EXHIBIT 10.1

UNDERWRITING AGREEMENT

between

DUOS TECHNOLOGIES GROUP, INC.

and

THINKEQUITY

A DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC.

as Representative of the Several Underwriters

--------------------------------------------------------------------------------

 

DUOS TECHNOLOGIES, INC.

UNDERWRITING AGREEMENT

New York, New York
February 12, 2020

ThinkEquity

A Division of Fordham Financial Management, Inc.

As Representative of the several Underwriters named on Schedule 1 attached
hereto
17 State Street, 22nd Fl

New York, NY 10004

Ladies and Gentlemen:

The undersigned, Duos Technologies Group, Inc., a corporation formed under the
laws of the State of Florida (collectively with its subsidiaries and affiliates,
including, without limitation, all entities disclosed or described in the
Registration Statement (as hereinafter defined) as being subsidiaries or
affiliates of Duos Technologies Group, Inc., the “Company”), hereby confirms its
agreement (this “Agreement”) with ThinkEquity, a division of Fordham Financial
Management, Inc., (hereinafter referred to as “you” (including its correlatives)
or the “Representative”) and with the other underwriters named on Schedule 1
hereto for which the Representative is acting as representative (the
Representative and such other underwriters being collectively called the
“Underwriters” or, individually, an “Underwriter”) as follows:

1.

Purchase and Sale of Shares.

1.1

Firm Shares.

1.1.1.

Nature and Purchase of Firm Shares.

(i)

On the basis of the representations and warranties herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to issue and
sell to the several Underwriters, an aggregate of 1,350,000 shares (“Firm
Shares”) of the Company’s common stock, par value $0.001 per share (the “Common
Stock”).

(ii)

The Underwriters, severally and not jointly, agree to purchase from the Company
the number of Firm Shares set forth opposite their respective names on Schedule
1 attached hereto and made a part hereof at a purchase price of $5.55 per share
(92.5% of the per Firm Share offering price). The Firm Shares are to be offered
initially to the public at the offering price set forth on the cover page of the
Prospectus (as defined in Section 2.1.1 hereof).

1.1.2.

Shares Payment and Delivery.

(i)

Delivery and payment for the Firm Shares shall be made at 10:00 a.m., Eastern
time, on the second (2nd) Business Day following the effective date (the
“Effective Date”) of the Registration Statement (as defined in Section 2.1.1
below) (or the third (3rd) Business Day following the Effective Date if the
Registration Statement is declared effective after 4:01 p.m., Eastern time) or
at such earlier time as shall be agreed upon by the Representative and the
Company, at the offices of Sichenzia Ross Ference LLP, 1065 Avenue of the
Americas, 37th Floor, New York, NY 10036 (“Representative Counsel”), or at such
other place (or remotely by facsimile or other electronic transmission) as shall
be

--------------------------------------------------------------------------------

 

agreed upon by the Representative and the Company. The hour and date of delivery
and payment for the Firm Shares is called the “Closing Date.”

(ii)

Payment for the Firm Shares shall be made on the Closing Date by wire transfer
in Federal (same day) funds, payable to the order of the Company upon delivery
of the certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Shares (or through the facilities of the Depository Trust
Company (“DTC”)) for the account of the Underwriters. The Firm Shares shall be
registered in such name or names and in such authorized denominations as the
Representative may request in writing at least two (2) full Business Days prior
to the Closing Date. The Company shall not be obligated to sell or deliver the
Firm Shares except upon tender of payment by the Representative for all of the
Firm Shares. The term “Business Day” means any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions are authorized
or obligated by law to close in New York, New York.

1.2

Over-allotment Option.

1.2.1.

Option Shares.  For the purposes of covering any over-allotments in connection
with the distribution and sale of the Firm Shares, the Company hereby grants to
the Underwriters an option to purchase up to 202,500 additional shares of Common
Stock, representing fifteen percent (15%) of the Firm Shares sold in the
offering, from the Company (the “Over-allotment Option”). Such 202,500
additional shares of Common Stock, the net proceeds of which will be deposited
with the Company’s account, are hereinafter referred to as “Option Shares.” The
purchase price to be paid per Option Share shall be equal to the price per Firm
Share set forth in Section 1.1.1 hereof. The Firm Shares and the Option Shares
are hereinafter referred to together as the “Public Securities.”  The offering
and sale of the Public Securities is hereinafter referred to as the “Offering.”

1.2.2.

Exercise of Option.  The Over-allotment Option granted pursuant to Section 1.2.1
hereof may be exercised by the Representative as to all (at any time) or any
part (from time to time) of the Option Shares within 45 days after the Effective
Date. The Underwriters shall not be under any obligation to purchase any Option
Shares prior to the exercise of the Over-allotment Option. The Over-allotment
Option granted hereby may be exercised by the giving of oral notice to the
Company from the Representative, which must be confirmed in writing by overnight
mail or facsimile or other electronic transmission setting forth the number of
Option Shares to be purchased and the date and time for delivery of and payment
for the Option Shares (the “Option Closing Date”), which shall not be later than
one (1) full Business Days after the date of the notice or such other time as
shall be agreed upon by the Company and the Representative, at the offices of
Representative Counsel or at such other place (including remotely by facsimile
or other electronic transmission) as shall be agreed upon by the Company and the
Representative. If such delivery and payment for the Option Shares does not
occur on the Closing Date, the Option Closing Date will be as set forth in the
notice. Upon exercise of the Over-allotment Option with respect to all or any
portion of the Option Shares, subject to the terms and conditions set forth
herein, (i) the Company shall become obligated to sell to the Underwriters the
number of Option Shares specified in such notice and (ii) each of the
Underwriters, acting severally and not jointly, shall purchase that portion of
the total number of Option Shares then being purchased as set forth in Schedule
1 opposite the name of such Underwriter.

1.2.3.

Payment and Delivery.  Payment for the Option Shares shall be made on the Option
Closing Date by wire transfer in Federal (same day) funds, payable to the order
of the Company upon delivery to you of certificates (in form and substance
satisfactory to the Underwriters) representing the Option Shares (or through the
facilities of DTC) for the account of the Underwriters. The Option Shares shall
be registered in such name or names and in such authorized denominations as the
Representative may request in writing at least one (1) full Business Day prior
to the Option Closing Date.

- 2 -

--------------------------------------------------------------------------------

 

The Company shall not be obligated to sell or deliver the Option Shares except
upon tender of payment by the Representative for applicable Option Shares.

1.3

Representative’s Warrants.

1.3.1.

Purchase Warrants. The Company hereby agrees to issue and sell to the
Representative (and/or its designees) on the Closing Date an option
(“Representative’s Warrant”) for the purchase of an aggregate of 67,500 shares
of Common Stock, representing 5% of the Firm Shares, for an aggregate purchase
price of $100.00. The Representative’s Warrant agreement, in the form attached
hereto as Exhibit A (the “Representative’s Warrant Agreement”), shall be
exercisable, in whole or in part, commencing on a date which is one hundred
eighty (180) days after the Effective Date and expiring on the five-year
anniversary of the Effective Date at an initial exercise price per share of
Common Stock of $9.00, which is equal to 150%  of the initial public offering
price of the Firm Shares. The Representative’s Warrant Agreement and the shares
of Common Stock issuable upon exercise thereof are hereinafter referred to
together as the “Representative’s Securities.” The Representative understands
and agrees that there are significant restrictions pursuant to FINRA Rule 5110
against transferring the Representative’s Warrant Agreement and the underlying
shares of Common Stock during the one hundred eighty (180) days after the
Effective Date and by its acceptance thereof shall agree that it will not sell,
transfer, assign, pledge or hypothecate the Representative’s Warrant Agreement,
or any portion thereof, or be the subject of any hedging, short sale,
derivative, put or call transaction that would result in the effective economic
disposition of such securities for a period of one hundred eighty (180) days
following the Effective Date to anyone other than (i) an Underwriter or a
selected dealer in connection with the Offering, or (ii) a bona fide officer or
partner of the Representative or of any such Underwriter or selected dealer; and
only if any such transferee agrees to the foregoing lock-up restrictions.

1.3.2.

Delivery. Delivery of the Representative’s Warrant Agreement shall be made on
the Closing Date and shall be issued in the name or names and in such authorized
denominations as the Representative may request.

2.

Representations and Warranties of the Company.  The Company represents and
warrants to the Underwriters as of the Applicable Time (as defined below), as of
the Closing Date and as of the Option Closing Date, if any, as follows:

2.1

Filing of Registration Statement.

2.1.1.

Pursuant to the Securities Act.  The Company has filed with the U.S. Securities
and Exchange Commission (the “Commission”) a registration statement, and an
amendment or amendments thereto, on Form S-1 (File No. 333-235455), including
any related prospectus or prospectuses, for the registration of the Public
Securities and the Representative’s Securities under the Securities Act of 1933,
as amended (the “Securities Act”), which registration statement and amendment or
amendments have been prepared by the Company in all material respects in
conformity with the requirements of the Securities Act and the rules and
regulations of the Commission under the Securities Act (the “Securities Act
Regulations”) and will contain all material statements that are required to be
stated therein in accordance with the Securities Act and the Securities Act
Regulations. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement became effective (including the Preliminary Prospectus included in the
registration statement, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein and all information
deemed to be a part thereof as of the Effective Date pursuant to paragraph (b)
of Rule 430A of the Securities Act Regulations (the “Rule 430A Information”)),
is referred to herein as the “Registration Statement.” If the Company files any
registration statement pursuant to Rule 462(b) of the Securities Act
Regulations, then after such filing, the term “Registration

- 3 -

--------------------------------------------------------------------------------

 

Statement” shall include such registration statement filed pursuant to Rule
462(b). The Registration Statement has been declared effective by the Commission
on the date hereof.  

Each prospectus used prior to the effectiveness of the Registration Statement,
and each prospectus that omitted the Rule 430A Information that was used after
such effectiveness and prior to the execution and delivery of this Agreement, is
herein called a “Preliminary Prospectus.” The Preliminary Prospectus, subject to
completion, dated February 12, 2020, that was included in the Registration
Statement immediately prior to the Applicable Time is hereinafter called the
“Pricing Prospectus.” The final prospectus in the form first furnished to the
Underwriters for use in the Offering is hereinafter called the “Prospectus.” Any
reference to the “most recent Preliminary Prospectus” shall be deemed to refer
to the latest Preliminary Prospectus included in the Registration Statement.  

“Applicable Time” means 5:00 p.m., Eastern time, on the date of this Agreement.

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433 of the Securities Act Regulations (“Rule 433”), including
without limitation any “free writing prospectus” (as defined in Rule 405 of the
Securities Act Regulations) relating to the Public Securities that is
(i) required to be filed with the Commission by the Company, (ii) a “road show
that is a written communication” within the meaning of Rule 433(d)(8)(i),
whether or not required to be filed with the Commission, or (iii) exempt from
filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a
description of the Public Securities or of the Offering that does not reflect
the final terms, in each case in the form filed or required to be filed with the
Commission or, if not required to be filed, in the form retained in the
Company’s records pursuant to Rule 433(g).

“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is intended for general distribution to prospective investors
(other than a “bona fide electronic road show,” as defined in Rule 433 (the
“Bona Fide Electronic Road Show”)), as evidenced by its being specified in
Schedule 2-B hereto.

“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is not an Issuer General Use Free Writing Prospectus.

“Pricing Disclosure Package” means any Issuer General Use Free Writing
Prospectus issued at or prior to the Applicable Time, the Pricing Prospectus and
the information included on Schedule 2-A hereto, all considered together.  

2.1.2.

Pursuant to the Exchange Act.  The Company has filed with the Commission a Form
8-A (File Number 001-39227) providing for the registration pursuant to Section
12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), of the shares of Common Stock. The registration of the shares of Common
Stock under the Exchange Act has been declared effective by the Commission on or
prior to the date hereof.  The Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the shares of
Common Stock under the Exchange Act, nor has the Company received any
notification that the Commission is contemplating terminating such registration.

2.2

Stock Exchange Listing.  The shares of Common Stock have been approved for
listing on the NASDAQ Capital Market (the “Exchange”), and the Company has taken
no action designed to, or likely to have the effect of, delisting the shares of
Common Stock from the Exchange, nor has the Company received any notification
that the Exchange is contemplating terminating such listing except as described
in the Registration Statement, the Pricing Disclosure Package and the
Prospectus.  

- 4 -

--------------------------------------------------------------------------------

 

2.3

No Stop Orders, etc.  Neither the Commission nor, to the Company’s knowledge,
any state regulatory authority has issued any order preventing or suspending the
use of the Registration Statement, any Preliminary Prospectus or the Prospectus
or has instituted or, to the Company’s knowledge, threatened to institute, any
proceedings with respect to such an order. The Company has complied with each
request (if any) from the Commission for additional information.

2.4

Disclosures in Registration Statement.

2.4.1.

Compliance with Securities Act and 10b-5 Representation.  

(i)

Each of the Registration Statement and any post-effective amendment thereto, at
the time it became effective, complied in all material respects with the
requirements of the Securities Act and the Securities Act Regulations. Each
Preliminary Prospectus, including the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment or
supplement thereto, and the Prospectus, at the time each was filed with the
Commission, complied in all material respects with the requirements of the
Securities Act and the Securities Act Regulations. Each Preliminary Prospectus
delivered to the Underwriters for use in connection with this Offering and the
Prospectus was or will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

(ii)

Neither the Registration Statement nor any amendment thereto, at its effective
time, as of the Applicable Time, at the Closing Date or at any Option Closing
Date (if any), contained, contains or will contain an untrue statement of a
material fact or omitted, omits or will omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
 

(iii)

The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date
or at any Option Closing Date (if any), did not, does not and will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and each Issuer
Limited Use Free Writing Prospectus hereto does not conflict with the
information contained in the Registration Statement, any Preliminary Prospectus,
the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free
Writing Prospectus, as supplemented by and taken together with the Pricing
Prospectus as of the Applicable Time, did not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that this representation and warranty shall
not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by the Representative expressly for use in the Registration
Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or
supplement thereto. The parties acknowledge and agree that such information
provided by or on behalf of any Underwriter consists solely of the following
disclosure contained in the “Underwriting” section of the Prospectus: (i) the
table showing the number of securities to be purchased by the Underwriter  and
the amount of selling concession, and (ii) the sections titled “Electronic
Offer, Sale and Distribution of Securities”, “Stabilization”, “Passive Market
Making” and “Offer Restrictions Outside the United States” (the “Underwriters’
Information”); and

(iv)

Neither the Prospectus nor any amendment or supplement thereto (including any
prospectus wrapper), as of its issue date, at the time of any filing with the
Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing
Date, included, includes or will include an untrue statement of a material fact
or omitted, omits or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were

- 5 -

--------------------------------------------------------------------------------

 

made, not misleading; provided, however, that this representation and warranty
shall not apply to the Underwriters’ Information.

2.4.2.

Disclosure of Agreements.  The agreements and documents described in the
Registration Statement, the Pricing Disclosure Package and the Prospectus
conform in all material respects to the descriptions thereof contained therein
and there are no agreements or other documents required by the Securities Act
and the Securities Act Regulations to be described in the Registration
Statement, the Pricing Disclosure Package and the Prospectus or to be filed with
the Commission as exhibits to the Registration Statement, that have not been so
described or filed. Each agreement or other instrument (however characterized or
described) to which the Company is a party or by which it is or may be bound or
affected and (i) that is referred to in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, or (ii) is material to the Company’s
business, has been duly authorized and validly executed by the Company, is in
full force and effect in all material respects and is enforceable against the
Company and, to the Company’s knowledge, the other parties thereto, in
accordance with its terms, except (x) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally, (y) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and
(z) that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought. None of such
agreements or instruments has been assigned by the Company, and neither the
Company nor, to the Company’s knowledge, any other party is in default
thereunder and, to the Company’s knowledge, no event has occurred that, with the
lapse of time or the giving of notice, or both, would constitute a default
thereunder. To the best of the Company’s knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses (each, a
“Governmental Entity”), including, without limitation, those relating to
environmental laws and regulations.

2.4.3.

Prior Securities Transactions.  No securities of the Company have been sold by
the Company or by or on behalf of, or for the benefit of, any person or persons
controlling, controlled by or under common control with the Company, except as
disclosed in the Registration Statement, the Pricing Disclosure Package and the
Preliminary Prospectus.

2.4.4.

Regulations.  The disclosures in the Registration Statement, the Pricing
Disclosure Package and the Prospectus concerning the effects of federal, state,
local and all foreign regulation on the Offering and the Company’s business as
currently contemplated are correct in all material respects and no other such
regulations are required to be disclosed in the Registration Statement, the
Pricing Disclosure Package and the Prospectus which are not so disclosed.

2.5

Changes After Dates in Registration Statement.

2.5.1.

No Material Adverse Change.  Since the respective dates as of which information
is given in the Registration Statement, the Pricing Disclosure Package and the
Prospectus, except as otherwise specifically stated therein: (i) there has been
no material adverse change in the financial position or results of operations of
the Company, nor 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 (a “Material Adverse
Change”); (ii) there have been no material transactions entered into by the
Company, other than as contemplated pursuant to this Agreement; and (iii) no
officer or director of the Company has resigned from any position with the
Company.

- 6 -

--------------------------------------------------------------------------------

 

2.5.2.

Recent Securities Transactions, etc.  Subsequent to the respective dates as of
which information is given in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, and except as may otherwise be indicated or
contemplated herein or disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, the Company has not: (i) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money; or (ii) declared or paid any dividend or made any other
distribution on or in respect to its capital stock.

2.6

Independent Accountants.  To the knowledge of the Company, Salberg & Company,
P.A. (the “Auditor”), whose report is filed with the Commission as part of the
Registration Statement, the Pricing Disclosure Package and the Prospectus, is an
independent registered public accounting firm as required by the Securities Act
and the Securities Act Regulations and the Public Company Accounting Oversight
Board. The Auditor has not, during the periods covered by the financial
statements included in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, provided to the Company any non-audit services, as
such term is used in Section 10A(g) of the Exchange Act.

2.7

Financial Statements, etc.  The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, fairly present the financial
position and the results of operations of the Company at the dates and for the
periods to which they apply; and such financial statements have been prepared in
conformity with U.S. generally accepted accounting principles (“GAAP”),
consistently applied throughout the periods involved (provided that unaudited
interim financial statements are subject to year-end audit adjustments that are
not expected to be material in the aggregate and do not contain all footnotes
required by GAAP); and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein.  Except
as included therein, no historical or pro forma financial statements are
required to be included in the Registration Statement, the Pricing Disclosure
Package or the Prospectus under the Securities Act or the Securities Act
Regulations. The pro forma and pro forma as adjusted financial information and
the related notes, if any, included in the Registration Statement, the Pricing
Disclosure Package and the Prospectus have been properly compiled and prepared
in accordance with the applicable requirements of the Securities Act and the
Securities Act Regulations and present fairly the information shown therein, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein.  All disclosures contained in the
Registration Statement, the Pricing Disclosure Package or the Prospectus
regarding “non-GAAP financial measures” (as such term is defined by the rules
and regulations of the Commission), if any, comply with Regulation G of the
Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent
applicable. Each of the Registration Statement, the Pricing Disclosure Package
and the Prospectus discloses all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other
relationships of the Company with unconsolidated entities or other persons that
may have a material current or future effect on the Company’s financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses.  Except as disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, (a) neither the Company nor any of its
direct and indirect subsidiaries, including each entity disclosed or described
in the Registration Statement, the Pricing Disclosure Package and the Prospectus
as being a subsidiary of the Company (each, a “Subsidiary” and, collectively,
the “Subsidiaries”), has incurred any material liabilities or obligations,
direct or contingent, or entered into any material transactions other than in
the ordinary course of business, (b) the Company has not declared or paid any
dividends or made any distribution of any kind with respect to its capital
stock, (c) there has not been any change in the capital stock of the Company or
any of its Subsidiaries, or, other than in the course of business, any grants
under any stock compensation plan, and (d) there has not been any material
adverse change in the Company’s long-term or short-term debt.

- 7 -

--------------------------------------------------------------------------------

 

2.8

Authorized Capital; Options, etc.  The Company had, at the date or dates
indicated in the Registration Statement, the Pricing Disclosure Package and the
Prospectus, the duly authorized, issued and outstanding capitalization as set
forth therein. Based on the assumptions stated in the Registration Statement,
the Pricing Disclosure Package and the Prospectus, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein. Except as set
forth in, or contemplated by, the Registration Statement, the Pricing Disclosure
Package and the Prospectus, on the Effective Date, as of the Applicable Time and
on the Closing Date and any Option Closing Date, there will be no stock options,
warrants, or other rights to purchase or otherwise acquire any authorized, but
unissued shares of Common Stock of the Company or any security convertible or
exercisable into shares of Common Stock of the Company, or any contracts or
commitments to issue or sell shares of Common Stock or any such options,
warrants, rights or convertible securities.

2.9

Valid Issuance of Securities, etc.

2.9.1.

Outstanding Securities.  All issued and outstanding securities of the Company
issued prior to the transactions contemplated by this Agreement have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company. The authorized shares of Common Stock conform in all material respects
to all statements relating thereto contained in the Registration Statement, the
Pricing Disclosure Package and the Prospectus. The offers and sales of the
outstanding shares of Common Stock were at all relevant times either registered
under the Securities Act and the applicable state securities or “blue sky” laws
or, based in part on the representations and warranties of the purchasers of
such Shares, exempt from such registration requirements.

2.9.2.

Securities Sold Pursuant to this Agreement.  The Public Securities and
Representative’s Securities have been duly authorized for issuance and sale and,
when issued and paid for, will be validly issued, fully paid and non-assessable;
the holders thereof are not and will not be subject to personal liability by
reason of being such holders; the Public Securities and Representative’s
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Public Securities and Representative’s
Securities has been duly and validly taken. The Public Securities and
Representative’s Securities conform in all material respects to all statements
with respect thereto contained in the Registration Statement, the Pricing
Disclosure Package and the Prospectus. All corporate action required to be taken
for the authorization, issuance and sale of the Representative’s Warrant
Agreement has been duly and validly taken; the shares of Common Stock issuable
upon exercise of the Representative’s Warrant have been duly authorized and
reserved for issuance by all necessary corporate action on the part of the
Company and when paid for and issued in accordance with the Representative’s
Warrant  and the Representative’s Warrant Agreement, such shares of Common Stock
will be validly issued, fully paid and non-assessable; the holders thereof are
not and will not be subject to personal liability by reason of being such
holders; and such shares of Common Stock are not and will not be subject to the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company.

2.10

Registration Rights of Third Parties.  Except as set forth in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, no holders of any
securities of the Company or any rights exercisable for or convertible or
exchangeable into securities of the Company have the right to require the
Company to register any such securities of the Company under the Securities Act
or to include any such securities in a registration statement to be filed by the
Company.

- 8 -

--------------------------------------------------------------------------------

 

2.11

Validity and Binding Effect of Agreements.  This Agreement and the
Representative’s Warrant Agreement have been duly and validly authorized by the
Company, and, when executed and delivered, will constitute, the valid and
binding agreements of the Company, enforceable against the Company in accordance
with their respective terms, except: (i) as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws; and
(iii) that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.

2.12

No Conflicts, etc.  The execution, delivery and performance by the Company of
this Agreement, the Representative’s Warrant Agreement and all ancillary
documents, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms hereof and
thereof do not and will not, with or without the giving of notice or the lapse
of time or both: (i) result in a material breach of, or conflict with any of the
terms and provisions of, or constitute a material default under, or result in
the creation, modification, termination or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms of
any agreement or instrument to which the Company is a party; (ii) result in any
violation of the provisions of the Company’s Articles of Incorporation (as the
same may be amended or restated from time to time, the “Charter”) or the by-laws
of the Company; or (iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any Governmental Entity as of the date hereof.

2.13

No Defaults; Violations.  No material default exists in the due performance and
observance of any term, covenant or condition of any material license, contract,
indenture, mortgage, deed of trust, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company is a party or by
which the Company may be bound or to which any of the properties or assets of
the Company is subject. The Company is not in violation of any term or provision
of its Charter or by-laws, or in violation of any franchise, license, permit,
applicable law, rule, regulation, judgment or decree of any Governmental Entity.

2.14

Corporate Power; Licenses; Consents.

2.14.1.

Conduct of Business.  Except as described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, the Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies that it needs as of the date hereof to conduct
its business purpose as described in the Registration Statement, the Pricing
Disclosure Package and the Prospectus.

2.14.2.

Transactions Contemplated Herein.  The Company has all corporate power and
authority to enter into this Agreement and to carry out the provisions and
conditions hereof, and all consents, authorizations, approvals and orders
required in connection therewith have been obtained. No consent, authorization
or order of, and no filing with, any court, government agency or other body is
required for the valid issuance, sale and delivery of the Public Securities and
the consummation of the transactions and agreements contemplated by this
Agreement and the Representative’s Warrant Agreement and as contemplated by the
Registration Statement, the Pricing Disclosure Package and the Prospectus,
except with respect to applicable federal and state securities laws and the
rules and regulations of the Financial Industry Regulatory Authority, Inc.
(“FINRA”).

2.15

D&O Questionnaires.  To the Company’s knowledge, all information contained in
the questionnaires (the “Questionnaires”) completed by each of the Company’s
directors and officers

- 9 -

--------------------------------------------------------------------------------

 

immediately prior to the Offering (the “Insiders”) as supplemented by all
information concerning the Company’s directors, officers and principal
shareholders as described in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, as well as in the Lock-Up Agreement (as defined in
Section 2.24 below), provided to the Underwriters, is true and correct in all
material respects and the Company has not become aware of any information which
would cause the information disclosed in the Questionnaires to become materially
inaccurate and incorrect.

2.16

Litigation; Governmental Proceedings.  There is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental proceeding
pending or, to the Company’s knowledge, threatened against, or involving the
Company or, to the Company’s knowledge, any executive officer or director which
has not been disclosed in the Registration Statement, the Pricing Disclosure
Package and the Prospectus or in connection with the Company’s listing
application for the listing of the Public Securities on the Exchange.

2.17

Good Standing.  The Company has been duly organized and is validly existing as a
corporation and is in good standing under the laws of the State of Florida as of
the date hereof, and is duly qualified to do business and is in good standing in
each other jurisdiction in which its ownership or lease of property or the
conduct of business requires such qualification, except where the failure to
qualify, singularly or in the aggregate, would not have  or reasonably be
expected to result in a Material Adverse Change.

2.18

Insurance.  The Company carries or is entitled to the benefits of insurance,
with reputable insurers, in such amounts and covering such risks which the
Company believes are adequate, including, but not limited to, directors and
officers insurance coverage at least equal to $2,000,000 and the Company has
included each Underwriter as an additional insured party to the directors and
officers insurance coverage and all such insurance is in full force and effect.
The Company has no reason to believe that it will not be able (i) to renew its
existing insurance coverage as and when such policies expire or (ii) to obtain
comparable coverage from similar institutions as may be necessary or appropriate
to conduct its business as now conducted and at a cost that would not result in
a Material Adverse Change.

2.19

Transactions Affecting Disclosure to FINRA.

2.19.1.

Finder’s Fees.  Except as described in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, there are no claims, payments,
arrangements, agreements or understandings relating to the payment of a
finder’s, consulting or origination fee by the Company or any Insider with
respect to the sale of the Public Securities hereunder or any other
arrangements, agreements or understandings of the Company or, to the Company’s
knowledge, any of its shareholders that may affect the Underwriters’
compensation, as determined by FINRA.

2.19.2.

Payments Within Twelve (12) Months.  Except as described in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, the Company has
not made any direct or indirect payments (in cash, securities or otherwise) to:
(i) any person, as a finder’s fee, consulting fee or otherwise, in consideration
of such person raising capital for the Company or introducing to the Company
persons who raised or provided capital to the Company; (ii) any FINRA member; or
(iii)  any person or entity that has any direct or indirect affiliation or
association with any FINRA member, within the twelve (12) months prior to the
Effective Date, other than the payment to the Underwriters as provided hereunder
in connection with the Offering.

2.19.3.

Use of Proceeds.  None of the net proceeds of the Offering will be paid by the
Company to any participating FINRA member or its affiliates, except as
specifically authorized herein.

- 10 -

--------------------------------------------------------------------------------

 

2.19.4.

FINRA Affiliation.  There is no (i) officer or director of the Company, (ii)
beneficial owner of 5% or more of any class of the Company's securities or (iii)
beneficial owner of the Company's unregistered equity securities which were
acquired during the 180-day period immediately preceding the filing of the
Registration Statement that is an affiliate or associated person of a FINRA
member participating in the Offering (as determined in accordance with the rules
and regulations of FINRA).

2.19.5.

Information. All information provided by the Company in its FINRA questionnaire
to Representative Counsel specifically for use by Representative Counsel in
connection with its Public Offering System filings (and related disclosure) with
FINRA is true, correct and complete in all material respects.

2.20

Foreign Corrupt Practices Act. None of the Company and its Subsidiaries or, to
the Company’s knowledge, any director, officer, agent, employee or affiliate of
the Company and its Subsidiaries or any other person acting on behalf of the
Company and its Subsidiaries, has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business of
the Company (or assist it in connection with any actual or proposed transaction)
that (i) might subject the Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in the
past, might have had a Material Adverse Change or (iii) if not continued in the
future, might adversely affect the assets, business, operations or prospects of
the Company. The Company has taken reasonable steps to ensure that its
accounting controls and procedures are sufficient to cause the Company to comply
in all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.

2.21

Compliance with OFAC. None of the Company and its Subsidiaries or, to the
Company’s knowledge, any director, officer, agent, employee or affiliate of the
Company and its Subsidiaries or any other person acting on behalf of the Company
and its Subsidiaries, is currently subject to any U.S. sanctions administered by
the Office of Foreign Assets Control of the U.S. Department of the Treasury
(“OFAC”), and the Company will not, directly or indirectly, use the proceeds of
the Offering hereunder, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other person or entity, for
the purpose of financing the activities of any person currently subject to any
U.S. sanctions administered by OFAC.

2.22

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

2.23

Officers’ Certificate.  Any certificate signed by any duly authorized officer of
the Company and delivered to you or to Representative Counsel shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.

2.24

Lock-Up Agreements.  Schedule 3 hereto contains a complete and accurate list of
the Company’s officers and directors of the Company(collectively, the “Lock-Up
Parties”).  The Company has caused each of the Lock-Up Parties to deliver to the
Representative an executed Lock-Up Agreement,

- 11 -

--------------------------------------------------------------------------------

 

in the form attached hereto as Exhibit B (the “Lock-Up Agreement”), prior to the
execution of this Agreement.

2.25

Subsidiaries.  All direct and indirect Subsidiaries of the Company are duly
organized and in good standing under the laws of the place of organization or
incorporation, and each Subsidiary is in good standing in each jurisdiction in
which its ownership or lease of property or the conduct of business requires
such qualification, except where the failure to qualify would not have a
material adverse effect on the assets, business or operations of the Company
taken as a whole.  The Company’s ownership and control of each Subsidiary is as
described in the Registration Statement, the Pricing Disclosure Package and the
Prospectus.

2.26

Related Party Transactions.  There are no business relationships or related
party transactions involving the Company or any other person required to be
described in the Registration Statement, the Pricing Disclosure Package and the
Prospectus that have not been described as required.

2.27

Board of Directors.  The Board of Directors of the Company is comprised of the
persons set forth under the heading of the Pricing Prospectus and the Prospectus
captioned “Directors and Executive Officers.” The qualifications of the persons
serving as board members and the overall composition of the board comply with
the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of 2002
and the rules promulgated thereunder (the “Sarbanes-Oxley Act”) applicable to
the Company and the listing rules of the Exchange.  At least one member of the
Audit Committee of the Board of Directors of the Company qualifies as an “audit
committee financial expert,” as such term is defined under Regulation S-K and
the listing rules of the Exchange.  In addition, at least a majority of the
persons serving on the Board of Directors qualify as “independent,” as defined
under the listing rules of the Exchange.

2.28

Sarbanes-Oxley Compliance.

2.28.1.

Disclosure Controls.  The Company has developed and currently maintains
disclosure controls and procedures that will comply with Rule 13a-15 or 15d-15
under the Exchange Act Regulations, and such controls and procedures are
effective to ensure that all material information concerning the Company will be
made known on a timely basis to the individuals responsible for the preparation
of the Company’s Exchange Act filings and other public disclosure documents.

2.28.2.

Compliance.  The Company is, or at the Applicable Time and on the Closing Date
will be, in material compliance with the provisions of the Sarbanes-Oxley Act
applicable to it, and has implemented or will implement such programs and taken
reasonable steps to ensure the Company’s future compliance (not later than the
relevant statutory and regulatory deadlines therefor) with all of the material
provisions of the Sarbanes-Oxley Act.

2.29

Accounting Controls. The Company and its Subsidiaries maintain systems of
“internal control over financial reporting” (as defined under Rules 13a-15 and
15d-15 under the Exchange Act Regulations) that comply with the requirements of
the Exchange Act and have been designed by, or under the supervision of, their
respective principal executive and principal financial officers, or persons
performing similar functions, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, including, but not limited to,
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to

- 12 -

--------------------------------------------------------------------------------

 

any differences. Except as disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, the Company is not aware of any material
weaknesses in its internal controls.  The Company’s auditors and the Audit
Committee of the Board of Directors of the Company have been advised of: (i) all
significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are known to the Company’s
management and that have adversely affected or are reasonably likely to
adversely affect the Company’ ability to record, process, summarize and report
financial information; and (ii) any fraud known to the Company’s management,
whether or not material, that involves management or other employees who have a
significant role in the Company’s internal controls over financial reporting.

2.30

No Investment Company Status.  The Company is not and, after giving effect to
the Offering and the application of the proceeds thereof as described in the
Registration Statement, the Pricing Disclosure Package and the Prospectus, will
not be, required to register as an “investment company,” as defined in the
Investment Company Act of 1940, as amended.

2.31

No Labor Disputes.  No labor dispute with the employees of the Company or any of
its Subsidiaries exists or, to the knowledge of the Company, is imminent.

2.32

Intellectual Property Rights.  The Company and each of its Subsidiaries owns or
possesses or has valid rights to use all patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses, inventions, trade secrets and similar
rights (“Intellectual Property Rights”) necessary for the conduct of the
business of the Company and its Subsidiaries as currently carried on and as
described in the Registration Statement, the Pricing Disclosure Package and the
Prospectus.  To the knowledge of the Company, no action or use by the Company or
any of its Subsidiaries necessary for the conduct of its business as currently
carried on and as described in the Registration Statement and the Prospectus
will involve or give rise to any infringement of, or license or similar fees
for, any Intellectual Property Rights of others.  Neither the Company nor any of
its Subsidiaries has received any notice alleging any such infringement, fee or
conflict with asserted Intellectual Property Rights of others. Except as would
not reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Change (A) to the knowledge of the Company, there is no
infringement, misappropriation or violation by third parties of any of the
Intellectual Property Rights owned by the Company; (B) there is no pending or,
to the knowledge of the Company, threatened action, suit, proceeding or claim by
others challenging the rights of the Company in or to any such Intellectual
Property Rights, and the Company is unaware of any facts which would form a
reasonable basis for any such claim, that would, individually or in the
aggregate, together with any other claims in this Section 2.34, reasonably be
expected to result in a Material Adverse Change; (C) the Intellectual Property
Rights owned by the Company and, to the knowledge of the Company, the
Intellectual Property Rights licensed to the Company have not been adjudged by a
court of competent jurisdiction invalid or unenforceable, in whole or in part,
and there is no pending or, to the Company’s knowledge, threatened action, suit,
proceeding or claim by others challenging the validity or scope of any such
Intellectual Property Rights, and the Company is unaware of any facts which
would form a reasonable basis for any such claim that would, individually or in
the aggregate, together with any other claims in this Section 2.34, reasonably
be expected to result in a Material Adverse Change; (D) there is no pending or,
to the Company’s knowledge, threatened action, suit, proceeding or claim by
others that the Company infringes, misappropriates or otherwise violates any
Intellectual Property Rights or other proprietary rights of others, the Company
has not received any written notice of such claim and the Company is unaware of
any other facts which would form a reasonable basis for any such claim that
would, individually or in the aggregate, together with any other claims in this
Section 2.34, reasonably be expected to result in a Material Adverse Change; and
(E) to the Company’s knowledge, no employee of the Company is in or has ever
been in violation in any material respect of any term of any employment
contract, patent disclosure agreement, invention assignment agreement,
non-competition agreement, non-solicitation agreement, nondisclosure agreement
or any restrictive covenant to or with a former employer

- 13 -

--------------------------------------------------------------------------------

 

where the basis of such violation relates to such employee’s employment with the
Company, or actions undertaken by the employee while employed with the Company
and could reasonably be expected to result, individually or in the aggregate, in
a Material Adverse Change. To the Company’s knowledge, all material technical
information developed by and belonging to the Company which has not been
patented has been kept confidential. The Company is not a party to or bound by
any options, licenses or agreements with respect to the Intellectual Property
Rights of any other person or entity that are required to be set forth in the
Registration Statement, the Pricing Disclosure Package and the Prospectus and
are not described therein. The Registration Statement, the Pricing Disclosure
Package and the Prospectus contain in all material respects the same description
of the matters set forth in the preceding sentence. None of the technology
employed by the Company has been obtained or is being used by the Company in
violation of any contractual obligation binding on the Company or, to the
Company’s knowledge, any of its officers, directors or employees, or otherwise
in violation of the rights of any persons..

2.33

Taxes.  Each of the Company and its Subsidiaries has filed all returns (as
hereinafter defined) required to be filed with taxing authorities prior to the
date hereof or has duly obtained extensions of time for the filing thereof.
 Each of the Company and its Subsidiaries has paid all taxes (as hereinafter
defined) shown as due on such returns that were filed and has paid all taxes
imposed on or assessed against the Company or such respective Subsidiary.  The
provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed, and for all periods to and including the
dates of such consolidated financial statements.  Except as disclosed in writing
to the Underwriters, (i) no issues have been raised (and are currently pending)
by any taxing authority in connection with any of the returns or taxes asserted
as due from the Company or its Subsidiaries, and (ii) no waivers of statutes of
limitation with respect to the returns or collection of taxes have been given by
or requested from the Company or its Subsidiaries.  The term “taxes” means all
federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatever, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto.  The term “returns” means all returns, declarations, reports,
statements and other documents required to be filed in respect to taxes.

2.34

ERISA Compliance.  The Company and any “employee benefit plan” (as defined under
the Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder (collectively, “ERISA”))
established or maintained by the Company or its “ERISA Affiliates” (as defined
below) are in compliance in all material respects with ERISA. “ERISA Affiliate”
means, with respect to the Company, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the “Code”) of which the Company is a member. No “reportable event” (as defined
under ERISA) has occurred or is reasonably expected to occur with respect to any
“employee benefit plan” established or maintained by the Company or any of its
ERISA Affiliates. No “employee benefit plan” established or maintained by the
Company or any of its ERISA Affiliates, if such “employee benefit plan” were
terminated, would have any “amount of unfunded benefit liabilities” (as defined
under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred
or reasonably expects to incur any material liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any “employee benefit
plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee
benefit plan” established or maintained by the Company or any of its ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and, to the knowledge of the Company, nothing has occurred, whether
by action or failure to act, which would cause the loss of such qualification.

- 14 -

--------------------------------------------------------------------------------

 

2.35

Compliance with Laws.  The Company: (A) is and at all times has been in
compliance with all statutes, rules, or regulations applicable to the ownership,
testing, development, manufacture, packaging, processing, use, distribution,
marketing, labeling, promotion, sale, offer for sale, storage, import, export or
disposal of any product manufactured or distributed by the Company (“Applicable
Laws”), except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Change; (B) has not received any warning
letter, untitled letter or other correspondence or notice from any other
governmental authority alleging or asserting noncompliance with any Applicable
Laws or any licenses, certificates, approvals, clearances, authorizations,
permits and supplements or amendments thereto required by any such Applicable
Laws (“Authorizations”);(C) possesses all material Authorizations and such
Authorizations are valid and in full force and effect and are not in material
violation of any term of any such Authorizations; (D) has not received notice of
any claim, action, suit, proceeding, hearing, enforcement, investigation,
arbitration or other action from any governmental authority or third party
alleging that any product operation or activity is in violation of any
Applicable Laws or Authorizations and has no knowledge that any such
governmental authority or third party is considering any such claim, litigation,
arbitration, action, suit, investigation or proceeding; (E) has not received
notice that any governmental authority has taken, is taking or intends to take
action to limit, suspend, modify or revoke any Authorizations and has no
knowledge that any such governmental authority is considering such action; (F)
has filed, obtained, maintained or submitted all material reports, documents,
forms, notices, applications, records, claims, submissions and supplements or
amendments as required by any Applicable Laws or Authorizations and that all
such reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete and correct on the date
filed (or were corrected or supplemented by a subsequent submission); and (G)
has not, either voluntarily or involuntarily, initiated, conducted, or issued or
caused to be initiated, conducted or issued, any recall, market withdrawal or
replacement, safety alert, post-sale warning, “dear doctor” letter, or other
notice or action relating to the alleged lack of safety or efficacy of any
product or any alleged product defect or violation and, to the Company’s
knowledge, no third party has initiated, conducted or intends to initiate any
such notice or action.

2.36

Reserved.

2.37

Real Property.  Except as set forth in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, the Company and its Subsidiaries have
good and marketable title in fee simple to, or have valid rights to lease or
otherwise use, all items of real or personal property which are material to the
business of the Company and its Subsidiaries taken as a whole, in each case free
and clear of all liens, encumbrances, security interests, claims and defects
that do not, singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Company or its Subsidiaries; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or any of its Subsidiaries holds
properties described in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, are in full force and effect, and neither the
Company nor any Subsidiary has received any notice of any material claim of any
sort that has been asserted by anyone adverse to the rights of the Company or
any Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such Subsidiary to the
continued possession of the leased or subleased premises under any such lease or
sublease.

2.38

Contracts Affecting Capital.  There are no transactions, arrangements or other
relationships between and/or among the Company, any of its affiliates (as such
term is defined in Rule 405 of the Securities Act Regulations) and any
unconsolidated entity, including, but not limited to, any structured finance,
special purpose or limited purpose entity that could reasonably be expected to
materially affect the Company’s or its Subsidiaries’ liquidity or the
availability of or requirements for their capital resources required to be
described or incorporated by reference in the Registration Statement,

- 15 -

--------------------------------------------------------------------------------

 

the Pricing Disclosure Package and the Prospectus which have not been described
or incorporated by reference as required.

2.39

Loans to Directors or Officers.  There are no outstanding loans, advances
(except normal advances for business expenses in the ordinary course of
business) or guarantees or indebtedness by the Company or its Subsidiaries to or
for the benefit of any of the officers or directors of the Company, its
Subsidiaries or any of their respective family members, except as disclosed in
the Registration Statement, the Pricing Disclosure Package and the Prospectus.

2.40

Smaller Reporting Company.  As of the time of filing of the Registration
Statement, the Company was a “smaller reporting company,” as defined in
Rule 12b-2 of the Exchange Act Regulations.

2.41

Industry Data.  The statistical and market-related data included in each of the
Registration Statement, the Pricing Disclosure Package and the Prospectus are
based on or derived from sources that the Company reasonably and in good faith
believes are reliable and accurate or represent the Company’s good faith
estimates that are made on the basis of data derived from such sources.

2.42

Reverse Stock Split.  The Company has effectuated a reverse stock split of its
shares of Common Stock on the basis of one (1) such share for each fourteen (14)
issued and outstanding shares thereof (the “Reverse Stock Split”).

2.43

Margin Securities.  The Company owns no “margin securities” as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
(the “Federal Reserve Board”), and none of the proceeds of Offering will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security, for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any margin security or for any
other purpose which might cause any of the shares of Common Stock to be
considered a “purpose credit” within the meanings of Regulation T, U or X of the
Federal Reserve Board.

3.

Covenants of the Company.  The Company covenants and agrees as follows:

3.1

Amendments to Registration Statement.  The Company shall deliver to the
Representative, prior to filing, any amendment or supplement to the Registration
Statement or Prospectus proposed to be filed after the Effective Date and not
file any such amendment or supplement to which the Representative shall
reasonably object in writing.

3.2

Federal Securities Laws.

3.2.1.

Compliance.  The Company, subject to Section 3.2.2, shall comply with the
requirements of Rule 430A of the Securities Act Regulations, and will notify the
Representative promptly, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become effective or
any amendment or supplement to the Prospectus shall have been filed; (ii) of the
receipt of any comments from the Commission; (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information; (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, or of the suspension of the qualification of the Public Securities
and Representative’s Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes or of
any examination pursuant to Section 8(d) or 8(e) of the Securities Act
concerning the Registration Statement and (v) if the Company becomes the subject
of a proceeding under Section 8A of the Securities Act in connection with the
Offering of the Public Securities and Representative’s Securities. The Company
shall

- 16 -

--------------------------------------------------------------------------------

 

effect all filings required under Rule 424(b) of the Securities Act Regulations,
in the manner and within the time period required by Rule 424(b) (without
reliance on Rule 424(b)(8)), and shall take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for filing under
Rule 424(b) was received for filing by the Commission and, in the event that it
was not, it will promptly file such prospectus. The Company shall use its best
efforts to prevent the issuance of any stop order, prevention or suspension and,
if any such order is issued, to obtain the lifting thereof at the earliest
possible moment.

3.2.2.

Continued Compliance.  The Company shall comply with the Securities Act, the
Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so
as to permit the completion of the distribution of the Public Securities as
contemplated in this Agreement and in the Registration Statement, the Pricing
Disclosure Package and the Prospectus. If at any time when a prospectus relating
to the Public Securities is (or, but for the exception afforded by Rule 172 of
the Securities Act Regulations (“Rule 172”), would be) required by the
Securities Act to be delivered in connection with sales of the Public
Securities, any event shall occur or condition shall exist as a result of which
it is necessary, in the opinion of counsel for the Underwriters or for the
Company, to (i) amend the Registration Statement in order that the Registration
Statement will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) amend or supplement the Pricing
Disclosure Package or the Prospectus in order that the Pricing Disclosure
Package or the Prospectus, as the case may be, will not include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser or (iii) amend the
Registration Statement or amend or supplement the Pricing Disclosure Package or
the Prospectus, as the case may be, in order to comply with the requirements of
the Securities Act or the Securities Act Regulations, the Company will promptly
(A) give the Representative notice of such event; (B) prepare any amendment or
supplement as may be necessary to correct such statement or omission or to make
the Registration Statement, the Pricing Disclosure Package or the Prospectus
comply with such requirements and, a reasonable amount of time prior to any
proposed filing or use, furnish the Representative with copies of any such
amendment or supplement and (C) file with the Commission any such amendment or
supplement; provided that the Company shall not file or use any such amendment
or supplement to which the Representative or counsel for the Underwriters shall
reasonably object. The Company will furnish to the Underwriters such number of
copies of such amendment or supplement as the Underwriters may reasonably
request. The Company has given the Representative notice of any filings made
pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours
prior to the Applicable Time.  The Company shall give the Representative notice
of its intention to make any such filing from the Applicable Time until the
later of the Closing Date and the exercise in full or expiration of the
Over-allotment Option specified in Section 1.2 hereof and will furnish the
Representative with copies of the related document(s) a reasonable amount of
time prior to such proposed filing, as the case may be, and will not file or use
any such document to which the Representative or counsel for the Underwriters
shall reasonably object.

3.2.3.

Exchange Act Registration.  For a period of three (3) years after the date of
this Agreement, the Company shall use its best efforts to maintain the
registration of the shares of Common Stock under the Exchange Act. The Company
shall not deregister the shares of Common Stock under the Exchange Act without
the prior written consent of the Representative.

3.2.4.

Free Writing Prospectuses.  The Company agrees that, unless it obtains the prior
written consent of the Representative, it shall not make any offer relating to
the Public Securities that would constitute an Issuer Free Writing Prospectus or
that would otherwise constitute a “free writing prospectus,” or a portion
thereof, required to be filed by the Company with the Commission or retained by
the Company under Rule 433; provided that the Representative shall be deemed to
have consented to each Issuer General Use Free Writing Prospectus hereto and any
“road show that is a written

- 17 -

--------------------------------------------------------------------------------

 

communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by
the Representative. The Company represents that it has treated or agrees that it
will treat each such free writing prospectus consented to, or deemed consented
to, by the Underwriters as an “issuer free writing prospectus,” as defined in
Rule 433, and that it has complied and will comply with the applicable
requirements of Rule 433 with respect thereto, including timely filing with the
Commission where required, legending and record keeping. If at any time
following issuance of an Issuer Free Writing Prospectus there occurred or occurs
an event or development as a result of which such Issuer Free Writing Prospectus
conflicted or would conflict with the information contained in the Registration
Statement or included or would include an untrue statement of a material fact or
omitted or would omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at that
subsequent time, not misleading, the Company will promptly notify the
Underwriters and will promptly amend or supplement, at its own expense, such
Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue
statement or omission.

3.3

Delivery to the Underwriters of Registration Statements.  The Company has
delivered or made available or shall deliver or make available to the
Representative and counsel for the Representative, without charge, signed copies
of the Registration Statement as originally filed and each amendment thereto
(including exhibits filed therewith) and signed copies of all consents and
certificates of experts, and will also deliver to the Underwriters, without
charge, a conformed copy of the Registration Statement as originally filed and
each amendment thereto (without exhibits) for each of the Underwriters. The
copies of the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.

3.4

Delivery to the Underwriters of Prospectuses.  The Company has delivered or made
available or will deliver or make available to each Underwriter, without charge,
as many copies of each Preliminary Prospectus as such Underwriter reasonably
requested, and the Company hereby consents to the use of such copies for
purposes permitted by the Securities Act. The Company will furnish to each
Underwriter, without charge, during the period when a prospectus relating to the
Public Securities is (or, but for the exception afforded by Rule 172, would be)
required to be delivered under the Securities Act, such number of copies of the
Prospectus (as amended or supplemented) as such Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto furnished to
the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

3.5

Effectiveness and Events Requiring Notice to the Representative.  The Company
shall use its best efforts to cause the Registration Statement to remain
effective with a current prospectus for at least nine (9) months after the
Applicable Time, and shall notify the Representative immediately and confirm the
notice in writing: (i) of the effectiveness of the Registration Statement and
any amendment thereto; (ii) of the issuance by the Commission of any stop order
or of the initiation, or the threatening, of any proceeding for that purpose;
(iii) of the issuance by any state securities commission of any proceedings for
the suspension of the qualification of the Public Securities for offering or
sale in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose; (iv) of the mailing and delivery to the Commission
for filing of any amendment or supplement to the Registration Statement or
Prospectus; (v) of the receipt of any comments or request for any additional
information from the Commission; and (vi) of the happening of any event during
the period described in this Section 3.5 that, in the judgment of the Company,
makes any statement of a material fact made in the Registration Statement, the
Pricing Disclosure Package or the Prospectus untrue or that requires the making
of any changes in (a) the Registration Statement in order to make the statements
therein not misleading, or (b) in the Pricing Disclosure Package or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities

- 18 -

--------------------------------------------------------------------------------

 

commission shall enter a stop order or suspend such qualification at any time,
the Company shall make every reasonable effort to obtain promptly the lifting of
such order.

3.6

Review of Financial Statements.  For a period of five (5) years after the date
of this Agreement, the Company, at its expense, shall cause its regularly
engaged independent registered public accounting firm to review (but not audit)
the Company’s financial statements for each of the three fiscal quarters
immediately preceding the announcement of any quarterly financial information.

3.7

Listing.  The Company shall use its reasonable best efforts to maintain the
listing of the shares of Common Stock (including the Public Securities) on the
Exchange for at least three years from the date of this Agreement.

3.8

Financial Public Relations Firm.  As of the Effective Date, the Company shall
have retained a financial public relations firm reasonably acceptable to the
Representative and the Company, which shall initially be Gateway Investor
Relations, which firm shall be experienced in assisting issuers in public
offerings of securities and in their relations with their security holders, and
shall retain such firm or another firm reasonably acceptable to the
Representative for a period of not less than two (2) years after the Effective
Date.

3.9

Reports to the Representative.

3.9.1.

Periodic Reports, etc.  For a period of three (3) years after the date of this
Agreement, the Company shall furnish or make available to the Representative
copies of such financial statements and other periodic and special reports as
the Company from time to time furnishes generally to holders of any class of its
securities and also promptly furnish to the Representative: (i) a copy of each
periodic report the Company shall be required to file with the Commission under
the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press
release and every news item and article with respect to the Company or its
affairs which was released by the Company; (iii) a copy of each Form 8-K
prepared and filed by the Company; (iv) five copies of each registration
statement filed by the Company under the Securities Act; and (v) such additional
documents and information with respect to the Company and the affairs of any
future subsidiaries of the Company as the Representative may from time to time
reasonably request; provided the Representative shall sign, if requested by the
Company, a Regulation FD compliant confidentiality agreement which is reasonably
acceptable to the Representative and Representative Counsel in connection with
the Representative’s receipt of such information. Documents filed with the
Commission pursuant to its EDGAR system shall be deemed to have been delivered
to the Representative pursuant to this Section 3.9.1.

3.9.2.

Transfer Agent; Transfer Sheets.  For a period of three (3) years after the date
of this Agreement, the Company shall retain a transfer agent and registrar
acceptable to the Representative (the “Transfer Agent”) and shall furnish to the
Representative at the Company’s sole cost and expense such transfer sheets of
the Company’s securities as the Representative may reasonably request, including
the daily and monthly consolidated transfer sheets of the Transfer Agent and
DTC.  Continental Stock Transfer & Trust Company is acceptable to the
Representative to act as Transfer Agent for the shares of Common Stock.

3.9.3.

Trading Reports.  During such time as the Public Securities are listed on the
Exchange, the Company shall provide to the Representative, at the Company’s
expense, such reports published by Exchange relating to price trading of the
Public Securities, as the Representative shall reasonably request.

3.10

Payment of Expenses

- 19 -

--------------------------------------------------------------------------------

 

3.10.1.

General Expenses Related to the Offering.  The Company hereby agrees to pay on
each of the Closing Date and the Option Closing Date, if any, to the extent not
paid at the Closing Date, all expenses incident to the performance of the
obligations of the Company under this Agreement, including, but not limited to:
(a) all filing fees and communication expenses relating to the registration of
the shares of Common Stock to be sold in the Offering (including the
Over-allotment Shares) with the Commission; (b) all Public Filing System filing
fees associated with the review of the Offering by FINRA; (c) all fees and
expenses relating to the listing of such Public Securities on the Exchange and
such other stock exchanges as the Company and the Representative together
determine; (d) all fees, expenses and disbursements relating to background
checks of the Company’s officers and directors in an amount not to exceed $5,000
in the aggregate; (e) all fees, expenses and disbursements relating to the
registration or qualification of the Public Securities under the “blue sky”
securities laws of such states and other jurisdictions as the Representative may
reasonably designate; (f) all fees, expenses and disbursements relating to the
registration, qualification or exemption of the Public Securities under the
securities laws of such foreign jurisdictions as the Representative may
reasonably designate; (g) the costs of all mailing and printing of the
underwriting documents (including, without limitation, the Underwriting
Agreement, any Blue Sky Surveys and, if appropriate, any Agreement Among
Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power
of Attorney), Registration Statements, Prospectuses and all amendments,
supplements and exhibits thereto and as many preliminary and final Prospectuses
as the Representative may reasonably deem necessary; (h) the costs and expenses
of a public relations firm; (i) the costs of preparing, printing and delivering
certificates representing the Public Securities; (j) fees and expenses of the
transfer agent for the shares of Common Stock; (k) stock transfer and/or stamp
taxes, if any, payable upon the transfer of securities from the Company to the
Underwriters; (l) to the extent approved by the Company in writing, the costs
associated with post-Closing advertising the Offering in the national editions
of the Wall Street Journal and New York Times; (m) the costs associated with one
set of bound volumes of the public offering materials as well as commemorative
mementos and lucite tombstones, each of which the Company or its designee shall
provide within a reasonable time after the Closing Date in such quantities as
the Representative may reasonably request, in an amount not to exceed $3,000;
(n) the fees and expenses of the Company’s accountants; (o) the fees and
expenses of the Company’s legal counsel and other agents and representatives;
(p) fees and expenses of the Representative’s legal counsel not to exceed
$75,000; (q) the $29,500 cost associated with the Underwriter’s use of Ipreo’s
book-building, prospectus tracking and compliance software for the Offering;
 and (r) up to $20,000 of the Underwriters’ actual accountable “road show”
expenses for the Offering.  The Representative may deduct from the net proceeds
of the Offering payable to the Company on the Closing Date, or the Option
Closing Date, if any, the expenses set forth herein to be paid by the Company to
the Underwriters.

3.10.2.

Non-accountable Expenses.  The Company further agrees that, in addition to the
expenses payable pursuant to Section 3.10.1, on the Closing Date it shall pay to
the Representative, by deduction from the net proceeds of the Offering
contemplated herein, a non-accountable expense allowance equal to one-half
percent (0.5%) of the gross proceeds received by the Company from the sale of
the Firm Shares (excluding the Option Shares), less the Advance (as such term is
defined in Section 8.3 hereof), provided, however, that in the event that the
Offering is terminated, the Company agrees to reimburse the Underwriters
pursuant to Section 8.3 hereof.

3.11

Application of Net Proceeds.  The Company shall apply the net proceeds from the
Offering received by it in a manner consistent with the application thereof
described under the caption “Use of Proceeds” in the Registration Statement, the
Pricing Disclosure Package and the Prospectus.

3.12

Delivery of Earnings Statements to Security Holders.  The Company shall make
generally available to its security holders as soon as practicable, but not
later than the first day of the fifteenth (15th) full calendar month following
the date of this Agreement, an earnings statement (which need not be certified
by independent registered public accounting firm unless required by the
Securities

- 20 -

--------------------------------------------------------------------------------

 

Act or the Securities Act Regulations, but which shall satisfy the provisions of
Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at
least twelve (12) consecutive months beginning after the date of this Agreement.

3.13

Stabilization.  Neither the Company nor, to its knowledge, any of its employees,
directors or shareholders (without the consent of the Representative) has taken
or shall take, directly or indirectly, any action designed to or that has
constituted or that might reasonably be expected to cause or result in, under
Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Public Securities.

3.14

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

3.15

Accountants.  As of the date of this Agreement, the Company shall retain an
independent registered public accounting firm reasonably acceptable to the
Representative, and the Company shall continue to retain a nationally recognized
independent registered public accounting firm for a period of at least three (3)
years after the date of this Agreement.  The Representative acknowledges that
the Auditor is acceptable to the Representative.

3.16

FINRA.  The Company shall advise the Representative (who shall make an
appropriate filing with FINRA) if it is or becomes aware that (i) any officer or
director of the Company, (ii) any beneficial owner of 5% or more of any class of
the Company's securities or (iii) any beneficial owner of the Company's
unregistered equity securities which were acquired during the 180 days
immediately preceding the filing of the Registration Statement is or becomes an
affiliate or associated person of a FINRA member participating in the Offering
(as determined in accordance with the rules and regulations of FINRA).

3.17

No Fiduciary Duties.  The Company acknowledges and agrees that the Underwriters’
responsibility to the Company is solely contractual in nature and that none of
the Underwriters or their affiliates or any selling agent shall be deemed to be
acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the
Company or any of its affiliates in connection with the Offering and the other
transactions contemplated by this Agreement.

3.18

Company Lock-Up Agreements.  

3.18.1.

Restriction on Sales of Capital Stock.  The Company, on behalf of itself and any
successor entity, agrees that, without the prior written consent of the
Representative, it will not, for a period of three (3) months after the date of
this Agreement (the “Lock-Up Period”), (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of capital stock of
the Company or any securities convertible into or exercisable or exchangeable
for shares of capital stock of the Company; (ii) file or caused to be filed any
registration statement with the Commission relating to the offering of any
shares of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of capital stock of the Company; (iii)
complete any offering of debt securities of the Company, other than entering
into a line of credit with a traditional bank or (iv) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of capital stock of the Company, whether any
such transaction

- 21 -

--------------------------------------------------------------------------------

 

described in clause (i), (ii), (iii) or (iv) above is to be settled by delivery
of shares of capital stock of the Company or such other securities, in cash or
otherwise.  

The restrictions contained in this Section 3.18.1 shall not apply to (i) the
shares of Common Stock to be sold hereunder, (ii) the issuance by the Company of
shares of Common Stock upon the exercise of a stock option or warrant or the
conversion of a security outstanding on the date hereof, of which the
Representative has been advised in writing or (iii) the issuance by the Company
of stock options or shares of capital stock of the Company under any equity
compensation plan of the Company, provided that in each of (ii) and (iii) above,
the underlying shares shall be restricted from sale during the entire Lock-Up
Period.

Notwithstanding the foregoing, if (i) during the last 17 days of the Lock-Up
Period, the Company issues an earnings release or material news or a material
event relating to the Company occurs, or (ii) prior to the expiration of the
Lock-Up Period, the Company announces that it will release earnings results or
becomes aware that material news or a material event will occur during the
16-day period beginning on the last day of the Lock-Up Period, the restrictions
imposed by this Section 3.18.1 shall continue to apply until the expiration of
the 18-day period beginning on the issuance of the earnings release or the
occurrence of such material news or material event, as applicable, unless the
Representative waives, in writing, such extension; provided, however, that this
extension of the Lock-Up Period shall not apply to the extent that FINRA has
amended or repealed NASD Rule 2711(f)(4), or has otherwise provided written
interpretive guidance regarding such rule, in each case, so as to eliminate the
prohibition of any broker, dealer, or member of a national securities
association from publishing or distributing any research report, with respect to
the securities of an Emerging Growth Company prior to or after the expiration of
any agreement between the broker, dealer, or member of a national securities
association and the Emerging Growth Company or its shareholders that restricts
or prohibits the sale of securities held by the Emerging Growth Company or its
shareholders after the initial public offering date.

3.18.2.

Restriction on Continuous Offerings.  Notwithstanding the restrictions contained
in Section 3.18.1, the Company, on behalf of itself and any successor entity,
agrees that, without the prior written consent of the Representative, it will
not, for a period of 12 months after the date of this Agreement, directly or
indirectly in any “at-the-market” or continuous equity transaction, offer to
sell, sell, contract to sell, grant any option to sell or otherwise dispose of
shares of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of capital stock of the Company.

3.19

Release of D&O Lock-up Period.  If the Representative, in its sole discretion,
agrees to release or waive the restrictions set forth in the Lock-Up Agreements
described in Section 2.24 hereof for an officer or director of the Company and
provide the Company with notice of the impending release or waiver at least
three (3) Business Days before the effective date of the release or waiver, the
Company agrees to announce the impending release or waiver by a press release
substantially in the form of Exhibit C hereto through a major news service at
least two (2) Business Days before the effective date of the release or waiver.

3.20

Blue Sky Qualifications.  The Company shall use its best efforts, in cooperation
with the Underwriters, if necessary, to qualify the Public Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Representative may designate and to
maintain such qualifications in effect so long as required to complete the
distribution of the Public Securities; provided, however, that the Company shall
not be obligated to file any general consent to service of process or to qualify
as a foreign corporation or as a dealer in securities in any jurisdiction in
which it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so subject.

- 22 -

--------------------------------------------------------------------------------

 

3.21

Reporting Requirements.  The Company, during the period when a prospectus
relating to the Public Securities is (or, but for the exception afforded by Rule
172, would be) required to be delivered under the Securities Act, will file all
documents required to be filed with the Commission pursuant to the Exchange Act
within the time periods required by the Exchange Act and Exchange Act
Regulations. Additionally, the Company shall report the use of proceeds from the
issuance of the Public Securities as may be required under Rule 463 under the
Securities Act Regulations.

4.

Conditions of Underwriters’ Obligations.  The obligations of the Underwriters to
purchase and pay for the Public Securities, as provided herein, shall be subject
to (i) the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any; (ii) the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof; (iii) the performance by the
Company of its obligations hereunder; and (iv) the following conditions:

4.1

Regulatory Matters.

4.1.1.

Effectiveness of Registration Statement; Rule 430A Information.  The
Registration Statement has become effective not later than 5:00 p.m., Eastern
time, on the date of this Agreement or such later date and time as shall be
consented to in writing by you, and, at each of the Closing Date and any Option
Closing Date, no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto has been issued under the
Securities Act, no order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus has been issued and no proceedings for any of those
purposes have been instituted or are pending or, to the Company’s knowledge,
contemplated by the Commission. The Company has complied with each request (if
any) from the Commission for additional information. The Prospectus containing
the Rule 430A Information shall have been filed with the Commission in the
manner and within the time frame required by Rule 424(b) (without reliance on
Rule 424(b)(8)) or a post-effective amendment providing such information shall
have been filed with, and declared effective by, the Commission in accordance
with the requirements of Rule 430A.

4.1.2.

FINRA Clearance.  On or before the date of this Agreement, the Representative
shall have received clearance from FINRA as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement.

4.1.3.

Exchange Stock Market Clearance.  On the Closing Date, the Company’s shares of
Common Stock, including the Firm Shares, shall have been approved for listing on
the Exchange, subject only to official notice of issuance. On the first Option
Closing Date (if any), the Company’s shares of Common Stock, including the
Option Shares, shall have been approved for listing on the Exchange, subject
only to official notice of issuance.

4.2

Company Counsel Matters.

4.2.1.

Closing Date Opinion of Counsel.  On the Closing Date, the Representative shall
have received the favorable opinion of Lucosky Brookman LLP, counsel to the
Company, dated the Closing Date and addressed to the Representative,
substantially in the form of Exhibit D attached hereto.

4.2.2.

Option Closing Date Opinions of Counsel. On the Option Closing Date, if any, the
Representative shall have received the favorable opinions of each counsel listed
in Sections 4.2.1 and 4.2.2, dated the Option Closing Date, addressed to the
Representative and in form and substance reasonably satisfactory to the
Representative, confirming as of the Option Closing Date, the statements made by
such counsels in their respective opinions delivered on the Closing Date.

- 23 -

--------------------------------------------------------------------------------

 

4.2.3.

Reliance. In rendering such opinions, such counsel may rely: (i) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to the
Representative) of other counsel reasonably acceptable to the Representative,
familiar with the applicable laws; and (ii) as to matters of fact, to the extent
they deem proper, on certificates or other written statements of officers of the
Company and officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to Representative Counsel if requested. The opinion of Lucosky Brookman LLP and
any opinion relied upon by Lucosky Brookman LLP shall include a statement to the
effect that it may be relied upon by Representative Counsel in its opinion
delivered to the Underwriters.

4.3

Comfort Letters.  

4.3.1.

Cold Comfort Letter.  At the time this Agreement is executed you shall have
received a cold comfort letter containing statements and information of the type
customarily included in accountants’ comfort letters with respect to the
financial statements and certain financial information contained in the
Registration Statement, the Pricing Disclosure Package and the Prospectus,
addressed to the Representative and in form and substance satisfactory in all
respects to you and to the Auditor, dated as of the date of this Agreement.

4.3.2.

Bring-down Comfort Letter.  At each of the Closing Date and the Option Closing
Date, if any, the Representative shall have received from the Auditor a letter,
dated as of the Closing Date or the Option Closing Date, as applicable, to the
effect that the Auditor reaffirms the statements made in the letter furnished
pursuant to Section 4.3.1, except that the specified date referred to shall be a
date not more than three (3) business days prior to the Closing Date or the
Option Closing Date, as applicable.

4.4

Officers’ Certificates.

4.4.1.

Officers’ Certificate.  The Company shall have furnished to the Representative a
certificate, dated the Closing Date and any Option Closing Date (if such date is
other than the Closing Date), of its Chief Executive Officer, its President and
its Chief Financial Officer stating that (i) such officers have carefully
examined the Registration Statement, the Pricing Disclosure Package, any Issuer
Free Writing Prospectus and the Prospectus and, in their opinion, the
Registration Statement and each amendment thereto, as of the Applicable Time and
as of the Closing Date (or any Option Closing Date if such date is other than
the Closing Date) did not include any untrue statement of a material fact and
did not omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Pricing Disclosure
Package, as of the Applicable Time and as of the Closing Date (or any Option
Closing Date if such date is other than the Closing Date), any Issuer Free
Writing Prospectus as of its date and as of the Closing Date (or any Option
Closing Date if such date is other than the Closing Date), the Prospectus and
each amendment or supplement thereto, as of the respective date thereof and as
of the Closing Date, did not include any untrue statement of a material fact and
did not omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, (ii) since the effective date of the Registration Statement, no
event has occurred which should have been set forth in a supplement or amendment
to the Registration Statement, the Pricing Disclosure Package or the Prospectus,
(iii) to the best of their knowledge after reasonable investigation, as of the
Closing Date (or any Option Closing Date if such date is other than the Closing
Date), the representations and warranties of the Company in this Agreement are
true and correct and the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date (or any Option Closing Date if such date is other than the
Closing Date), and (iv) there has not been, subsequent to the date of the most
recent audited financial statements included or incorporated by reference in the
Pricing Disclosure Package, any

- 24 -

--------------------------------------------------------------------------------

 

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.

4.4.2.

Secretary’s Certificate.  At each of the Closing Date and the Option Closing
Date, if any, the Representative shall have received a certificate of the
Company signed by the Secretary of the Company, dated the Closing Date or the
Option Date, as the case may be, respectively, certifying: (i) that each of the
Charter and Bylaws is true and complete, has not been modified and is in full
force and effect; (ii) that the resolutions of the Company’s Board of Directors
relating to the Offering are in full force and effect and have not been
modified; (iii) as to the accuracy and completeness of all correspondence
between the Company or its counsel and the Commission; and (iv) as to the
incumbency of the officers of the Company. The documents referred to in such
certificate shall be attached to such certificate.

4.5

No Material Changes.  Prior to and on each of the Closing Date and each Option
Closing Date, if any: (i) there shall have been no material adverse change or
development involving a prospective material adverse change in the condition or
prospects or the business activities, financial or otherwise, of the Company
from the latest dates as of which such condition is set forth in the
Registration Statement, the Pricing Disclosure Package and the Prospectus;
(ii) no action, suit or proceeding, at law or in equity, shall have been pending
or threatened against the Company or any Insider before or by any court or
federal or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect the
business, operations, prospects or financial condition or income of the Company,
except as set forth in the Registration Statement, the Pricing Disclosure
Package and the Prospectus; (iii) no stop order shall have been issued under the
Securities Act and no proceedings therefor shall have been initiated or
threatened by the Commission; and (iv) the Registration Statement, the Pricing
Disclosure Package and the Prospectus and any amendments or supplements thereto
shall contain all material statements which are required to be stated therein in
accordance with the Securities Act and the Securities Act Regulations and shall
conform in all material respects to the requirements of the Securities Act and
the Securities Act Regulations, and neither the Registration Statement, the
Pricing Disclosure Package nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

4.6

Delivery of Agreements.

4.6.1.

Lock-Up Agreements.  On or before the date of this Agreement, the Company shall
have delivered to the Representative executed copies of the Lock-Up Agreements
from each of the persons listed in Schedule 3 hereto.

4.6.2.

Representative’s Warrant Agreement.  On the Closing Date, the Company shall have
delivered to the Representative executed copies of the Representative’s Warrant
Agreement.

4.7

Additional Documents.  At the Closing Date and at each Option Closing Date (if
any) Representative Counsel shall have been furnished with such documents and
opinions as they may require for the purpose of enabling Representative Counsel
to deliver an opinion to the Underwriters, or in order to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Public Securities and the
Representative’s Securities as herein contemplated shall be satisfactory in form
and substance to the Representative and Representative Counsel.

- 25 -

--------------------------------------------------------------------------------

 

4.8

Reverse Stock Split.  Not later than the first trading day of the Firm Shares
following the date hereof, the Reverse Stock Split shall be effective.

5.

Indemnification.

5.1

Indemnification of the Underwriters.

5.1.1.

General.  Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Underwriter, its affiliates and each of its and
their respective directors, officers, members, employees, representatives,
partners, shareholders, affiliates, counsel, and agents and each person, if any,
who controls any such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively the “Underwriter
Indemnified Parties,” and each an “Underwriter Indemnified Party”), against any
and all loss, liability, claim, damage and expense whatsoever (including but not
limited to any and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, whether arising out of any action between
any of the Underwriter Indemnified Parties and the Company or between any of the
Underwriter Indemnified Parties and any third party, or otherwise) to which they
or any of them may become subject under the Securities Act, the Exchange Act or
any other statute or at common law or otherwise or under the laws of foreign
countries (a “Claim”), (i) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in (A) the Registration
Statement, the Pricing Disclosure Package, any Preliminary Prospectus, the
Prospectus, or in any Issuer Free Writing Prospectus or in any Written
Testing-the-Waters Communication (as from time to time each may be amended and
supplemented); (B) any materials or information provided to investors by, or
with the approval of, the Company in connection with the marketing of the
Offering, including any “road show” or investor presentations made to investors
by the Company (whether in person or electronically); or (C) any application or
other document or written communication (in this Section 5, collectively called
“application”) executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Public
Securities and Representative’s Securities under the securities laws thereof or
filed with the Commission, any state securities commission or agency, the
Exchange or any other national securities exchange; or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, the Underwriters’ Information or (ii)
otherwise arising in connection with or allegedly in connection with the
Offering. The Company also agrees that it will reimburse each Underwriter
Indemnified Party for all fees and expenses (including but not limited to any
and all legal or other expenses reasonably incurred in investigating, preparing
or defending against any litigation, commenced or threatened, or any claim
whatsoever, whether arising out of any action between any of the Underwriter
Indemnified Parties and the Company or between any of the Underwriter
Indemnified Parties and any third party, or otherwise) (collectively, the
“Expenses”), and further agrees wherever and whenever possible to advance
payment of Expenses as they are incurred by an Underwriter Indemnified Party in
investigating, preparing, pursuing or defending any Claim.

5.1.2.

Procedure.  If any action is brought against an Underwriter Indemnified Party in
respect of which indemnity may be sought against the Company pursuant to Section
5.1.1, such Underwriter Indemnified Party shall promptly notify the Company in
writing of the institution of such action and the Company shall assume the
defense of such action, including the employment and fees of counsel (subject to
the approval of such Underwriter Indemnified Party) and payment of actual
expenses if an Underwriter Indemnified Party requests that the Company do so.
Such Underwriter Indemnified Party shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of the Company, and shall be advanced by the Company. The Company
shall not be liable for any settlement of any action effected without its
consent (which shall not be unreasonably withheld). In addition, the Company
shall not, without the prior written consent of the

- 26 -

--------------------------------------------------------------------------------

 

Underwriters, settle, compromise or consent to the entry of any judgment in or
otherwise seek to terminate any pending or threatened action in respect of which
advancement, reimbursement, indemnification or contribution may be sought
hereunder (whether or not such Underwriter Indemnified Party is a party thereto)
unless such settlement, compromise, consent or termination (i) includes an
unconditional release of each Underwriter Indemnified Party, acceptable to such
Underwriter Indemnified Party, from all liabilities, expenses and claims arising
out of such action for which indemnification or contribution may be sought and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act, by or on behalf of any Underwriter Indemnified Party.

5.2

Indemnification of the Company.  Each Underwriter, severally and not jointly,
agrees to indemnify and hold harmless the Company, its directors, its officers
who signed the Registration Statement and persons who control the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act against any and all loss, liability, claim, damage and expense described in
the foregoing indemnity from the Company to the several Underwriters, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions made in the Registration Statement, any
Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any
amendment or supplement thereto or in any application, in reliance upon, and in
strict conformity with, the Underwriters’ Information. In case any action shall
be brought against the Company or any other person so indemnified based on any
Preliminary Prospectus, the Registration Statement, the Pricing Disclosure
Package or Prospectus or any amendment or supplement thereto or any application,
and in respect of which indemnity may be sought against any Underwriter, such
Underwriter shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the several Underwriters by the provisions of Section 5.1.2.  The
Company agrees promptly to notify the Representative of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or any person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, in connection with the
issuance and sale of the Public Securities or in connection with the
Registration Statement, the Pricing Disclosure Package, the Prospectus, or any
Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication.

5.3

Contribution.

5.3.1.

Contribution Rights.  If the indemnification provided for in this Section 5
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 5.1 or 5.2 in respect of any loss, claim, damage
or liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Underwriters, on the other,
from the Offering of the Public 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 Company, on the one hand, and the
Underwriters, on the other, with respect to the statements or omissions that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations.  The relative benefits
received by the Company, on the one hand, and the Underwriters, on the other,
with respect to such Offering shall be deemed to be in the same proportion as
the total net proceeds from the Offering of the Public Securities purchased
under this Agreement (before deducting expenses) received by the Company, as set
forth in the table on the cover page of the Prospectus, on the one hand, and the
total underwriting discounts and commissions received by the Underwriters with
respect to the shares of the Common Stock purchased under this Agreement, as set
forth in the table on the cover page of the Prospectus, on the other hand.  The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the

- 27 -

--------------------------------------------------------------------------------

 

Company or the Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission.  The Company and the Underwriters agree that it would not
be just and equitable if contributions pursuant to this Section 5.3.1 were to be
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
into account the equitable considerations referred to herein.  The amount paid
or payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 5.3.1
shall be deemed to include, for purposes of this Section 5.3.1, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.  Notwithstanding the
provisions of this Section 5.3.1 in no event shall an Underwriter be required to
contribute any amount in excess of the amount by which the total underwriting
discounts and commissions received by such Underwriter with respect to the
Offering of the Public Securities exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

5.3.2.

Contribution Procedure.  Within fifteen (15) days after receipt by any party to
this Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party (“contributing party”),
notify the contributing party of the commencement thereof, but the failure to so
notify the contributing party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies a contributing party or its representative of the commencement thereof
within the aforesaid 15 days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding affected by such party seeking contribution on account of any
settlement of any claim, action or proceeding affected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 5.3.2 are intended to
supersede, to the extent permitted by law, any right to contribution under the
Securities Act, the Exchange Act or otherwise available.  Each Underwriter’s
obligations to contribute pursuant to this Section 5.3 are several and not
joint.

6.

Default by an Underwriter.

6.1

Default Not Exceeding 10% of Firm Shares or Option Shares. If any Underwriter or
Underwriters shall default in its or their obligations to purchase the Firm
Shares or the Option Shares, if the Over-allotment Option is exercised
hereunder, and if the number of the Firm Shares or Option Shares with respect to
which such default relates does not exceed in the aggregate 10% of the number of
Firm Shares or Option Shares that all Underwriters have agreed to purchase
hereunder, then such Firm Shares or Option Shares to which the default relates
shall be purchased by the non-defaulting Underwriters in proportion to their
respective commitments hereunder.

6.2

Default Exceeding 10% of Firm Shares or Option Shares. In the event that the
default addressed in Section 6.1 relates to more than 10% of the Firm Shares or
Option Shares, you may in your discretion arrange for yourself or for another
party or parties to purchase such Firm Shares or Option Shares to which such
default relates on the terms contained herein. If, within one (1) Business Day
after such default relating to more than 10% of the Firm Shares or Option
Shares, you do not arrange for the purchase of such Firm Shares or Option
Shares, then the Company shall be entitled to a further period of one (1)
Business Day within which to procure another party or parties satisfactory to
you to purchase said Firm Shares or Option Shares on such terms. In the event
that neither you nor the Company arrange for

- 28 -

--------------------------------------------------------------------------------

 

the purchase of the Firm Shares or Option Shares to which a default relates as
provided in this Section 6, this Agreement will automatically be terminated by
you or the Company without liability on the part of the Company (except as
provided in Sections 3.9 and 5 hereof) or the several Underwriters (except as
provided in Section 5 hereof); provided, however, that if such default occurs
with respect to the Option Shares, this Agreement will not terminate as to the
Firm Shares; and provided, further, that nothing herein shall relieve a
defaulting Underwriter of its liability, if any, to the other Underwriters and
to the Company for damages occasioned by its default hereunder.

6.3

Postponement of Closing Date.  In the event that the Firm Shares or Option
Shares to which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company shall have the right to postpone the Closing Date or Option
Closing Date for a reasonable period, but not in any event exceeding five (5)
Business Days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement, the Pricing Disclosure Package or the Prospectus
or in any other documents and arrangements, and the Company agrees to file
promptly any amendment to the Registration Statement, the Pricing Disclosure
Package or the Prospectus that in the opinion of counsel for the Underwriter may
thereby be made necessary.  The term “Underwriter” as used in this Agreement
shall include any party substituted under this Section 6 with like effect as if
it had originally been a party to this Agreement with respect to such shares of
Common Stock.

7.

Additional Covenants.

7.1

Board Composition and Board Designations.  The Company shall ensure that:
(i) the qualifications of the persons serving as members of the Board of
Directors and the overall composition of the Board comply with the
Sarbanes-Oxley Act, with the Exchange Act and with the listing rules of the
Exchange or any other national securities exchange, as the case may be, in the
event the Company seeks to have its Public Securities listed on another exchange
or quoted on an automated quotation system, and (ii) if applicable, at least one
member of the Audit Committee of the Board of Directors qualifies as an “audit
committee financial expert,” as such term is defined under Regulation S-K and
the listing rules of the Exchange.

7.2

Prohibition on Press Releases and Public Announcements.  The Company shall not
issue press releases or engage in any other publicity, without the
Representative’s prior written consent, for a period ending at 5:00 p.m.,
Eastern time, on the first (1st) Business Day following the forty-fifth (45th)
day after the Closing Date, other than normal and customary releases issued in
the ordinary course of the Company’s business.

7.3

Right of First Refusal.  Provided that the Firm Shares are sold in accordance
with the terms of this Agreement, the Representative shall have an irrevocable
right of first refusal (the “Right of First Refusal”), for a period of twelve
(12 months after the date the Offering is completed, to act as sole and
exclusive investment banker, sole and exclusive book-runner, sole and exclusive
financial advisor, sole and exclusive underwriter and/or sole and exclusive
placement agent, at the Representative’s sole and exclusive discretion, for each
and every future public and private equity and debt offering, including all
equity linked financings (each, a “Subject Transaction”), during such twelve
(12) month period, of the Company, or any successor to or subsidiary of the
Company, on terms and conditions customary to the Representative for such
Subject Transactions.  For the avoidance of any doubt, the Company shall not
retain, engage or solicit any additional investment banker, book-runner,
financial advisor, underwriter and/or placement agent in a Subject Transaction
without the express written consent of the Representative.

The Company shall notify the Representative of its intention to pursue a Subject
Transaction, including the material terms thereof, by providing written notice
thereof by registered mail or overnight

- 29 -

--------------------------------------------------------------------------------

 

courier service addressed to the Representative.  If the Representative fails to
exercise its Right of First Refusal with respect to any Subject Transaction
within ten (10) Business Days after the mailing of such written notice, then the
Representative shall have no further claim or right with respect to the Subject
Transaction. The Representative may elect, in its sole and absolute discretion,
not to exercise its Right of First Refusal with respect to any Subject
Transaction; provided that any such election by the Representative shall not
adversely affect the Representative’s Right of First Refusal with respect to any
other Subject Transaction during the twelve (12) month period agreed to above.  

8.

Effective Date of this Agreement and Termination Thereof.

8.1

Effective Date.  This Agreement shall become effective when both the Company and
the Representative have executed the same and delivered counterparts of such
signatures to the other party.

8.2

Termination.  The Representative shall have the right to terminate this
Agreement at any time prior to any Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, general securities
markets in the United States; or (ii) if trading on the New York Stock Exchange
or the Nasdaq Stock Market LLC shall have been suspended or materially limited,
or minimum or maximum prices for trading shall have been fixed, or maximum
ranges for prices for securities shall have been required by FINRA or by order
of the Commission or any other government authority having jurisdiction; or
(iii) if the United States shall have become involved in a new war or an
increase in major hostilities; or (iv) if a banking moratorium has been declared
by a New York State or federal authority; or (v) if a moratorium on foreign
exchange trading has been declared which materially adversely impacts the United
States securities markets; or (vi) if the Company shall have sustained a
material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which, whether or not such loss shall have
been insured, will, in your opinion, make it inadvisable to proceed with the
delivery of the Firm Shares or Option Shares; or (vii) if the Company is in
material breach of any of its representations, warranties or covenants
hereunder; or (viii) if the Representative shall have become aware after the
date hereof of such a material adverse change in the conditions or prospects of
the Company, or such adverse material change in general market conditions as in
the Representative’s judgment would make it impracticable to proceed with the
offering, sale and/or delivery of the Public Securities or to enforce contracts
made by the Underwriters for the sale of the Public Securities.

8.3

Expenses.  Notwithstanding anything to the contrary in this Agreement, except in
the case of a default by the Underwriters, pursuant to Section 6.2 above, in the
event that this Agreement shall not be carried out for any reason whatsoever,
within the time specified herein or any extensions thereof pursuant to the terms
herein, the Company shall be obligated to pay to the Underwriters their actual
and accountable out-of-pocket expenses related to the transactions contemplated
herein then due and payable (including the fees and disbursements of
Representative Counsel) up to $50,000, inclusive of the $10,000 advance for
accountable expenses previously paid by the Company to the Representative (the
“Advance”) and upon demand the Company shall pay the full amount thereof to the
Representative on behalf of the Underwriters; provided, however, that such
expense cap in no way limits or impairs the indemnification and contribution
provisions of this Agreement.  Notwithstanding the foregoing, any advance
received by the Representative will be reimbursed to the Company to the extent
not actually incurred in compliance with FINRA Rule 5110(f)(2)(C).

8.4

Indemnification.  Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall remain in full force and effect and shall not be in any way
affected by, such election or termination or failure to carry out the terms of
this Agreement or any part hereof.

- 30 -

--------------------------------------------------------------------------------

 

8.5

Representations, Warranties, Agreements to Survive.  All representations,
warranties and agreements contained in this Agreement or in certificates of
officers of the Company submitted pursuant hereto, shall remain operative and in
full force and effect regardless of (i) any investigation made by or on behalf
of any Underwriter or its Affiliates or selling agents, any person controlling
any Underwriter, its officers or directors or any person controlling the Company
or (ii) delivery of and payment for the Public Securities.

9.

Miscellaneous.

9.1

Notices.  All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and shall be mailed (registered or certified mail,
return receipt requested), personally delivered or sent by facsimile
transmission and confirmed and shall be deemed given when so delivered or faxed
and confirmed or if mailed, two (2) days after such mailing.

If to the Representative:

ThinkEquity

17 State Street, 22nd Fl

New York, NY 10004
Attn:

Fax:

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

Sichenzia Ross Ference LLP

1185 Avenue of the Americas, 37th Floor

New York, NY 10036

Attn:

Fax

If to the Company:

Duos Technologies Group, Inc.

6622 Southpoint Drive South, Suite 310

Jacksonville, FL 32216

Attention:  

Fax No:

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

Lucosky Brookman LLP

101 Wood Avenue South, 5th Floor

Woodridge, NJ 08830

Attention:  

Fax No:

9.2

Headings.  The headings contained herein are for the sole purpose of convenience
of reference, and shall not in any way limit or affect the meaning or
interpretation of any of the terms or provisions of this Agreement.

9.3

Amendment.  This Agreement may only be amended by a written instrument executed
by each of the parties hereto.

- 31 -

--------------------------------------------------------------------------------

 

9.4

Entire Agreement.  This Agreement (together with the other agreements and
documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof. Notwithstanding anything to the contrary set forth herein, it is
understood and agreed by the parties hereto that all other terms and conditions
of that certain engagement letter between the Company and ThinkEquity, a
division of Fordham Financial Management, Inc., dated November 22, 2019, shall
remain in full force and effect.

9.5

Binding Effect.  This Agreement shall inure solely to the benefit of and shall
be binding upon the Representative, the Underwriters, the Company and the
controlling persons, directors and officers referred to in Section 5 hereof, and
their respective successors, legal representatives, heirs and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. The term “successors and assigns” shall not include
a purchaser, in its capacity as such, of securities from any of the
Underwriters.

9.6

Governing Law; Consent to Jurisdiction; Trial by Jury.  This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of New York, without giving effect to conflict of laws principles thereof. The
Company hereby agrees that any action, proceeding or claim against it arising
out of, or relating in any way to this Agreement shall be brought and enforced
in the New York Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, and irrevocably submits to
such jurisdiction, which jurisdiction shall be exclusive. The Company hereby
waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 9.1 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the Company in any action,
proceeding or claim. The Company agrees that the prevailing party(ies) in any
such action shall be entitled to recover from the other party(ies) all of its
reasonable attorneys’ fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor. The Company (on its
behalf and, to the extent permitted by applicable law, on behalf of its
stockholders and affiliates) and each of the Underwriters hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.

9.7

Execution in Counterparts.  This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto. Delivery of a signed counterpart of this
Agreement by facsimile or email/pdf transmission shall constitute valid and
sufficient delivery thereof.

9.8

Waiver, etc.  The failure of any of the parties hereto to at any time enforce
any of the provisions of this Agreement shall not be deemed or construed to be a
waiver of any such provision, nor to in any way effect the validity of this
Agreement or any provision hereof or the right of any of the parties hereto to
thereafter enforce each and every provision of this Agreement. No waiver of any
breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.

[Signature Page Follows]

- 32 -

--------------------------------------------------------------------------------

 

If the foregoing correctly sets forth the understanding between the Underwriters
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between us.

Very truly yours,

 

 

Duos Technologies Group, Inc.

 

 

By:

 

 

Name:

 

Title:

Confirmed as of the date first written
above mentioned, on behalf of itself and as
Representative of the several Underwriters
named on Schedule 1 hereto:

THINKEQUITY

A Division of Fordham Financial Management, Inc.

By: ____________________________

Name:

Title:

[SIGNATURE PAGE]

DUOS TECHNOLOGIES GROUP, INC. – UNDERWRITING AGREEMENT

--------------------------------------------------------------------------------

 

SCHEDULE 1

Underwriter

Total Number of

Firm Shares to be
Purchased

 

Number of Additional
Shares to be Purchased if
the Over-Allotment Option
is Fully Exercised

 

 

 

 

ThinkEquity, a division of Fordham Financial Management, Inc.

945,000

 

141,750

The Benchmark Company, LLC

405,000

 

60,750

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

1,350,000

 

202,500

Sch. 1-1

--------------------------------------------------------------------------------

 

SCHEDULE 2-A

Pricing Information

Number of Firm Shares: 1,350,000

Number of Option Shares: 202,500

Public Offering Price per Share:  $6.00

Underwriting Discount per Share:  $0.45

Underwriting Non-accountable expense allowance per Share:  $0.03

Proceeds to Company per Share (before expenses): $5.52

SCHEDULE 2-B

Issuer General Use Free Writing Prospectuses

None.

SCHEDULE 2-C

Written Testing-the-Waters Communications

None.

Sch. 2-1

--------------------------------------------------------------------------------

 

SCHEDULE 3

List of Lock-Up Parties

Gianni B. Arcaini

Adrian G. Goldfarb

Blair M. Fonda

Kenneth Ehrman

Ned Mavrommatis

Connie L. Weeks

Sch. 3-1

--------------------------------------------------------------------------------

 

EXHIBIT A

Form of Representative’s Warrant Agreement

THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN
PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL
NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A
PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW)
TO ANYONE OTHER THAN (I) THINKEQUITY, A DIVISION OF FORDHAM FINANCIAL
MANAGEMENT, INC., OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE
OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF THINKEQUITY, A DIVISION OF
FORDHAM FINANCIAL MANAGEMENT, INC., OR OF ANY SUCH UNDERWRITER OR SELECTED
DEALER.

THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [________________] [DATE THAT
IS [180 DAYS OR ONE YEAR] FROM THE EFFECTIVE DATE OF THE OFFERING]. VOID AFTER
5:00 P.M., EASTERN TIME, [___________________] [DATE THAT IS FIVE YEARS FROM THE
EFFECTIVE DATE OF THE OFFERING].

WARRANT TO PURCHASE COMMON STOCK

 

DUOS TECHNOLGIES GROUP, INC.

 

Warrant Shares: _______

Initial Exercise Date: ______, 2020

 

 

THIS WARRANT TO PURCHASE COMMON STOCK (the “Warrant”) certifies that, for value
received, _____________ or its assigns (the “Holder”) is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after ____, 2020 (the “Initial Exercise Date”) and,
in accordance with FINRA Rule 5110(f)(2)(G)(i), prior to at 5:00 p.m. (New York
time) on the date that is five (5) years following the Effective Date (the
“Termination Date”) but not thereafter, to subscribe for and purchase from Duos
Technologies Group, Inc., a Florida corporation (the “Company”), up to ______
shares of Common Stock, par value $0.001 per share, of the Company (the “Warrant
Shares”), as subject to adjustment hereunder. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise Price, as defined
in Section 2(b).

 

Section 1. Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated in this Section 1:

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.

 

Ex. A-1

--------------------------------------------------------------------------------

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Commission” means the United States Securities and Exchange Commission.

“Effective Date” means the effective date of the registration statement on Form
S-1 (File No. 333-235455), including any related prospectus or prospectuses, for
the registration of the Company’s common stock, par value $0.001 per share and
the Warrant Shares under the Securities Act, that the Company has filed with the
Commission.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Trading Day” means a day on which the New York Stock Exchange is open for
trading.

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, or the New York Stock Exchange (or any successors to any of the
foregoing).

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) 
if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of
a share of Common Stock for such date (or the nearest preceding date) on the
OTCQB or OTCQX as applicable, (c) if Common Stock is not then listed or quoted
for trading on the OTCQB or OTCQX and if prices for Common Stock are then
reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of Common Stock so reported, or (d) in all other
cases, the fair market value of the Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.

  

Ex. A-2

--------------------------------------------------------------------------------

 

Section 2. Exercise.

 

a)                  Exercise of the purchase rights represented by this Warrant
may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company
(or such other office or agency of the Company as it may designate by notice in
writing to the registered Holder at the address of the Holder appearing on the
books of the Company) of a duly executed facsimile copy (or e-mail attachment)
of the Notice of Exercise Form annexed hereto. Within two (2) Trading Days
following the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the shares specified in the applicable Notice of
Exercise by wire transfer or cashier’s check drawn on a United States bank
unless the cashless exercise procedure specified in Section 2(c) below is
specified in the applicable Notice of Exercise. No ink-original Notice of
Exercise shall be required, nor shall any medallion guarantee (or other type of
guarantee or notarization) of any Notice of Exercise form be required.
Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the Warrant has
been exercised in full, in which case, the Holder shall surrender this Warrant
to the Company for cancellation within five (5) Trading Days of the date the
final Notice of Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. The Holder and the Company shall
maintain records showing the number of Warrant Shares purchased and the date of
such purchases. The Company shall deliver any objection to any Notice of
Exercise Form within two (2) Business Days of receipt of such notice. The Holder
and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.

 

b)                  Exercise Price. The exercise price per share of the Common
Stock under this Warrant shall be $9.00, subject to adjustment hereunder (the
“Exercise Price”).

 

c)                  Cashless Exercise. If at any time on or after the Initial
Exercise Date, there is no effective registration statement registering, or the
prospectus contained therein is not available for the issuance of the Warrant
Shares to the Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in which the Holder shall
be entitled to receive the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the
date of the applicable Notice of Exercise if such Notice of Exercise is (1) both
executed and delivered pursuant to Section 2(a) hereof on a day that is not a
Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof
on a Trading Day prior to the opening of “regular trading hours” (as defined in
Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws)
on such Trading Day, (ii) the VWAP on the Trading Day immediately preceding the
date of the applicable Notice of Exercise if such Notice of Exercise is executed
during “regular trading hours” on a Trading Day and is delivered within two (2)
hours thereafter (including until two (2) hours after the close of “regular
trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the
VWAP on the date of the applicable Notice of Exercise if the date of such Notice
of Exercise is a Trading

Ex. A-3

--------------------------------------------------------------------------------

 

Day and such Notice of Exercise is both executed and delivered pursuant to
Section 2(a) hereof after the close of “regular trading hours” on such Trading
Day;

 

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

(X) = the number of Warrant Shares that would be issuable upon exercise of this
Warrant in accordance with the terms of this Warrant if such exercise were by
means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in such a “cashless exercise,” the parties
acknowledge and agree that in accordance with Section 3(a)(9) of the Securities
Act, the Warrant Shares shall take on the registered characteristics of the
Warrants being exercised, and the holding period of the Warrants being exercised
may be tacked on to the holding period of the Warrant Shares.  The Company
agrees not to take any position contrary to this Section 2(c). 

 

 Notwithstanding anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise pursuant to this
Section 2(c).

 

d)                 Mechanics of Exercise.

 

   i.

Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant
Shares purchased hereunder to be transmitted by its transfer agent to the Holder
by crediting the account of the Holder’s or its designee’s balance account with
The Depository Trust Company through its Deposit or Withdrawal at Custodian
system (“DWAC”) if the Company is then a participant in such system and either
(A) there is an effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder, or (B) the Warrant
Shares are eligible for resale by the Holder without volume or manner-of-sale
limitations pursuant to Rule 144 and, in either case, the Warrant Shares have
been sold by the Holder prior to the Warrant Share Delivery Date (as defined
below), and otherwise by physical delivery of a certificate, registered in the
Company’s share register in the name of the Holder or its designee, for the
number of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of Exercise by the
date that is two (2) Trading Days after the delivery to the Company of the
Notice of Exercise (such date, the “Warrant Share Delivery Date”). If the
Warrant Shares can be delivered via DWAC, the transfer agent shall have received
from the Company, at the expense of the Company, any legal opinions or other
documentation required by it to deliver such Warrant Shares without legend
(subject to receipt by the Company of reasonable back up documentation from the
Holder, including with respect to affiliate status) and, if applicable and
requested by the Company prior to the Warrant Share Delivery Date, the transfer
agent shall have received from the Holder a confirmation of sale of the Warrant
Shares (provided the requirement of the Holder to provide a confirmation as to
the sale of Warrant Shares shall not be applicable to the issuance of unlegended
Warrant Shares upon a cashless exercise of this Warrant if the Warrant Shares
are then eligible for resale pursuant to Rule 144(b)(1)). The Warrant Shares
shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised,
with payment to the Company of the Exercise Price (or by cashless exercise, if

Ex. A-4

--------------------------------------------------------------------------------

 

permitted) and all taxes required to be paid by the Holder, if any, pursuant to
Section 2(d)(vi) prior to the issuance of such shares, having been paid. If the
Company fails for any reason to deliver to the Holder the Warrant Shares subject
to a Notice of Exercise by the second Trading Day following the Warrant Share
Delivery Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of Warrant Shares subject to such
exercise (based on the VWAP of the Common Stock on the date of the applicable
Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on
the fifth Trading Day after such liquidated damages begin to accrue) for each
Trading Day after the second Trading Day following such Warrant Share Delivery
Date until such Warrant Shares are delivered or Holder rescinds such exercise.

    

ii.

Delivery of New Warrants Upon Exercise. If this Warrant shall have been
exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder
to purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.

 

iii.

Rescission Rights. If the Company fails to cause its transfer agent to deliver
to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant
Share Delivery Date, then the Holder will have the right to rescind such
exercise; provided, however, that the Holder shall be required to return any
Warrant Shares or Common Stock subject to any such rescinded exercise notice
concurrently with the return to Holder of the aggregate Exercise Price paid to
the Company for such Warrant Shares and the restoration of Holder’s right to
acquire such Warrant Shares pursuant to this Warrant (including, issuance of a
replacement warrant certificate evidencing such restored right).

 

iv.

Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon
Exercise. In addition to any other rights available to the Holder, if the
Company fails to cause its transfer agent to transmit to the Holder the Warrant
Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and
if after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) or the Holder’s brokerage firm otherwise
purchases, 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 (A) pay in cash to the Holder the
amount, if any, 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 (1) the number of Warrant Shares
that the Company was required to deliver to the Holder in connection with the
exercise at issue times (2) the price at which the sell order giving rise to
such purchase obligation was executed, and (B) 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 (in which case such exercise
shall be deemed rescinded) or deliver to the Holder the number of shares of
Common Stock that would have been issued had the

Ex. A-5

--------------------------------------------------------------------------------

 

Company timely complied with its exercise and delivery obligations hereunder.
For example, if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (A) of the immediately preceding sentence
the Company shall be required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In and, upon request of the Company, evidence of the amount
of such loss. 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 shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

  

v.

No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole share.

 

vi.

Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other incidental expense
in respect of the issuance of such Warrant Shares, all of which taxes and
expenses shall be paid by the Company, and such Warrant Shares shall be issued
in the name of the Holder or in such name or names as may be directed by the
Holder; provided, however, that in the event that Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all transfer agent fees required for
same-day processing of any Notice of Exercise and all fees to the Depository
Trust Company (or another established clearing corporation performing similar
functions) required for same-day electronic delivery of the Warrant Shares.

 

vii.

Closing of Books. The Company will not close its stockholder books or records in
any manner which prevents the timely exercise of this Warrant, pursuant to the
terms hereof.

viii.

Signature. This Section 2 and the exercise form attached hereto set forth the
totality of the procedures required of the Holder in order to exercise this
Purchase Warrant.  Without limiting the preceding sentences, no ink-original
exercise form shall be required, nor shall any medallion guarantee (or other
type of guarantee or notarization) of any exercise form be required in order to
exercise this Purchase Warrant.  No additional legal opinion, other information
or instructions shall be required of the Holder to exercise this Purchase
Warrant.  The Company shall honor exercises of

Ex. A-6

--------------------------------------------------------------------------------

 

this Purchase Warrant and shall deliver Shares underlying this Purchase Warrant
in accordance with the terms, conditions and time periods set forth herein.

    

e)                  Holder’s Exercise Limitations. The Company shall not effect
any exercise of this Warrant, and a Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent
that after giving effect to such issuance after exercise as set forth on the
applicable Notice of Exercise, the Holder (together with the Holder’s
Affiliates, and any other Persons acting as a group together with the Holder or
any of the Holder’s Affiliates), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below).  For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
the Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised portion of
this Warrant beneficially owned by the Holder or any of its Affiliates and (ii)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other Common Stock
Equivalents) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for purposes of this
Section 2(e), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for any schedules
required to be filed in accordance therewith. To the extent that the limitation
contained in this Section 2(e) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the submission of
a Notice of Exercise shall be deemed to be the Holder’s determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 2(e), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common Stock as
reflected in (A) the Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public announcement by the
Company or (C) a more recent written notice by the Company or the Company’s
transfer agent setting forth the number of shares of Common Stock outstanding. 
Upon the written or oral request of a Holder, the Company shall within two
Trading Days confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding.  In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Warrant, by the Holder or
its Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99%
of the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon exercise of this
Warrant. The Holder, upon notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 2(e), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon

Ex. A-7

--------------------------------------------------------------------------------

 

exercise of this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial Ownership
Limitation will not be effective until the 61st day after such notice is
delivered to the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms
of this Section 2(e) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Warrant. 

  

Section 3. Certain Adjustments.

 

a)                  Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock (which,
for avoidance of doubt, shall not include any shares of Common Stock issued by
the Company upon exercise of this Warrant), (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, (iii) combines (including by way
of reverse stock split) outstanding shares of Common Stock into a smaller number
of shares, or (iv) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.  For the purposes of clarification, the
Exercise Price of this Warrant will not be adjusted in the event that the
Company or any Subsidiary thereof, as applicable, sells or grants any option to
purchase, or sell or grant any right to reprice, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents, at an effective price
per share less than the Exercise Price then in effect.

 

b)                  [RESERVED]

  

c)                  Subsequent Rights Offerings. In addition to any adjustments
pursuant to Section 3(a) above, if at any time the Company grants, issues or
sells any Common Stock Equivalents or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on exercise hereof, including without
limitation, the Beneficial Ownership Limitation) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights (provided, however, to the extent that the Holder’s right to
participate in any such Purchase Right would result in the Holder exceeding the
Beneficial Ownership Limitation, then the Holder shall not be entitled to
participate in such Purchase Right to such extent (or beneficial ownership of
such shares of Common Stock as a result of such Purchase Right to such extent)
and such

Ex. A-8

--------------------------------------------------------------------------------

 

Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).

 

d)                 Pro Rata Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend (other than cash
dividends) or other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of shares or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Warrant, then, in each
such case, the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation) immediately before the
date of which a record is taken for such Distribution, or, if no such record is
taken, the date as of which the record holders of shares of Common Stock are to
be determined for the participation in such Distribution (provided, however, to
the extent that the Holder's right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation, then the
Holder shall not be entitled to participate in such Distribution to such extent
(or in the beneficial ownership of any shares of Common Stock as a result of
such Distribution to such extent) and the portion of such Distribution shall be
held in abeyance for the benefit of the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation). To the extent that this Warrant has not been partially or
completely exercised at the time of such Distribution, such portion of the
Distribution shall be held in abeyance for the benefit of the Holder until the
Holder has exercised this Warrant.

  

e)                  Fundamental Transaction. If, at any time while this Warrant
is outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into
another Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization 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, or (v) the Company, directly
or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person or group of Persons whereby such other Person or group acquires
more than 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock or share purchase agreement or other business combination) (each a
“Fundamental Transaction”), then, upon any subsequent exercise of this Warrant,
the Holder shall have the right to receive, for each Warrant Share that would
have been issuable upon such exercise immediately prior to the occurrence of
such Fundamental Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable by

Ex. A-9

--------------------------------------------------------------------------------

 

holders of Common Stock as a result of such Fundamental Transaction for each
share of Common Stock for which this Warrant is exercisable immediately prior to
such Fundamental Transaction (without regard to any limitation in Section 2(e)
on the exercise of this Warrant). 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. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor
(the “Successor Entity”) to assume in writing all of the obligations of the
Company under this Warrant in accordance with the provisions of this Section
3(e) pursuant to written agreements in form and substance reasonably
satisfactory to the Holder and approved by the Holder (without unreasonable
delay) prior to such Fundamental Transaction and shall, at the option of the
Holder, deliver to the Holder in exchange for this Warrant a security of the
Successor Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant which is exercisable for a corresponding number of
shares of capital stock of such Successor Entity (or its parent entity)
equivalent to the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant) prior to such Fundamental Transaction, and with an exercise price which
applies the exercise price hereunder to such shares of capital stock (but taking
into account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such exercise price being for the purpose
of protecting the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to the Holder. Upon the occurrence of any
such Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein.

  

f)                   Calculations. All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the case may
be. For purposes of this Section 3, the number of shares of Common Stock deemed
to be issued and outstanding as of a given date shall be the sum of the number
of shares of Common Stock (excluding treasury shares, if any) issued and
outstanding.

 

g)                  Notice to Holder.

 

i.

Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant
to any provision of this Section 3, the Company shall promptly mail to the
Holder a notice setting forth the Exercise Price after such adjustment and any
resulting adjustment to the number of Warrant Shares and setting forth a brief
statement of the facts requiring such adjustment.

 

Ex. A-10

--------------------------------------------------------------------------------

 

ii.

Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend
(or any other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a redemption of
the Common Stock, (C) the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights, (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
mailed a notice to the Holder at its last address as it shall appear upon the
Warrant Register of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, stating (x) the date
on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to provide such
notice or any defect therein shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Holder shall remain entitled to exercise this Warrant during
the period commencing on the date of such notice to the effective date of the
event triggering such notice except as may otherwise be expressly set forth
herein.

  

Section 4. Transfer of Warrant.

 

a)                  Transferability. Pursuant to FINRA Rule 5110(g)(1), neither
this Warrant nor any Warrant Shares issued upon exercise of this Warrant shall
be sold, transferred, assigned, pledged, or hypothecated, or be the subject of
any hedging, short sale, derivative, put, or call transaction that would result
in the effective economic disposition of the securities by any person for a
period of 180 days immediately following the date of effectiveness or
commencement of sales of the offering pursuant to which this Warrant is being
issued, except the transfer of any security:

 

i.

by operation of law or by reason of reorganization of the Company;

 

ii.

to any FINRA member firm participating in the offering and the officers or
partners thereof, if all securities so transferred remain subject to the lock-up
restriction in this Section 4(a) for the remainder of the time period;

Ex. A-11

--------------------------------------------------------------------------------

 

 

iii.

if the aggregate amount of securities of the Company held by the Holder or
related person do not exceed 1% of the securities being offered;

 

iv.

that is beneficially owned on a pro-rata basis by all equity owners of an
investment fund, provided that no participating member manages or otherwise
directs investments by the fund, and participating members in the aggregate do
not own more than 10% of the equity in the fund; or

 

v.

the exercise or conversion of any security, if all securities received remain
subject to the lock-up restriction in this Section 4(a) for the remainder of the
time period.

  

Subject to the foregoing restriction, any applicable securities laws and the
conditions set forth in Section 4(d), this Warrant and all rights hereunder
(including, without limitation, any registration rights) are transferable, in
whole or in part, upon surrender of this Warrant at the principal office of the
Company or its designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by the Holder or
its agent or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. Notwithstanding anything herein to
the contrary, the Holder shall not be required to physically surrender this
Warrant to the Company unless the Holder has assigned this Warrant in full, in
which case, the Holder shall surrender this Warrant to the Company within three
(3) Trading Days of the date the Holder delivers an assignment form to the
Company assigning this Warrant full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.

 

b)                  New Warrants. This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or
exchanges shall be dated the initial issuance date of this Warrant and shall be
identical with this Warrant except as to the number of Warrant Shares issuable
pursuant thereto.

 

c)                  Warrant Register. 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.  

 

d)                 Representation by the Holder. The Holder, by the acceptance
hereof, represents and warrants that it is acquiring this Warrant and, upon any
exercise hereof, will

Ex. A-12

--------------------------------------------------------------------------------

 

acquire the Warrant Shares issuable upon such exercise, for its own account and
not with a view to or for distributing or reselling such Warrant Shares or any
part thereof in violation of the Securities Act or any applicable state
securities law, except pursuant to sales registered or exempted under the
Securities Act.

  

Section 5. Registration Rights.

5.1.        Demand Registration.

 

5.1.1          Grant of Right. The Company, upon written demand (a “Demand
Notice”) of the Holder(s) of at least 51% of the Warrants and/or the underlying
Warrant Shares (“Majority Holders”), agrees to register, on one occasion, all or
any portion of the Warrant Shares underlying the Warrants (collectively, the
“Registrable Securities”). On such occasion, the Company will file a
registration statement with the Commission covering the Registrable Securities
within sixty (60) days after receipt of a Demand Notice and use its reasonable
best efforts to have the registration statement declared effective promptly
thereafter, subject to compliance with review by the Commission; provided,
however, that the Company shall not be required to comply with a Demand Notice
if the Company has filed a registration statement with respect to which the
Holder is entitled to piggyback registration rights pursuant to Section 5.2
hereof and either: (i) the Holder has elected to participate in the offering
covered by such registration statement or (ii) if such registration statement
relates to an underwritten primary offering of securities of the Company, until
the offering covered by such registration statement has been withdrawn or until
thirty (30) days after such offering is consummated. The demand for registration
may be made at any time beginning on the Initial Exercise Date and expiring on
the fifth anniversary of the Effective Date. The Company covenants and agrees to
give written notice of its receipt of any Demand Notice by any Holder(s) to all
other registered Holders of the Warrants and/or the Registrable Securities
within ten (10) days after the date of the receipt of any such Demand Notice.

 

5.1.2           Terms. The Company shall bear all fees and expenses attendant to
the registration of the Registrable Securities pursuant to Section 5.1.1, but
the Holders shall pay any and all underwriting commissions and the expenses of
any legal counsel selected by the Holders to represent them in connection with
the sale of the Registrable Securities. The Company agrees to use its reasonable
best efforts to cause the filing required herein to become effective promptly
and to qualify or register the Registrable Securities in such States as are
reasonably requested by the Holder(s); provided, however, that in no event shall
the Company be required to register the Registrable Securities in a State in
which such registration would cause: (i) the Company to be obligated to register
or license to do business in such State or submit to general service of process
in such State, or (ii) the principal shareholders of the Company to be obligated
to escrow their shares of capital stock of the Company. The Company shall cause
any registration statement filed pursuant to the demand right granted under
Section 5.1.1 to remain effective for a period of at least twelve (12)
consecutive months after the date that the Holders of the Registrable Securities
covered by such registration statement are first given the opportunity to sell
all of such securities. The Holders shall only use the prospectuses provided by
the Company to sell the Warrant Shares covered by such registration statement,
and will immediately cease to use any prospectus furnished by the Company if the
Company advises the Holder that such prospectus may no longer be used due to a
material misstatement or omission. Notwithstanding the provisions of this
Section 5.1.2, the Holder shall be entitled to a demand registration under this
Section 5.1.2 on only one (1) occasion and such demand registration right shall
terminate on the fifth anniversary

Ex. A-13

--------------------------------------------------------------------------------

 

of the date of the Underwriting Agreement (as defined below) in accordance with
FINRA Rule 5110(f)(2)(G)(iv).

 

 

5.2

“Piggy-Back” Registration.

 

5.2.1          Grant of Right. In addition to the demand right of registration
described in Section 5.1 hereof, the Holder shall have the right, for a period
of no more than two (2) years from the Initial Exercise Date in accordance with
FINRA Rule 5110(f)(2)(G)(v), to include the Registrable Securities as part of
any other registration of securities filed by the Company (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under the
Securities Act or pursuant to Form S-8 or any equivalent form); provided,
however, that if, solely in connection with any primary underwritten public
offering for the account of the Company, the managing underwriter(s) thereof
shall, in its reasonable discretion, impose a limitation on the number of Shares
which may be included in the Registration Statement because, in such
underwriter(s)’ judgment, marketing or other factors dictate such limitation is
necessary to facilitate public distribution, then the Company shall be obligated
to include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which the Holder requested inclusion
hereunder as the underwriter shall reasonably permit. Any exclusion of
Registrable Securities shall be made pro rata among the Holders seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Holders; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities.

 

5.2.2           Terms. The Company shall bear all fees and expenses attendant to
registering the Registrable Securities pursuant to Section 5.2.1 hereof, but the
Holders shall pay any and all underwriting commissions and the expenses of any
legal counsel selected by the Holders to represent them in connection with the
sale of the Registrable Securities. In the event of such a proposed
registration, the Company shall furnish the then Holders of outstanding
Registrable Securities with not less than thirty (30) days written notice prior
to the proposed date of filing of such registration statement. Such notice to
the Holders shall continue to be given for each registration statement filed by
the Company during the two (2) year period following the Initial Exercise Date
until such time as all of the Registrable Securities have been sold by the
Holder. The holders of the Registrable Securities shall exercise the
“piggy-back” rights provided for herein by giving written notice within ten (10)
days of the receipt of the Company’s notice of its intention to file a
registration statement. Except as otherwise provided in this Warrant, there
shall be no limit on the number of times the Holder may request registration
under this Section 5.2.2; provided, however, that such registration rights shall
terminate on the second anniversary of the Initial Exercise Date.

 

 

5.3

General Terms

 

5.3.1          Indemnification. The Company shall indemnify the Holder(s) of the
Registrable Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such Holders within the meaning
of Section 15 of the Securities Act or Section 20 (a) of the Exchange Act
against all loss, claim, damage, expense or liability (including all reasonable
attorneys’ fees and other expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Securities Act, the Exchange Act or otherwise, arising
from such registration statement but only to the same extent and with the same
effect as the provisions pursuant to which the

Ex. A-14

--------------------------------------------------------------------------------

 

Company has agreed to indemnify the Underwriters contained in Section 5.1 of the
Underwriting Agreement between the Underwriters and the Company, dated as of
[___], 2020. The Holder(s) of the Registrable Securities to be sold pursuant to
such registration statement, and their successors and assigns, shall severally,
and not jointly, indemnify the Company, against all loss, claim, damage, expense
or liability (including all reasonable attorneys’ fees and other expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which they may become subject under the Securities Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf of
such Holders, or their successors or assigns, in writing, for specific inclusion
in such registration statement to the same extent and with the same effect as
the provisions contained in Section 5.2 of the Underwriting Agreement pursuant
to which the Underwriters have agreed to indemnify the Company.

 

5.3.2           Exercise of Warrants. Nothing contained in this Warrant shall be
construed as requiring the Holder(s) to exercise their Warrants prior to or
after the initial filing of any registration statement or the effectiveness
thereof.

 

5.3.3           Documents Delivered to Holders. The Company shall furnish to
each Holder participating in any of the foregoing offerings and to each
underwriter of any such offering, if any, a signed counterpart, addressed to
such Holder or underwriter, of: (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii) a “cold
comfort” letter dated the effective date of such registration statement (and, if
such registration includes an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement) signed by the independent
registered public accounting firm which has issued a report on the Company’s
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants’ letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer’s counsel
and in accountants’ letters delivered to underwriters in underwritten public
offerings of securities. The Company shall also deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter, if any, copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit each Holder and underwriter to
do such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or rules of
FINRA. Such investigation shall include access to books, records and properties
and opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
as any such Holder shall reasonably request.

 

5.3.4           Underwriting Agreement. The Company shall enter into an
underwriting agreement with the managing underwriter(s), if any, selected by any
Holders whose Registrable Securities are being registered pursuant to this
Section 5, which managing underwriter shall be reasonably satisfactory to the
Company. Such agreement shall be reasonably satisfactory in form and substance
to the Company, each Holder and such managing underwriters, and shall contain
such representations, warranties and covenants by the Company and such other
terms as are customarily contained in agreements of that type used by the
managing underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Registrable Securities and may, at
their option, require that any or all the representations, warranties and

Ex. A-15

--------------------------------------------------------------------------------

 

covenants of the Company to or for the benefit of such underwriters shall also
be made to and for the benefit of such Holders. Such Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such Holders, their
Warrant Shares and their intended methods of distribution.

 

5.3.5           Documents to be Delivered by Holder(s). Each of the Holder(s)
participating in any of the foregoing offerings shall furnish to the Company a
completed and executed questionnaire provided by the Company requesting
information customarily sought of selling security holders.

 

5.3.6           Damages. Should the registration or the effectiveness thereof
required by Sections 5.1 and 5.2 hereof be delayed by the Company or the Company
otherwise fails to comply with such provisions, the Holder(s) shall, in addition
to any other legal or other relief available to the Holder(s), be entitled to
obtain specific performance or other equitable (including injunctive) relief
against the threatened breach of such provisions or the continuation of any such
breach, without the necessity of proving actual damages and without the
necessity of posting bond or other security.

Section 6. Miscellaneous.

 

a)                  No Rights as Stockholder Until Exercise. This Warrant does
not entitle the Holder to any voting rights, dividends or other rights as a
stockholder of the Company prior to the exercise hereof as set forth in Section
2(d)(i).

 

b)                  Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
or any certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

 

c)                  Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall not be a Trading Day, then, such action may be taken or
such right may be exercised on the next succeeding Trading Day.

 

d)                 Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of issuing the necessary Warrant Shares upon the exercise
of the purchase rights under this Warrant. The Company will take all such
reasonable action as may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable law or regulation,
or of any requirements of the Trading Market upon which the Common Stock may be
listed. The Company covenants that all Warrant Shares which may be issued upon
the exercise of the purchase rights represented by this Warrant

Ex. A-16

--------------------------------------------------------------------------------

 

will, upon exercise of the purchase rights represented by this Warrant and
payment for such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges created by the Company in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).

  

Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (ii) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant and (iii) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may be,
necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.

 

e)                  Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the underwriting agreement, dated  ___, 2020,
by and between the Company and ThinkEquity, a division of Fordham Financial
Management, Inc., as representatives of the underwriters set forth therein (the
“Underwriting Agreement”).

 

f)                   Restrictions. The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, and the
Holder does not utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.

 

g)                  Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or the
Underwriting Agreement, if the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material damages to the
Holder, the Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys’ fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.

 

Ex. A-17

--------------------------------------------------------------------------------

 

h)                  Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall be
delivered in accordance with the notice provisions of the Underwriting
Agreement.

  

i)                    Limitation of Liability. No provision hereof, in the
absence of any affirmative action by the Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or privileges
of the Holder, shall give rise to any liability of the Holder for the purchase
price of any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.

 

j)                    Remedies. The Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive and not to assert the defense in any action for specific
performance that a remedy at law would be adequate.

 

k)                  Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors and permitted assigns of
the Company and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder from time to
time of this Warrant and shall be enforceable by the Holder or holder of Warrant
Shares.

 

l)                    Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.

 

m)                Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

 

n)                  Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

 

 

********************

 

(Signature Page Follows)

 

 

 

Ex. A-18

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above indicated.

 

DUOS TECHNOLOGIES GROUP, INC.

 

 

 

 

 

By:__________________________________________

Name:

Title:

 

 

Ex. A-19

--------------------------------------------------------------------------------

 

NOTICE OF EXERCISE

 

TO:

DUOS TECHNOLOGIES GROUP, INC.

_________________________

 

(1)   The undersigned hereby elects to purchase ________ Warrant Shares of the
Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.

 

(2)   Payment shall take the form of (check applicable box):

 

[ ] in lawful money of the United States; or

 

[ ] if permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection
2(c).

 

(3)   Please register and issue said Warrant Shares in the name of the
undersigned or in such other name as is specified below:

 

_______________________________

 

 

The Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4)   Accredited Investor. If the Warrant is being exercised via cash exercise,
the undersigned is an “accredited investor” as defined in Regulation D
promulgated under the Securities Act of 1933, as amended

 

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:
_______________________________________________________________

Signature of Authorized Signatory of Investing Entity:
_________________________________________

Name of Authorized Signatory:
___________________________________________________________

Title of Authorized Signatory:
____________________________________________________________

Date:
________________________________________________________________________________

Ex. A-20

--------------------------------------------------------------------------------

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

 

 

 

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant
and all rights evidenced thereby are hereby assigned to

 

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

 

 

_______________________________________________________________

 

Dated: ______________, _______

 

 

Holder’s Signature: _____________________________

 

Holder’s Address: _____________________________

 

_____________________________

 

 

 

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

 

 

 

 

 

 

 

 

 

  

Ex. A-21

--------------------------------------------------------------------------------

 

EXHIBIT B

Lock-Up Agreement

 [•], 2020

ThinkEquity

A Division of Fordham Financial Management, Inc.

17 State Street, 22nd Floor

New York, NY 10004

As Representative of the several Underwriters named on Schedule 1 to the
Underwriting Agreement referenced below

Ladies and Gentlemen:

The undersigned understands that ThinkEquity, a Division of Fordham Financial
Management, Inc. (the “Representative”), proposes to enter into an Underwriting
Agreement (the “Underwriting Agreement”) with Duos Technologies Group, Inc., a
Florida corporation (the “Company”), providing for the [initial] public offering
(the “Public Offering”) of shares of common stock, par value $0.001 per share,
of the Company (the “Common Shares”).

To induce the Representative to continue its efforts in connection with the
Public Offering, the undersigned hereby agrees that, without the prior written
consent of the Representative, the undersigned will not, during the period
commencing on the date hereof and ending ninety (90) days after the date of the
Underwriting Agreement relating to the Public Offering (the “Lock-Up Period”),
(1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or
dispose of, directly or indirectly, any Common Shares or any securities
convertible into or exercisable or exchangeable for Common Shares, whether now
owned or hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition (collectively,
the “Lock-Up Securities”); (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Lock-Up Securities, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in
cash or otherwise; (3) make any demand for or exercise any right with respect to
the registration of any Lock-Up Securities; or (4) publicly disclose the
intention to make any offer, sale, pledge or disposition, or to enter into any
transaction, swap, hedge or other arrangement relating to any Lock-Up
Securities.  Notwithstanding the foregoing, and subject to the conditions below,
the undersigned may transfer Lock-Up Securities without the prior written
consent of the Representative in connection with (a) transactions relating to
Lock-Up Securities acquired in open market transactions after the completion of
the Public Offering; provided that no filing under Section 13 or Section 16(a)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or
other public announcement shall be required or shall be voluntarily made in
connection with subsequent sales of Lock-Up Securities acquired in such open
market transactions; (b) transfers of Lock-Up Securities as a bona fide gift, by
will or intestacy or to a family member or trust for the benefit of the
undersigned or a family member (for purposes of this lock-up agreement, “family
member” means any relationship by blood, marriage or adoption, not more remote
than first cousin); (c) transfers of Lock-Up Securities to a charity or
educational institution; (d) if the undersigned is a corporation, partnership,
limited liability company or other business entity, (i) any transfers of Lock-Up
Securities to another corporation, partnership or other business entity that
controls, is controlled by or is under common control with the undersigned or
(ii) distributions of Lock-Up Securities to members, partners, stockholders,
subsidiaries or affiliates (as defined in Rule 405 promulgated under the
Securities Act of 1933, as amended) of the undersigned; (e) if the undersigned
is a trust, to a trustee or beneficiary of

Ex. B-1

--------------------------------------------------------------------------------

 

the trust; provided that in the case of any transfer pursuant to the foregoing
clauses (b), (c) (d) or (e), (i) any such transfer shall not involve a
disposition for value, (ii) each transferee shall sign and deliver to the
Representative a lock-up agreement substantially in the form of this lock-up
agreement and (iii) no filing under Section 13 or Section 16(a) of the Exchange
Act or other public announcement shall be required or shall be voluntarily made;
(f) the receipt by the undersigned from the Company of Common Shares upon the
vesting of restricted stock awards or stock units or upon the exercise of
options to purchase the Company’s Common Shares issued under an equity incentive
plan of the Company or an employment arrangement described in the Pricing
Prospectus (as defined in the Underwriting Agreement) (the “Plan Shares”) or the
transfer of Common Shares or any securities convertible into Common Shares to
the Company upon a vesting event of the Company’s securities or upon the
exercise of options to purchase the Company’s securities, in each case on a
“cashless” or “net exercise” basis or to cover tax obligations of the
undersigned in connection with such vesting or exercise, but only to the extent
such right expires during the Lock-up Period, provided that no filing under
Section 13 or Section 16(a) of the Exchange Act or other public announcement
shall be required or shall be voluntarily made within [90] days after the date
of the Underwriting Agreement, and after such [90]th day, if the undersigned is
required to file a report under Section 13 or Section 16(a) of the Exchange Act
reporting a reduction in beneficial ownership of Common Shares during the
Lock-Up Period, the undersigned shall include a statement in such schedule or
report to the effect that the purpose of such transfer was to cover tax
withholding obligations of the undersigned in connection with such vesting or
exercise and, provided further, that the Plan Shares shall be subject to the
terms of this lock-up agreement; (g) the transfer of Lock-Up Securities pursuant
to agreements described in the Pricing Prospectus under which the Company has
the option to repurchase such securities or a right of first refusal with
respect to the transfer of such securities, provided that if the undersigned is
required to file a report under Section 13 or Section 16(a) of the Exchange Act
reporting a reduction in beneficial ownership of Common Shares during the
Lock-Up Period, the undersigned shall include a statement in such schedule or
report describing the purpose of the transaction; (h) the establishment of a
trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of
Lock-Up Securities, provided that (i) such plan does not provide for the
transfer of Lock-Up Securities during the Lock-Up Period and (ii) to the extent
a public announcement or filing under the Exchange Act, if any, is required of
or voluntarily made by or on behalf of the undersigned or the Company regarding
the establishment of such plan, such public announcement or filing shall include
a statement to the effect that no transfer of Lock-Up Securities may be made
under such plan during the Lock-Up Period; (i) the transfer of Lock-Up
Securities that occurs by operation of law, such as pursuant to a qualified
domestic order or in connection with a divorce settlement, provided that the
transferee agrees to sign and deliver a lock-up agreement substantially in the
form of this lock-up agreement for the balance of the Lock-Up Period, and
provided further, that any filing under Section 13 or Section 16(a) of the
Exchange Act that is required to be made during the Lock-Up Period as a result
of such transfer shall include a statement that such transfer has occurred by
operation of law; and (j) the transfer of Lock-Up Securities pursuant to a bona
fide third party tender offer, merger, consolidation or other similar
transaction made to all holders of the Common Shares involving a change of
control (as defined below) of the Company after the closing of the Public
Offering and approved by the Company’s board of directors; provided that in the
event that the tender offer, merger, consolidation or other such transaction is
not completed, the Lock-Up Securities owned by the undersigned shall remain
subject to the restrictions contained in this lock-up agreement.  For purposes
of clause (j) above, “change of control” shall mean the consummation of any bona
fide third party tender offer, merger, amalgamation, consolidation or other
similar transaction the result of which is that any “person” (as defined in
Section 13(d)(3) of the Exchange Act), or group of persons, becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a
majority of total voting power of the voting stock of the Company.  The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company’s transfer agent and registrar against the transfer of the
undersigned’s Lock-Up Securities except in compliance with this lock-up
agreement.

Ex. B-2

--------------------------------------------------------------------------------

 

If (i) during the last 17 days of the Lock-Up Period, the Company issues an
earnings release or material news or a material event relating to the Company
occurs, or (ii) prior to the expiration of the Lock-Up Period, the Company
announces that it will release earnings results or becomes aware that material
news or a material event will occur during the 16-day period beginning on the
last day of the Lock-Up Period, the restrictions imposed by this lock-up
agreement shall continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the occurrence of such
material news or material event, as applicable, unless the Representative
waives, in writing, such extension.

The undersigned agrees that, prior to engaging in any transaction or taking any
other action that is subject to the terms of this lock-up agreement during the
period from the date hereof to and including the 34th day following the
expiration of the Lock-Up Period, the undersigned will give notice thereof to
the Company and will not consummate any 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.

If the undersigned is an officer or director of the Company, (i) the undersigned
agrees that the foregoing restrictions shall be equally applicable to any
issuer-directed or “friends and family” Securities that the undersigned may
purchase in the Public Offering; (ii) the Representative agrees that, at least
three (3) business days before the effective date of any release or waiver of
the foregoing restrictions in connection with a transfer of Lock-Up Securities,
the Representative will notify the Company of the impending release or waiver;
and (iii) the Company has agreed in the Underwriting Agreement to announce the
impending release or waiver by press release through a major news service at
least two (2) business days before the effective date of the release or waiver.
 Any release or waiver granted by the Representative hereunder to any such
officer or director shall only be effective two (2) business days after the
publication date of such press release.  The provisions of this paragraph will
not apply if (a) the release or waiver is effected solely to permit a transfer
of Lock-Up Securities not for consideration and (b) the transferee has agreed in
writing to be bound by the same terms described in this lock-up agreement to the
extent and for the duration that such terms remain in effect at the time of such
transfer.

The undersigned understands that the Company and the Representative are relying
upon this lock-up agreement in proceeding toward consummation of the Public
Offering.  The undersigned further understands that this lock-up agreement is
irrevocable and shall be binding upon the undersigned’s heirs, legal
representatives, successors and assigns.

The undersigned understands that, if the Underwriting Agreement is not executed
by March 31, 2020 or if the Underwriting Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Common Shares to be sold thereunder, then this
lock-up agreement shall be void and of no further force or effect.

Ex. B-3

--------------------------------------------------------------------------------

 

Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions.  Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Representative.

Very truly yours,

 

 

 

(Name - Please Print)

 

 

 

 

(Signature)

 

 

 

 

(Name of Signatory, in the case of entities - Please Print)

 

 

 

 

(Title of Signatory, in the case of entities - Please Print)

Address:

 

 

 

 

 

 

 

Ex. B-4

--------------------------------------------------------------------------------

 

EXHIBIT C

Form of Press Release

Duos Technologies Group, Inc.

[Date]

[COMPANY] (the “Company”) announced today that ThinkEquity, a division of
Fordham Financial Management, Inc., acting as representative for the
underwriters in the Company’s recent public offering of  _______ shares of the
Company’s common stock, is [waiving] [releasing] a lock-up restriction with
respect to _________  shares of the Company’s common stock held by [certain
officers or directors] [an officer or director] of the Company.  The [waiver]
[release] will take effect on  _________, 20___, and the shares may be sold on
or after such date.  

This press release is not an offer or sale of the securities in the United
States or in any other jurisdiction where such offer or sale is prohibited, and
such securities may not be offered or sold in the United States absent
registration or an exemption from registration under the Securities Act of 1933,
as amended.

Ex. C-1

--------------------------------------------------------------------------------

 

EXHIBIT D

Form of Opinion of Counsel

Ex. D-1