditions of Placement Agent’s Obligations. The obligations
of the Placement Agent hereunder and the Investors under the Purchase Agreements
are subject to the following conditions:

 

(a)                Filings with the Commission. Each 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 3(a)
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 Securities 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
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus or
otherwise) shall have been complied with to the reasonable satisfaction of the
Placement Agent. 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 Disclosure Package, 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, the Agent’s Warrants and the Agent’s Warrant Shares 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, the Warrant Shares, the Agent’s Warrants and the Agent’s Warrant
Shares 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
Disclosure Package, (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
Disclosure Package, 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 due to
the issuance of shares upon the exercise of outstanding options or warrants or
the conversion of convertible indebtedness), 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 or affecting the
business, assets, general affairs, management, financial position, prospects,
stockholders’ equity or results of operations of the Company, otherwise than as
set forth in the Disclosure Package, 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 Agent, 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 Disclosure
Package.

 

 23 

 

 

(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 Agent
shall have received from Robinson Brog, counsel to the Company, such counsels’
written opinions, addressed to the Placement Agent and the Investors and dated
the Closing Date, in form and substance reasonably satisfactory to the Placement
Agent and their counsel. Such counsel to the Company shall also have furnished
to the Placement Agent a written statement (“Negative Assurances”), addressed to
the Placement Agent and dated the Closing Date, in form and substance
satisfactory to the Placement Agent and their counsel.

 

(g)               Opinion of IP Counsel to the Company. The Placement Agent
shall have received from Beusse Wolter Sanks Mora & Maire, P.A., IP counsel for
the Company, such opinion or opinions, dated the Closing Date, with respect to
such matters as the Placement Agent may reasonably require, and the Company
shall have furnished to such counsel such documents as it requests to enable it
to pass upon such matters.

 

(h)               Opinion of Counsel to the Placement Agent. The Placement Agent
shall have received from Faegre Baker Daniels LLP, counsel for the Placement
Agent, such opinion or opinions, dated the Closing Date, with respect to such
matters as the Placement Agent may reasonably require, and the Company shall
have furnished to such counsel such documents as it requests to enable it to
pass upon such matters.

 

(i)                  Accountant’s Comfort Letters. On the date hereof, the
Placement Agent shall have received a letter dated the date hereof (the “Comfort
Letters”), addressed to the Placement Agent and in form and substance reasonably
satisfactory to the Placement Agent and their counsel, from KPMG, LLP and Marcum
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 Disclosure Package, 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, Statement of Auditing
Standard No. 100 (or successor bulletins) and AU Section 634, in connection with
registered public offerings.

 

 24 

 

 

(j)                 CFO Certificate. On the date hereof, the Company shall have
furnished to the Placement Agent a certificate, dated as of such date, signed on
behalf of the Company by its Chief Financial Officer, regarding certain
financial information in the Disclosure Package respectively, in form and
substance satisfactory to the Placement Agent.

 

(k)               Bring-Down Letters. On the Closing Date, the Placement Agent
shall have received from KPMG, LLP and Marcum LLC a letter (the “Bring-Down
Letter”), dated the Closing Date, addressed to the Placement Agent and in form
and substance reasonably satisfactory to the Placement Agent 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.

 

(l)                  Officer’s Certificate. The Placement Agent shall have
received on the Closing Date a certificate, addressed to the Placement Agent and
dated the Closing Date, of the Chief Executive Officer or Chief Operating
Officer and the Chief Financial 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 Disclosure
Package, 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, in or affecting the condition (financial or otherwise), results
of operations, business, assets or prospects of the Company 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 Securities for offering or sale, nor suspending or preventing the use of the
Disclosure Package, 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 Disclosure Package, 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

 

 25 

 

 

(v)       no event has occurred as a result of which it is necessary to amend or
supplement the Registration Statement, the Prospectus or the Disclosure Package
in order to make the statements therein not untrue or misleading in any material
respect.

  

(m)             No FINRA Objection. The Placement Agent 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 Agent in
connection with the issuance and sale of the Securities, the Agent’s Warrants
and the Agent’s Warrant Shares.

 

(n)               Purchase Agreements. The Company shall have entered into the
Security Purchase Agreement and Warrant Purchase Agreement with each of the
Investors, and such agreement shall be in full force and effect on the Closing
Date.

 

(o)               Lock-Up Letters. The Placement Agent shall have received the
written agreements, substantially in the form of Exhibit C hereto, of all of the
executive officers and directors of the Company set forth on Schedule III.

 

(p)               Additional Documents. Prior to the Closing Date, the Company
shall have furnished to the Placement Agent such further information,
certificates or documents as the Placement Agent 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 Agent.

 

If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Placement
Agent 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 4, Section 6 and Section 8 hereof shall at all times
be effective and shall survive such termination.

  

 26 

 

 

6.                  Indemnification and Contribution.

 

(a)                Indemnification of the Placement Agent. The Company agrees to
indemnify, defend and hold harmless the Placement Agent, its affiliates and each
of its and their respective directors, officers, members, employees,
representatives and agents and its affiliates, and each of its and their
respective directors, officers, members, employees, representatives and agents
and each person who controls such Placement Agent within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, and the successors
and assigns of all of the foregoing persons, from and against any losses,
claims, damages, expenses or liabilities, joint or several, to which such person
may become subject, under the Securities Act, the Exchange Act, or other federal
or state statutory law or regulation, the common law or otherwise (including in
settlement of any litigation if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Disclosure Package, the
Prospectus, or any amendment or supplement thereto, any Issuer Free Writing
Prospectus or in any materials or information provided to Investors by, or with
the approval of, the Company in connection with the marketing of the offering of
the Common Stock (“Marketing Materials”), including any roadshow or investor
presentations made to Investors by the Company (whether in person or
electronically) or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse such
Placement Agent for any legal or other expenses reasonably incurred by it in
connection with investigating or defending against such loss, claim, damage,
liability, expense or action; or (ii) in whole or in part upon any inaccuracy in
the representations and warranties of the Company contained herein; or (iii) in
whole or in part upon any failure of the Company to perform its obligations
hereunder, under the Warrants, the Agent’s Warrants or under law; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, expense, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any Preliminary Prospectus,
the Disclosure Package, the Prospectus, or any such amendment or supplement, any
Issuer Free Writing Prospectus or in any Marketing Materials, in reliance upon
and in conformity with written information furnished to the Company by the
Placement Agent, specifically for use in the preparation thereof, which
information the parties hereto agree is limited to the Placement Agent’s
Information.

 

(b)               Indemnification of the Company. The Placement Agent agrees,
severally, but not jointly, to indemnify, defend and hold harmless the Company,
its affiliates and each of its and their respective directors, officers,
members, employees, representatives and agents and its affiliates, and each of
its and their respective directors, officers, members, employees,
representatives and agents and each person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and the successors and assigns of all of the foregoing persons against any
losses, claims, damages, expenses or liabilities to which the Company may become
subject, under the Securities Act, the Exchange Act, or other federal or state
statutory law or regulation, the common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Placement Agent), insofar as such losses, claims, damages,
expenses or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Disclosure Package, the Prospectus, or any amendment or supplement thereto or
any Issuer Free Writing Prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Disclosure Package, the
Prospectus, or any such amendment or supplement thereto, or any Issuer Free
Writing Prospectus in reliance upon and in conformity with written information
furnished to the Company by such Placement Agent (whether directly or through
the Placement Agent), specifically for use in the preparation thereof, which
information the parties hereto agree is limited to the Placement Agent’s
Information, and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
against any such loss, claim, damage, liability or action. Notwithstanding the
provisions of this Section 6(b), in no event shall any indemnity by the
Placement Agent under this Section 6(b) exceed the total compensation received
by such Placement Agent in accordance with Section 1(b) hereof.

 

 27 

 

 

(c)                Notice and Procedures. If any action, suit or proceeding
(each, a “Proceeding”) is brought against a person (an “Indemnified Party”) in
respect of which indemnity may be sought against the Company or the Placement
Agent (as applicable, the “Indemnifying Party”) pursuant to subsections (a) or
(b) above, respectively, of this Section 6, such Indemnified Party shall
promptly notify such Indemnifying Party in writing of the institution of such
Proceeding and such Indemnifying Party shall assume the defense of such
Proceeding, including the employment of counsel reasonably satisfactory to such
Indemnified Party and payment of all fees and expenses; provided, however, that
the omission to so notify such Indemnifying Party shall not relieve such
Indemnifying Party from any liability which such Indemnifying Party may have to
any Indemnified Party or otherwise, except to the extent the Indemnifying Party
has been materially prejudiced by such failure; and provided, further, that the
failure to notify the Indemnifying Party shall not relieve it from any liability
that it may have to an Indemnified Party otherwise than under subsection (a) or
(b) above. The Indemnified Party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such Proceeding, (ii) the
Indemnifying Party shall not have, within a reasonable period of time in light
of the circumstances, employed counsel to defend such Proceeding or (iii) such
Indemnified Party or parties shall have reasonably concluded upon written advice
of counsel that there may be one or more legal defenses available to it or them
which are different from, additional to or in conflict with those available to
such Indemnifying Party (in which case such Indemnifying Party shall not have
the right to direct that portion of the defense of such Proceeding on behalf of
the Indemnified Party or parties, but such Indemnifying Party or parties may
employ counsel and participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of the Indemnifying Party), in any of
which events such reasonable fees and expenses shall be borne by such
Indemnifying Party and paid as incurred (it being understood, however, that such
Indemnifying Party shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel) in any one Proceeding or
series of related Proceedings in the same jurisdiction representing the
Indemnified Parties who are parties to such Proceeding). An Indemnifying Party
shall not be liable for any settlement of any Proceeding effected without its
written consent but, if settled with its written consent, such Indemnifying
Party agrees to indemnify and hold harmless the Indemnified Party or parties
from and against any loss or liability by reason of such settlement.
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 sentence of this
Section 6(c), then 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 60 days after receipt by such Indemnifying
Party of the aforesaid request, (ii) such Indemnifying Party shall not have
fully reimbursed the Indemnified Party in accordance with such request prior to
the date of such settlement and (iii) such Indemnified Party shall have given
the Indemnifying Party at least 30 days’ prior notice of its intention to
settle. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement, compromise or consent to the entry of
judgment in 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 and does not include an admission
of fault or culpability or a failure to act by or on behalf of such Indemnified
Party.

 

 28 

 

 

(d)               Contribution. If the indemnification provided for in this
Section 6 is unavailable to an Indemnified Party under subsections (a) or (b) of
this Section 6 or insufficient to hold an Indemnified Party harmless in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then each applicable Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of the losses, claims, damages, liabilities or
expenses referred to in subsections (a) or (b) above, (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 the Indemnified Party or parties on the other hand
in connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Placement Agent on the other hand shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Securities (before deducting expenses) received by the Company bear to the
Agency Fee received by the Placement Agent. The relative fault of the Company on
the one hand and the Placement Agent 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, on the one hand, or by the
Placement Agent, on the other hand, and the parties’ relevant intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement, omission, act or failure to act; provided that the parties hereto
agree that the written information furnished to the Company by the Placement
Agent for use in the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, consists solely of the Placement Agent’s
Information relating to the Placement Agent.

 

(e)                 Allocation. The Company and the Placement Agent agree that
it would not be just and equitable if contribution pursuant to subsection (d)
above were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the first sentence of subsection (d) above. Notwithstanding the
provisions of this Section 6(e), no Placement Agent shall be required to
contribute any amount in excess of the total Agency Fee received by such
Placement Agent in accordance with Section 1(b) less the amount of any damages
which such Placement Agent has otherwise paid or become liable to pay by reason
of any untrue or alleged untrue statement, omission or alleged omission, act or
alleged act or failure to act or alleged failure to act. 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 6 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.

 

 29 

 

 

(f)                Representations and Agreements to Survive Delivery. The
obligations of the Company and the Placement Agent under this Section 6 shall be
in addition to any liability which the Company and the Placement Agent may
otherwise have. The indemnity and contribution agreements contained in this
Section 6 and the covenants, agreements, warranties and representations of the
Company contained in this Agreement 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 the Placement Agent, any person who
controls such Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act or any affiliate of such
Placement Agent, or by or on behalf of the Company, its directors or officers or
any person who controls the Company within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act, and (iii) the issuance and
delivery of the Securities. The Company and the Placement Agent agree promptly
to notify each other of the commencement of any Proceeding against it and, in
the case of the Company, against any of the Company’s officers or directors in
connection with the issuance and sale of the Securities, or in connection with
the Registration Statement, the Disclosure Package or the Prospectus.

 

7.                  Information Furnished by the Placement Agent. The Company
acknowledges that the statements set forth under the heading “Plan of
Distribution” in the Statutory Prospectus and the Prospectus (the “Placement
Agent’s Information”) constitute the only information relating to the Placement
Agent furnished in writing to the Company by the Placement Agent as such
information is referred to in Sections 2 and 6 hereof.

 

8.                  Termination. The Placement Agent 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
Agent 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 NYSE MKT, the NASDAQ Global Market, the NASDAQ Capital
Market or in the over-the-counter markets, (B) trading in the Common Stock of
the Company shall have been suspended on any exchange or 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, (D) there shall have
occurred any outbreak or material escalation of hostilities or acts of terrorism
involving the United States or there shall have been a declaration by the United
States of a national emergency or war, or (E) there shall have occurred any
other calamity or crisis or any material change in general economic, political
or financial conditions in the United States or elsewhere, if the effect of any
such event specified in clause (D) or (E), in the reasonable judgment of the
Placement Agent, is material and adverse and makes it impractical or inadvisable
to proceed with the completion of the sale of and payment for the Securities on
the Closing Date on the terms and in the manner contemplated by this Agreement,
the Disclosure Package and the Prospectus, (ii) since the time of execution of
this Agreement or the earlier respective dates as of which information is given
in the Disclosure Package 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 Purchase Agreements, other than by reason
of a default by the Placement Agent, or (iv) any condition of the Placement
Agent’s obligations hereunder is not fulfilled. This Agreement may be terminated
by any party if the Closing does not occur on or before September 31, 2015. Any
such termination shall be without liability of any party to any other party
except that the provisions of Section 4, Section 6, and Section 12 hereof shall
at all times be effective notwithstanding such termination.

 

 30 

 

 

9.                  Notices. All statements, requests, notices and agreements
hereunder shall be in writing or by facsimile, and:

 

(a)                if to the Placement Agent, shall be delivered or sent by
mail, telex or facsimile transmission as follows:

 

Northland Securities, Inc.

45 South 7th Street, Suite 2000

Minneapolis, MN 55402

Attention: Jeff Peterson

Facsimile No.: (612) 395-5216

 

with a copy (which shall not constitute notice) to:

 

Faegre Baker Daniels, LLP

90 S 7th Street, Suite 2200

Minneapolis, MN 55402

Attention: Jonathan Zimmerman

Facsimile No.: (612) 766-1600

 

(b)                 if to the Company shall be delivered or sent by mail, telex
or facsimile transmission to:

 

Nxt-ID, Inc.

288 Christian Street

HC 2nd Floor

Oxford, CT 06478

 

with a copy (which shall not constitute notice) to:

 

Robinson Brog

875 Third Avenue, 9th Floor

New York, NY 10022

Attention: David Danovitch

Facsimile No.: (212) 603-6391

 

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.

 

 31 

 

 

10.              Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and shall be binding upon the Placement Agent, 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 (i) 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 6(a) hereof
and the indemnities of the Placement Agent shall also be for the benefit of the
controlling persons, officers and directors referred to in Section 6(b) hereof;
and (ii) the Investors are relying on the representations, warranties, covenants
and agreements made by the Company under, and are intended third party
beneficiaries of, this Agreement. The term “successors and assigns” as herein
used shall not include any purchaser of the Securities by reason merely of such
purchase.

 

11.             Governing Law; Submission to Jurisdiction. 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. Except
as set forth below, no Proceeding may be commenced, prosecuted or continued in
any court other than the courts of State of New York located in the City and
County of New York or the United States District Court for the Southern District
of New York, which courts shall have jurisdiction over the adjudication of such
matters, and the parties hereby consent to the jurisdiction of such courts and
personal service with respect thereto. The Company hereby consents to personal
jurisdiction, service and venue in any court in which any Proceeding arising out
of or in any way relating to this Agreement is brought by any third party
against the Placement Agent. All parties hereby waive all right to trial by jury
in any Proceeding (whether based upon contract, tort or otherwise) in any way
arising out of or relating to this Agreement. All parties agree that a final
judgment in any such Proceeding brought in any such court shall be conclusive
and binding upon each party and may be enforced in any other courts in the
jurisdiction of which a party is or may be subject, by suit upon such judgment.

 

12.              No Fiduciary Relationship. The Company hereby acknowledges and
agrees that:

 

(a)                No Other Relationship. The Placement Agent have been retained
solely to act as the exclusive placement agent in connection with the offering
of the Company’s securities. The Company further acknowledges that the Placement
Agent 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 Agent act or be responsible as a fiduciary to the
Company, its management, stockholders, creditors or any other person in
connection with any activity that such Placement Agent 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 Agent has
advised or is advising the Company on other matters. The Placement Agent hereby
expressly disclaims 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.

 

 32 

 

 

(b)                Arm’s-Length Negotiations. The price of the Securities set
forth in this Agreement was established by the Company following discussions and
arm’s-length negotiations with the Investors and the Placement Agent, 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 Agent and their affiliates are engaged in a broad
range of transactions which may involve interests that differ from those of the
Company and that no Placement Agent has any 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 Agent 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 Agent 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.

 

13.             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.

 

14.              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.

 

15.              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.

 

 33 

 

 

16.              Research Analyst Independence. The Company acknowledges that
the Placement Agent’s 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 each of the Placement Agent 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 such
Placement Agent’s investment banking division. The Company acknowledges that the
Placement Agent is a full service securities firm 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 16 shall relieve the Placement Agent of
any responsibility or liability it may otherwise bear in connection with
activities in violation of applicable securities laws, rules or regulations.

 

17.              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 the Agent’s Warrants and
supersedes all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof.

 

18.              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.

 

19.              Effectiveness. This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.

 

[Signature page follows.]

 

 34 

 

 

If the foregoing is in accordance with your understanding of the agreement
between the Company and the Placement Agent, kindly indicate your acceptance in
the space provided for that purpose below.

 

  Very truly yours,       NXT-ID, INC.       By:         Name:     Title:

 

Accepted as of     the date first above written:       NORTHLAND SECURITIES,
INC.        By:       Name:     Title:  

 

 

 

 

 

 

Signature Page to

Placement Agency Agreement

 

 

 

 

Schedules and Exhibits

 

Schedule I   Issuer Free Writing Prospectus       Schedule III   List of
Directors and Officers For Lock-Up Letter       Exhibit A:   Form of Warrant    
  Exhibit B:   Pricing Information       Exhibit C:   Form of Lock-Up Letter

 

 

 

 

Schedule I

  

Issuer Free Writing Prospectus

 

 

 

 

 

 

 

None.

 

 

 

 

Schedule III

  

List of Directors and Officers For Lock-Up

 

Gino Pereira Vincent Miceli David Tunnell Major General David Gust Michael
D’Almada-Remedios Daniel Sharkey

 

 

 

 

 

Exhibit A

 

Form of Warrant

 

 

[attached]

 

 

 

 

NXT-ID, INC.

  

FORM OF WARRANT

 

Warrant No.: ___ Original Issue: Date: ________, 2015 ________, 2015

 

NXT-ID, INC. a Delaware corporation (the “Company”), hereby certifies that, for
value received, ______________ or its registered assigns (the “Holder”), is
entitled to purchase from the Company up to a total of 86,071.45 shares of
Common Stock (each such share, a “Warrant Share” and all such shares, the
“Warrant Shares”), at any time and from time to time from and after the Original
Issue Date and through and including _________, 2020 (the “Expiration Date”)
relating to an offering of Common Stock by the Company, and subject to the
following terms and conditions:

 

This Warrant is granted in connection with that certain Placement Agency
Agreement, dated July 30, 2015 between the Company and Northland Securities,
Inc. (the “Placement Agency Agreement”) and the offering of 1,721,429 Shares of
the Common Stock and warrants, which are exercisable for shares of the Common
Stock, registered on the Company’s Registration Statement on Form S-3 (the
“Registration Statement”) filed with the U.S. Securities and Exchange Commission
(the “SEC”) and declared effective on May 14, 2015, as amended (the “Offering”).

 

1.       Definitions. As used in this Warrant, the following terms shall have
the respective definitions set forth in this Section 1. Capitalized terms that
are used and not defined in this Warrant that are defined in the Placement
Agency Agreement shall have the respective definitions set forth in the
Placement Agency Agreement.

 

“Closing Price” means, for any date of determination, the price determined by
the first of the following clauses that applies: (i) if the Common Stock is then
listed or quoted on a Trading Market, the closing bid price per share of the
Common Stock for such date (or the nearest preceding date) on such market; (ii)
if prices for the Common Stock are then quoted on the OTC Bulletin Board or OTC
Quotation Board, the closing bid price per share of the Common Stock for such
date (or the nearest preceding date) so quoted; (iii) if prices for the Common
Stock are then reported in the “Pink Sheets” published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (iv) in all other cases, the fair market value of a
share of Common Stock as determined by an independent qualified appraiser
selected in good faith and paid for by the Company.

 

“Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any securities into which such common stock may hereafter be
reclassified.

 

“Exercise Price” means $_______, subject to adjustment in accordance with
Section 9.

 

“Fundamental Transaction” means any of the following: (i) the Company effects
any merger or consolidation of the Company with or into another person, (ii) the
Company effects any sale of all or substantially all of its assets in one or a
series of related transactions, (iii) any tender offer or exchange offer
(whether by the Company or another person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property.

 

 

 

 

“Original Issue Date” means the Original Issue Date first set forth on the first
page of this Warrant or its predecessor instrument.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTC Bulletin Board or OTC Quotation Board), or (ii) if
the Common Stock is not listed on a Trading Market (other than the OTC Bulletin
Board or OTC Quotation Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board or OTC Quotation
Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding to its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in clauses (i),
(ii) and (iii) hereof, then Trading Day shall mean any day, other than a
Saturday or Sunday and other than a day that banks in the State of New York are
generally authorized or required by applicable law to be closed.

 

“Trading Market” means whichever of the New York Stock Exchange, NYSE AMEX, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or the OTC Bulletin Board or OTC Quotation Board on which the Common Stock is
listed or quoted for trading on the date in question.

 

2.       Registration of Warrant. The Company shall register this Warrant upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

 

3.      Registration of Transfers. The Company shall register the transfer of
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Company at its address specified herein. Upon any such registration or
transfer, a new Warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new Warrant, a “New Warrant”), evidencing the portion of
this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of a Warrant.

 

4.       Exercise and Duration of Warrants.

 

(a)       This Warrant shall be exercisable by the registered Holder in whole at
any time and in part from time to time from the Original Issue Date through and
including the Expiration Date. At 5:00 p.m., Eastern time on the Expiration
Date, the portion of this Warrant not exercised prior thereto shall be and
become void and of no value. The Company may not call or redeem any portion of
this Warrant without the prior written consent of the affected Holder. In no
event will the Company be required to net cash settle the Warrant exercise.

 

(b)       Notwithstanding anything to the contrary contained herein, the number
of Warrant Shares that may be acquired by the Holder upon any exercise of this
Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to ensure that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially owned by such Holder and its
affiliates (as defined under Rule 144, “Affiliates”) and any other persons whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% of the
total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise).  For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder. 
This provision shall not restrict the number of shares of Common Stock which a
Holder may receive or beneficially own in order to determine the amount of
securities or other consideration that such Holder may receive in the event of a
Fundamental Transaction as contemplated in Section 9 of this Warrant.  By
written notice to the Company, the Holder may waive the provisions of this
Section 4(b) but any such waiver will not be effective until the 61st day after
delivery of such notice, nor will any such waiver effect any other Holder.

 

 A-2 

 

 

Notwithstanding anything to the contrary contained herein, the number of Warrant
Shares that may be acquired by the Holder upon any exercise of this Warrant (or
otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other persons whose beneficial ownership of Common Stock would be aggregated
with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not
exceed 9.999% of the total number of issued and outstanding shares of Common
Stock (including for such purpose the shares of Common Stock issuable upon such
exercise).  For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder.  This provision shall not restrict the number of shares
of Common Stock which a Holder may receive or beneficially own in order to
determine the amount of securities or other consideration that such Holder may
receive in the event of a Fundamental Transaction as contemplated in Section 9
of this Warrant.  This restriction may not be waived.

 

5.       Delivery of Warrant Shares.

 

(a)       To effect exercises hereunder, the Holder shall not be required to
physically surrender this Warrant unless the aggregate Warrant Shares
represented by this Warrant are being exercised. Upon delivery of the Exercise
Notice (in the form attached hereto) to the Company (with the attached Warrant
Shares Exercise Log) at its address for notice set forth herein and upon payment
of the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder and the Company shall promptly (but in no event
later than three Trading Days after the Date of Exercise (as defined herein))
issue and deliver to the Holder, a certificate for the Warrant Shares issuable
upon such exercise, which, unless otherwise required by applicable law, shall be
free of restrictive legends. A “Date of Exercise” means the date on which the
Holder shall have delivered to the Company: (i) the Exercise Notice (with the
Warrant Exercise Log attached to it), appropriately completed and duly signed
and (ii) if such Holder is not utilizing the cashless exercise provisions set
forth in this Warrant, payment of the Exercise Price for the number of Warrant
Shares so indicated by the Holder to be purchased.

 

(b)       If by the third Trading Day after a Date of Exercise the Company fails
to deliver the required number of Warrant Shares in the manner required pursuant
to Section 5(a), then the Holder will have the right to rescind such exercise.

 

(c)       If by the third Trading Day after a Date of Exercise the Company fails
to deliver the required number of Warrant Shares in the manner required pursuant
to Section 5(a), and if after such third Trading Day and prior to the receipt of
such Warrant Shares, the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the
amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the exercise at issue
by (B) the closing bid price of the Common Stock at the time of the obligation
giving rise to such purchase obligation and (2) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In.

 

 A-3 

 

 

(d)       The Company’s obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing Warrant Shares upon exercise
of the Warrant as required pursuant to the terms hereof.

 

6.       Charges, Taxes and Expenses. Issuance and delivery of Warrant Shares
upon exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or Warrants in a name other than that of the Holder. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

7.       Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity (which shall not include a surety bond), if requested.
Applicants for a New Warrant under such circumstances shall also comply with
such other reasonable regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a New Warrant is requested as
a result of a mutilation of this Warrant, then the Holder shall deliver such
mutilated Warrant to the Company as a condition precedent to the Company’s
obligation to issue the New Warrant.

 

8.       Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of Persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable.

 

9.       Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.

 

(a)       Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall
be adjusted to equal the product obtained by multiplying the then-current
Exercise Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination.

 

 A-4 

 

 

(b)       Fundamental Transactions. If, at any time while this Warrant is
outstanding there is a Fundamental Transaction, then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (the “Alternate
Consideration”). For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. At the Holder’s option and request, any successor to the Company or
surviving entity in such Fundamental Transaction shall, either (1) issue to the
Holder a new warrant substantially in the form of this Warrant and consistent
with the foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof,
or (2) purchase the Warrant from the Holder for a purchase price, payable in
cash within five Trading Days after such request (or, if later, on the effective
date of the Fundamental Transaction), equal to the Black Scholes value of the
remaining unexercised portion of this Warrant on the date of such request. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this paragraph (b) and insuring that the Warrant (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

 

(c)       Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to this Section 9, the number of Warrant Shares that may
be purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such adjustment.

 

(d)       Calculations. All calculations under this Section 9 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

 

(e)       Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company’s transfer agent.

 

 A-5 

 

 

10.     Payment of Exercise Price. The Holder may pay the Exercise Price in one
of the following manners:

 

(a)       Cash Exercise. The Holder may deliver immediately available funds; or

 

(b)       Cashless Exercise. The Holder may notify the Company in an Exercise
Notice of its election to utilize a cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:

 

X = Y [(A-B)/A]  

 

where:

 

X = the number of Warrant Shares to be issued to the Holder.

Y = the number of Warrant Shares with respect to which this Warrant is being
exercised.

A = the average of the Closing Prices for the five Trading Days immediately
prior to (but not including) the Exercise Date.

B = the Exercise Price.  

 

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued.

 

11.     No Fractional Shares. No fractional shares of Warrant Shares will be
issued in connection with any exercise of this Warrant. In lieu of any
fractional shares which would, otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the Closing Price of one
Warrant Share on the date of exercise.

 

12.     Notices. Any and all notices or other communications or deliveries
hereunder (including, without limitation, any Exercise Notice) shall be in
writing and shall be deemed given and effective if provided pursuant to the
Placement Agency Agreement. In case any time: (1) the Company shall declare any
cash dividend on its capital stock; (2) the Company shall pay any dividend
payable in stock upon its capital stock or make any distribution to the holders
of its capital stock; (3) the Company shall offer for subscription pro rata to
the holders of its capital stock any additional shares of stock of any class or
other rights; (4) there shall be any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
or (5) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, in any one or more of said cases, the Company
shall give prompt written notice to the Holder. Such notice shall also specify
the date as of which the holders of capital stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their capital stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, or conversion or redemption, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company’s transfer books are closed in respect thereto.

 

13.     Lock Up. Notwithstanding any other provision of this Warrant, in
accordance with FINRA Rule 5110(g), this Warrant shall not be sold during the
Offering, or sold, transferred, assigned, pledged, or hypothecated, or be the
subject of any hedging, short sale, derivative, put, or call transaction that
would result in the effective economic disposition of this Warrant or the
Warrant Shares, by any person for a period of 180 days immediately following the
date of effectiveness or commencement of sales of the Offering, except as
provided in paragraph (g)(2) of FINRA Rule 5110.

 

14.    Transfer; Assignment. Subject to compliance with any applicable
securities laws, this Warrant may be transferred or assigned by the Holder
without the consent of the Company (including, without limitation, transfers or
assignments to the Holder’s employees and affiliates). This Warrant may not be
assigned by the Company without the written consent of the Holder.

 

 A-6 

 

 

15.     Miscellaneous.

 

(a)       This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any
person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Warrant. This Warrant may be amended only
in writing signed by the Company and the Holder and their successors and
assigns.

 

(b)       All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.

 

(c)       The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

 

(d)       In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

 

(e)       Prior to exercise of this Warrant, the Holder hereof shall not, by
reason of by being a Holder, be entitled to any rights of a stockholder with
respect to the Warrant Shares.

 

[Remainder of page intentionally left blank, signature page follows]

 

 A-7 

 

 

In witness whereof, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.

 

 

  nxt-id, inc.       By:                       Name:     Its:  

 

Accepted and agreed:  

 

NORTHLAND SECURITIES, INC.

      By:     Name:                           Its:    

 

 A-8 

 

 

EXERCISE NOTICE

 

The undersigned Holder hereby irrevocably elects to purchase
                     shares of Common Stock pursuant to the attached Warrant.
Capitalized terms used herein and not otherwise defined have the respective
meanings set forth in the Warrant.

 

(1) The undersigned Holder hereby exercises its right to purchase
                     Warrant Shares pursuant to the Warrant.

 

(2) The Holder intends that payment of the Exercise Price shall be made as
(check one):

 

☐ “Cash Exercise” under Section 10

 

☐ “Cashless Exercise” under Section 10

 

(3) If the Holder has elected a Cash Exercise, the Holder shall pay the sum of
$____________ to the Company in accordance with the terms of the Warrant.

 

(4) Pursuant to this Exercise Notice, the Company shall deliver to the Holder
                     Warrant Shares in accordance with the terms of the Warrant.

 

Dated ______________ __, _____

Name of Holder:

 

(Print)

                  By:     Its:                      (Signature must conform in
all respects to name of holder as specified on the face of the Warrant)

 

 A-9 

 

 

Warrant Shares Exercise Log

 

Date 

Number of Warrant

Shares Available

to be Exercised

 

Number of Warrant

Shares Exercised

 

Number of Warrant

Shares Remaining

to be Exercised

                     

 

 A-10 

 

 

FORM OF ASSIGNMENT

 

[To be completed and signed only upon transfer of Warrant]

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                             the right represented by the attached Warrant to
purchase                  shares of Common Stock to which such Warrant relates
and appoints                              attorney to transfer said right on the
books of the Company with full power of substitution in the premises.

 

Dated: __________ __, _______

 

      (Signature must conform in all respects to name of holder as specified on
the face of the Warrant)       Address of Transferee                          
Note: Address for Delivery may not be a P.O. box and must be a physical address
where stock certificates may be delivered in connection with this purchase or
any future stock issued through splits, warrant conversions or other
circumstances. The delivery address may be a personal residence, or a broker
dealer where the certificate would be deposited

 

 A-11 

 

 

Exhibit B

 

Pricing Information

  

Number of Shares of Common Stock: 1,721,429

 

Price Per Share: $1.75

 

 

 

 

EXHIBIT C

 

Form of Lock Up Agreement

 

[attached]

 

 

 

 

Form of Lock-Up Agreement

 

July __, 2015

  

Northland Securities, Inc.

As representatives of the underwriters named

in Schedule I to the Purchase Agreement

referred to below

c/o Northland Securities, Inc.

45 South 7th Street, Suite 2000

Minneapolis, MN 55402

 

Ladies and Gentlemen:

 

As an inducement to the underwriters (the “Underwriters”) to execute a purchase
agreement (the “Purchase Agreement”) providing for a public offering (the
“Offering”) of securities of Nxt-ID, 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 Northland Securities, Inc. (the
“Representative”) during the period specified in the second succeeding paragraph
(the “Lock-Up Period”), the undersigned will not: (1) offer, pledge, announce
the intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, make any short sale or otherwise transfer or dispose of,
directly or indirectly, any shares of the Company’s common stock (the “Common
Stock”) or any securities convertible into, exercisable or exchangeable for or
that represent the right to receive Common Stock (including without limitation,
Common Stock which may be deemed to be beneficially owned by the undersigned in
accordance with the rules and regulations of the 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 final prospectus
used to sell Common Stock in the Offering pursuant to the Purchase Agreement;
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 Representative, waives, in writing, such
extension.

 

The undersigned hereby acknowledges that the Company will be requested to agree
in the Purchase 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.

 

 

 

 

Notwithstanding the foregoing provisions of this agreement:

 

  1. The undersigned may transfer the Undersigned’s Securities (i) as a bona
fide gift or gifts and (ii) to any trust for the direct or indirect benefit of
the undersigned or the immediate family of the undersigned; provided, in each
case, that (x) such transfer shall not involve a disposition for value, (y) the
transferee agrees in writing with the Underwriters 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.

 

  2. In addition, the foregoing restrictions shall not apply to (i) the exercise
of stock options granted pursuant to the Company’s equity incentive plans;
provided that 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.

 

The undersigned understands that the undersigned shall be released from all
obligations under this Agreement if (i) the Company notifies the Underwriters
that it does not intend to proceed with the Offering, (ii) the Purchase
Agreement does not become effective, or if the Purchase Agreement (other than
the provisions thereof which survive termination) shall terminate or be
terminated prior to payment for and delivery of the Common Stock to be sold
thereunder, or (iii) the Offering is not completed by October 31, 2015.

 

The undersigned understands that the Underwriters are entering into the Purchase
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.

 

  Very truly yours,               Printed Name of Holder           Signature    
      Printed Name & Title of Person Signing (if signing as custodian, trustee,
or on behalf of an entity)