Exhibit 10.1

 

EXECUTION VERSION

 

STANDBY EQUITY DISTRIBUTION AGREEMENT

 

THIS STANDBY EQUITY DISTRIBUTION AGREEMENT dated as of August 22, 2017 (this
“Agreement”) is made by and between YA II PN, LTD., a Cayman Islands exempt
limited partnership (the “Investor”), and MICRONET ENERTEC TECHNOLOGIES, INC., a
company organized under the laws of the State of Delaware (the “Company”).

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall have the right to issue and sell to the
Investor, from time to time as provided herein, and the Investor shall purchase
from the Company up to $10,000,000 of the Company’s common stock, par value
$0.001 per share (the “Common Stock”); and

 

WHEREAS, the shares of Common Stock are listed for trading on the Nasdaq Capital
Market under the symbol “MICT;” and

 

WHEREAS, the offer and sale of the Common Stock issuable hereunder will be made
in reliance upon the provisions of Regulation D (“Regulation D”) promulgated
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the “Securities Act”), or upon such other exemption from
the registration requirements of the Securities Act as may be available with
respect to any or all of the transactions to be made hereunder.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

Article I. Certain Definitions

 

Section 1.01    “Additional Amount” shall have the meaning set forth in Section
2.01(c)(ii).

 

Section 1.02    “Adjusted Advance Amount” shall have the meaning set forth in
Section 2.01(c)(i).

 

Section 1.03    “Advance” shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.

 

Section 1.04    “Advance Date” shall mean the 1st Trading Day after expiration
of the applicable Pricing Period for each Advance.

 

Section 1.05    “Advance Notice” shall mean a written notice in the form of
Exhibit A attached hereto to the Investor executed by an officer of the Company
and setting forth the Advance amount that the Company requests from the
Investor.

 

Section 1.06    “Advance Notice Date” shall mean each date the Company is deemed
to have delivered (in accordance with Section 2.01(b) of this Agreement) to the
Investor an Advance Notice requiring the Investor to advance funds to the
Company, subject to the terms of this Agreement.

 

Section 1.07    “Affiliate” shall have the meaning set forth in Section 3.07.

 

 

 

 

Section 1.08    “Applicable Laws” shall mean all applicable laws, statutes,
rules, regulations, orders, executive orders, directives, policies, guidelines
and codes having the force of law, whether local, national, or international, as
amended from time to time, including without limitation (i) all applicable laws
that relate to money laundering, terrorist financing, financial record keeping
and reporting, (ii) all applicable laws that relate to anti-bribery,
anti-corruption, books and records and internal controls, including the United
States Foreign Corrupt Practices Act of 1977, and (iii) any applicable
Sanctions.

 

Section 1.09    “Commitment Amount” shall mean the aggregate amount of up to
$10,000,000 provided that, the Company shall not effect any sales under this
Agreement and the Investor shall not have the obligation to purchase shares of
Common Stock under this Agreement to the extent that after giving effect to such
purchase and sale the aggregate number of shares of Common Stock issued under
this Agreement would exceed 19.9% of the outstanding shares of Common Stock as
of the date of this Agreement, except that such limitation shall not apply in
the event that the Company (i) obtains the approval of its stockholders as
required by the applicable rules of the Nasdaq Stock Market for issuances of
Common Stock in excess of such amount or (ii) obtains a written opinion from
outside counsel to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the Investor.

 

Section 1.10    “Commitment Fee” shall have the meaning set forth in Section
13.05.

 

Section 1.11    “Commitment Fee Shares” shall have the meaning set forth in
Section 13.05.

 

Section 1.12    “Commitment Period” shall mean the period commencing on the
Effective Date, and expiring upon the date of termination of this Agreement in
accordance with Section 11.02.

 

Section 1.13    “Common Stock” shall have meaning set forth in the Recitals.

 

Section 1.14    “Company Indemnitees” shall have the meaning set forth in
Section 5.02.

 

Section 1.15    “Condition Satisfaction Date” shall have the meaning set forth
in Section 7.01.

 

Section 1.16    “Consolidation Event” shall have the meaning set forth in
Section 6.08.

 

Section 1.17    “Daily Value Traded” in respect of a particular Trading Day
means the product obtained by multiplying the daily trading volume of the Common
Stock for that day on the Principal Market by the VWAP for such day.

 

Section 1.18    “Effective Date” shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Shares.

 

Section 1.19    “Environmental Laws” shall have the meaning set forth in Section
4.08.

 

Section 1.20    “Exchange Act” shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.

 

Section 1.21    “Excluded Day” shall have the meaning set forth in
Section 2.01(c)(i).

 

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Section 1.22    “Hazardous Materials” shall have the meaning set forth in
Section 4.08.

 

Section 1.23    “Indemnified Liabilities” shall have the meaning set forth in
Section 5.01.

 

Section 1.24    “Investor Indemnitees” shall have the meaning set forth in
Section 5.01.

 

Section 1.25    “Market Price” shall mean the lowest daily VWAP during the
relevant Pricing Period, other than the daily VWAP on any Excluded Days.

 

Section 1.26    “Material Adverse Effect” shall mean any condition,
circumstance, or situation that would reasonably be expected to result in (i) a
material adverse effect on the legality, validity or enforceability of this
Agreement or the transactions contemplated herein, (ii) a material adverse
effect on the results of operations, assets, business or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under this Agreement.

 

Section 1.27    “Maximum Advance Amount” in respect of each Advance Notice means
the greater of (i) 20% of the aggregate of the Daily Value Traded during the
period of five consecutive Trading Days ending on (and including) (A) the
Advance Notice Date if the Advance Notice is delivered after the close of the
Principal Market, or (B) the last Trading Day immediately prior to the Advance
Notice Date if the Advance Notice is delivered prior to the closing of the
Principal Market, or (ii) $50,000.

 

Section 1.28    “Material Outside Event” shall have the meaning set forth in
Section 6.07.

 

Section 1.29    “Minimum Acceptable Price” shall be, with respect each Advance
Notice, 85% of the closing price of the Common Stock on the Principal Market on
(i) the Advance Notice Date if the Advance Notice is delivered after the close
of the Principal Market, or (ii) the last Trading Day immediately prior to the
Advance Notice Date if the Advance Notice is delivered prior to the closing of
the Principal Market.

 

Section 1.30    “Ownership Limitation” shall have the meaning set forth in
Section 2.01(d)(i).

 

Section 1.31    “Person” shall mean an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.

 

Section 1.32    “Plan of Distribution” shall have the meaning set forth in
Section 6.01(a).

 

Section 1.33    “Pricing Period” shall mean the 5 consecutive Trading Days
commencing on the Trading Day immediately following the Advance Notice Date.

 

Section 1.34    “Principal Market” shall mean the OTCQX, the OTCQB, the New York
Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global
Market, or the NASDAQ Capital Market, whichever is at the time the principal
trading exchange or market for the Common Stock.

 

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Section 1.35    “Purchase Price” shall mean the price per share obtained by
multiplying the Market Price by 98.5%.

 

Section 1.36    “Registrable Securities” shall mean (i) the Shares, and (ii) any
securities issued or issuable with respect to any of the foregoing by way of
exchange, stock dividend or stock split or in connection with a combination of
shares, recapitalization, consolidation or other reorganization or otherwise. As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) the Registration Statement has been
declared effective by the SEC and such Registrable Securities have been disposed
of pursuant to the Registration Statement, (b) such Registrable Securities have
been sold under circumstances in which all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act (“Rule
144”) are met, or (c) such Registrable Securities may be sold without any time,
volume or manner limitations pursuant to Rule 144.

 

Section 1.37    “Registration Limitation” shall have the meaning set forth in
Section 2.01(d)(ii).

 

Section 1.38    “Registration Period” shall have the meaning set forth in
Section 6.01(b).

 

Section 1.39    “Registration Statement” shall mean a registration statement on
Form S-1 or Form S-3 or on such other form promulgated by the SEC for which the
Company then qualifies, and which form shall be available for the registration
of the resale by the Investor of the Registrable Securities under the Securities
Act.

 

Section 1.40    “Regulation D” shall have the meaning set forth in the recitals
of this Agreement.

 

Section 1.41    “Sanctions” means any sanctions administered or enforced by U.S.
Department of Treasury’s Office of Office of Foreign Asset Control of the U.S.
Department of Treasury from time to time (“OFAC”) or the U.S. State Department,
the United Nations Security Council, the European Union, Her Majesty’s Treasury,
or other relevant sanctions authority.

 

Section 1.42    “Sanctions Programs” means any OFAC economic sanction program
(including, without limitation, programs related to Crimea, Cuba, Iran, North
Korea, Sudan and Syria).

 

Section 1.43    “SEC” shall mean the U.S. Securities and Exchange Commission.

 

Section 1.44    “SEC Documents” shall have the meaning set forth in Section
4.04.

 

Section 1.45    “Securities Act” shall have the meaning set forth in the
recitals of this Agreement.

 

Section 1.46    “Settlement Document” shall have the meaning set forth in
Section 2.02(a).

 

Section 1.47    “Shares” shall mean the Common Stock to be issued from time to
time hereunder pursuant to Advances.

 

Section 1.48    “Subsidiary” and “Subsidiaries” shall have the respective
meanings set forth in Section 4.01.

 

Section 1.49    “Transaction Documents” shall have the meaning set forth in
Section 4.02.

 

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Section 1.50    “Trading Day” shall mean any day during which the Principal
Market shall be open for business.

 

Section 1.51    “VWAP” means, for any Trading Day, the daily volume weighted
average price of the Common Stock for such date on the Principal Market as
reported by Bloomberg L.P. (or, if not reported on Bloomberg, L.P., another
reporting service reasonably agreed to by the parties) during regular trading
hours.

 

Article II. Advances

 

Section 2.01    Advances; Mechanics. Subject to the terms and conditions of this
Agreement (including, without limitation, the provisions of Article VII hereof),
the Company, at its sole and exclusive option, may issue and sell to the
Investor, and the Investor shall purchase from the Company, Shares on the
following terms:

 

  (a) Advance Notice. At any time during the Commitment Period the Company may
require the Investor to purchase Shares by delivering an Advance Notice to the
Investor, subject to the conditions set forth in Section 7.01, and in accordance
with the following provisions:

 

  (i) The Company shall, in its sole discretion, select the Advance amount it
desires to request in each Advance Notice and the time it desires to deliver
each Advance Notice, which amount shall not exceed the Maximum Advance Amount,
provided, however, the Company acknowledges and agrees that the total Advance
amount that the Company will receive in connection with each Advance Notice may
be less than the Advance amount requested in the Advance Notice due to
reductions to the Advance amount in accordance with Section 2.01(c) and 2.01(d).

 

  (ii) There shall be no mandatory minimum Advances and no non-usages fee for
not utilizing the Commitment Amount or any part thereof.

 

  (b) Date of Delivery of Advance Notice. Advance Notices shall be delivered in
accordance with the instructions set forth on the bottom of Exhibit A. An
Advance Notice shall be deemed delivered on (i) the day it is received by the
Investor if such notice is received prior to 8:00 p.m. Eastern Time in
accordance with the instructions set forth on the bottom of Exhibit A or (ii)
the immediately succeeding day if it is received after 8:00 p.m. Eastern Time,
in each case in accordance with the instructions set forth on the bottom of
Exhibit A.

 

  (c) Minimum Acceptable Price.

 

  (i) With respect to each Advance Notice, each Trading Day during a Pricing
Period for which (A) the VWAP of the Common Stock is below the Minimum
Acceptable Price in effect with respect to such Advance Notice, or (B) there is
no VWAP (each such day, an “Excluded Day”), shall result in an automatic
reduction to the amount of the Advance set forth in such Advance Notice by 20%
(the resulting amount of each Advance being the “Adjusted Advance Amount”), and
each Excluded Day shall be excluded from the Pricing Period for purposes of
determining the Market Price.

 

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  (ii) The total amount of each Advance (after reductions have been made to
arrive at the Adjusted Advance Amount) shall be automatically increased by an
amount (the “Additional Amount”) equal to the product of (A) the number of
shares of Common Stock sold by the Investor on each Excluded Day, if any, and
(B) a price per share equal to the Minimum Acceptable Price in effect with
respect to such Advance Notice (without any further discount), provided that
this increase shall not cause the total Advance amount to exceed the amount set
forth in the original Advance Notice or any limitations set forth in Section
2.01(d).

 

  (d) Advance Limitations. Regardless of the Advance amount requested by the
Company in the Advance Notice and the adjustments contemplated by Section
2.01(c), the Adjusted Advance Amount shall be reduced in accordance with each of
the following limitations:

 

  (i) Ownership Limitation; Commitment Amount. In no event shall the number of
Shares issuable to the Investor pursuant to an Advance cause the aggregate
number of shares of Common Stock beneficially owned (as calculated pursuant to
Section 13(d) of the Exchange Act) by the Investor and its affiliates to exceed
4.99% of the then outstanding Common Stock (the “Ownership Limitation”). In
connection with each Advance Notice delivered by the Company, any portion of an
Adjusted Advance Amount that would (i) cause the Investor to exceed the
Ownership Limitation or (ii) cause the aggregate amount of Advances (that is,
the aggregate amount of prior Advances made to the Company plus such Adjusted
Advance Amount) to exceed the Commitment Amount shall automatically be withdrawn
with no further action required by the Company, and such Advance Notice shall be
deemed automatically modified to reduce the Adjusted Advance Amount by an amount
equal to such withdrawn portion. The Investor shall notify the Company promptly
of any reduction of the Adjusted Advance Amount due to the Ownership Limitation,
but failure to provide such notice shall have no effect on the operation or
implementation of the other provisions of this Section 2.01(d)(i).

 

  (ii) Registration Limitation. In no event shall the aggregate number of Shares
subject to an Advance Notice (as such number of Shares may be reduced pursuant
to Section 2.01(c) and Section 2.01(d)(i)) cause the number of Shares purchased
by the Investor pursuant to this Agreement to exceed the number of Shares
registered for resale by the Investor under the Registration Statement(s) then
in effect (the “Registration Limitation”). In connection with each Advance
Notice, any portion of an Adjusted Advance Amount (after giving effect to any
reduction in accordance with Section 2.01(d)(i)) that would exceed the
Registration Limitation shall automatically be withdrawn with no further action
required by the Company and such Advance Notice shall be deemed automatically
modified to reduce the aggregate amount of the Adjusted Advance Notice by an
amount equal to such withdrawn portion in respect of each Advance Notice.

 

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  (e) Notwithstanding any other provision in this Agreement, the Company and the
Investor acknowledge and agree that (i) upon the Investor’s receipt of a valid
Advance Notice the parties shall be deemed to have entered into an unconditional
contract binding on both parties for the purchase and sale of Shares pursuant to
such Advance Notice in accordance with the terms of this Agreement and subject
to applicable law and (ii) subject to Section 3.08, the Investor may sell shares
of Common Stock of the Company during the Pricing Period.

 

Section 2.02    Closings. Each Closing shall take place as soon as practicable
after each Advance Date in accordance with the procedures set forth below. In
connection with each Closing, the Company and the Investor shall fulfill each of
its obligations as set forth below:

 

  (a) On each Advance Date, the Investor shall deliver to the Company a written
document, in the form attached hereto as Exhibit B (each a “Settlement
Document”), setting forth the Advance (taking into account any adjustments
pursuant to Section 2.01), the Market Price, the Purchase Price, the number of
Shares to be purchased by the Investor, and a report by Bloomberg, L.P.
indicating the VWAP for each of the Trading Days during the Pricing Period (or,
if not reported on Bloomberg, L.P., another reporting service reasonably agreed
to by the parties), in each case in accordance with the terms and conditions of
this Agreement. The number of Shares to be purchased by the Investor at the
Closing for such Advance shall equal the sum of (i) the Adjusted Advance Amount
divided by the Purchase Price, rounded to the nearest whole number of Shares,
plus (ii) the aggregate number of shares of Common Stock sold by the Investor on
Excluded Days during such Pricing Period (as contemplated by Section
2.01(c)(ii)).

 

  (b) Promptly after receipt of the Settlement Document with respect to each
Advance (and, in any event, not later than two Trading Days after such receipt),
the Company will, or will cause its transfer agent to, electronically transfer
such number of Shares to be purchased by the Investor (as set forth in the
Settlement Document) by crediting the Investor’s account or its designee’s
account at the Depository Trust Company through its Deposit Withdrawal at
Custodian System or by such other means of delivery as may be mutually agreed
upon by the parties hereto (which in all cases the resale of such Shares shall
be covered by an effective Registration Statement), and transmit notification to
the Investor that such Share transfer has been requested. Promptly upon receipt
of such notification, the Investor shall pay to the Company the aggregate amount
of the Advance (as set forth in the Closing Statement) in cash in immediately
available funds to an account designated by the Company in writing and transmit
notification to the Company that such funds transfer has been requested. No
fractional shares of Common Stock shall be issued, and any fractional amounts
shall be rounded to the nearest whole number of shares. Any certificates
evidencing Common Stock delivered pursuant hereto (other than any Commitment Fee
Shares) shall be free of restrictive legends. To facilitate the transfer of the
shares of Common Stock (other than any Commitment Fee Shares) by the Investor,
such shares of Common Stock will not bear any restrictive legends so long as
there is an effective Registration Statement covering such Common Stock. Upon
the request of the Investor at any time at which there is an effective
Registration Statement covering the Commitment Fee Shares and subject to
applicable law, the Company will use its commercially reasonable efforts to
assist the Investor in exchanging the original stock certificate evidencing the
Commitment Fee Shares for a certificate free of restrictive legends.

 

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  (c) On or prior to the Advance Date, each of the Company and the Investor
shall deliver to the other all documents, instruments and writings required to
be delivered by either of them pursuant to this Agreement in order to implement
and effect the transactions contemplated herein.

 

Section 2.03    Hardship. In the event the Investor sells Shares after receipt
of an Advance Notice and the Company fails to perform its obligations as
mandated in Section 2.02, the Company agrees that in addition to and in no way
limiting the rights and obligations set forth in Article V hereto and in
addition to any other remedy to which the Investor is entitled at law or in
equity, including, without limitation, specific performance, it will hold the
Investor harmless against any loss, claim, damage, or expense (including
reasonable legal fees and expenses), as incurred, arising out of or in
connection with such default by the Company and acknowledges that irreparable
damage would occur in the event of any such default. It is accordingly agreed
that the Investor shall be entitled to an injunction or injunctions to prevent
such breaches of this Agreement and to specifically enforce (subject to the
Securities Act and rules of the Principal Market), without the posting of a bond
or other security, the terms and provisions of this Agreement.

 

Section 2.04    In the event the Investor fails to perform its obligations as
mandated in Section 2.02, the Investor agrees that in addition to and in no way
limiting the rights and obligations set forth in Article V hereto and in
addition to any other remedy to which the Company is entitled at law or in
equity, including, without limitation, specific performance, it will hold the
Company harmless against any loss, claim, damage, or expense (including
reasonable legal fees and expenses), as incurred, arising out of or in
connection with such default by the Investor and acknowledges that irreparable
damage may occur in the event of any such default. It is accordingly agreed that
the Company shall be entitled to an injunction or injunctions to prevent such
breaches of this Agreement and to specifically enforce (subject to the
Securities Act and other rules of the Principal Market), without the posting of
a bond or other security, the terms and provisions of this Agreement.

 

Article III. Representations and Warranties of Investor

 

Investor hereby represents and warrants to, and agrees with, the Company that
the following are true and correct as of the date hereof and as of each Advance
Date:

 

Section 3.01    Organization and Authorization. The Investor is duly organized,
validly existing and in good standing under the laws of the Cayman Islands and
has all requisite power and authority to execute, deliver and perform this
Agreement, including all transactions contemplated hereby. The decision to
invest, the execution and delivery by the Investor of this Agreement and the
other Transaction Documents to which the Investor is a party, the performance by
the Investor of its obligations hereunder and thereunder, and the consummation
by the Investor of the transactions contemplated hereby and thereby have been
duly authorized and require no other proceedings on the part of the Investor.
The undersigned has the right, power and authority to execute and deliver this
Agreement and the other Transaction Documents to which the Investor is a party,
on behalf of the Investor or its shareholders. This Agreement and such
Transaction Documents have been (or, when executed and delivered, will be) duly
executed and delivered by the Investor and, assuming the execution and delivery
hereof and acceptance thereof by the Company, will constitute the legal, valid
and binding obligations of the Investor, enforceable against the Investor in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or other laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies and
except as rights to indemnification and to contribution may be limited by
federal or state securities law.

 

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Section 3.02    Evaluation of Risks. The Investor has such knowledge and
experience in financial, tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with the
transactions contemplated hereby. The Investor acknowledges and agrees that its
investment in the Company involves a high degree of risk, and that the Investor
may lose all or a part of its investment.

 

Section 3.03    No Legal, Investment or Tax Advice from the Company. The
Investor acknowledges that it had the opportunity to review this Agreement and
the transactions contemplated by this Agreement with its own legal counsel and
investment and tax advisors. The Investor is relying solely on such counsel and
advisors and not on any statements or representations of the Company or any of
the Company’s representatives or agents for legal, tax, investment or other
advice with respect to the Investor’s acquisition of Shares hereunder, the
transactions contemplated by this Agreement or the laws of any jurisdiction.

 

Section 3.04    Investment Purpose. The shares of Common Stock purchased by the
Investor hereunder are being or will be purchased for its own account, for
investment purposes, and without any view or intention to distribute such shares
in violation of the Securities Act or any other applicable securities laws. The
Investor agrees not to assign or in any way transfer the Investor’s rights to
the shares or any interest therein or its obligations under this Agreement and
acknowledges that the Company will not recognize any purported assignment or
transfer except in accordance with applicable Federal and state securities laws.
No other Person has or will have a direct or indirect beneficial interest in the
shares. The Investor agrees not to sell, hypothecate or otherwise transfer the
Investor’s Common Stock unless such shares are registered under Federal and
applicable state securities laws or unless, in the opinion of counsel
satisfactory to the Company, an exemption from such registration is available.

 

Section 3.05    Accredited Investor. The Investor is an “Accredited Investor” as
that term is defined in Rule 501(a)(3) of Regulation D.

 

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Section 3.06    Information. The Investor and its advisors (and its counsel), if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and information it deemed material to making an
informed investment decision. The Investor and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management and
has received answers to such questions. Neither such inquiries nor any other due
diligence investigations conducted by the Investor or its advisors, if any, or
its representatives shall modify, amend or affect the Investor’s right to rely
on the Company’s representations and warranties contained in this Agreement. The
Investor understands that its investment involves a high degree of risk. The
Investor has sought such accounting, legal and tax advice, as it has considered
necessary to make an informed investment decision with respect to the
transactions contemplated hereby.

 

Section 3.07    Not an Affiliate. The Investor is not an officer, director or a
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with the Company or any
“affiliate” of the Company (as that term is defined in Rule 405 promulgated
under the Securities Act).

 

Section 3.08    Trading Activities. The Investor’s trading activities with
respect to the Common Stock shall be in compliance with all applicable federal
and state securities laws, rules and regulations and the rules and regulations
of the Principal Market on which the Common Stock is listed or traded. Neither
the Investor nor its affiliates has any open short position in the Common Stock,
nor has the Investor entered into any hedging transaction that establishes a net
short position with respect to the Common Stock, and the Investor agrees that it
shall not, and that it will cause its affiliates not to, engage in any short
sales or hedging transactions with respect to the Common Stock; provided that
the Company acknowledges and agrees that upon receipt of an Advance Notice the
Investor has the right to sell (a) the Shares to be issued to the Investor
pursuant to the Advance Notice prior to receiving such Shares or (b) other
shares of Common Stock of the Company that it holds as a long position.

 

Section 3.09    General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Common Stock offered
hereby.

 

Article IV. Representations and Warranties of the Company

 

Except as set forth in the SEC Documents, or in the Disclosure Schedules, which
Disclosure Schedules shall be deemed a part hereof and shall qualify any
representation or warranty otherwise made herein, the Company represents and
warrants to the Investor that, as of the date hereof and as of each Advance Date
(other than representations and warranties which address matters only as of a
certain date, which shall be true and correct as written as of such certain
date), that:

 

Section 4.01    Organization and Qualification. Each of the Company and the
Subsidiaries (as defined below) is an entity duly organized and validly existing
under the laws of its state of organization or incorporation, and has the
requisite power and authority to own its properties and to carry on its business
as now being conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing (to the extent applicable) in
every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
“Subsidiary” means a corporation, partnership, limited liability company, or
other business entity of which a majority of the shares of voting securities is
at the time beneficially owned, or the management of which is otherwise
controlled, directly or indirectly, through one or more intermediaries, or both,
by the Company, and all of the foregoing are collectively referred to herein as
the “Subsidiaries.”

 

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Section 4.02    Authorization, Enforcement, Compliance with Other Instruments.
The Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and the other Transaction Documents
to which the Company is a party and to issue the Shares and the Commitment Fee
Shares in accordance with the terms hereof and thereof. The execution and
delivery by the Company of this Agreement and such other Transaction Documents,
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Shares) have been or
(with respect to consummation) will be duly authorized by the Company’s board of
directors or other governing body and no further consent or authorization will
be required by the Company, its board of directors or its shareholders. This
Agreement and the other Transaction Documents to which it is a party have been
(or, when executed and delivered, will be) duly executed and delivered by the
Company and, assuming the execution and delivery thereof and acceptance by the
Investor, constitute (or, when duly executed and delivered, will be) the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or other laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies and
except as rights to indemnification and to contribution may be limited by
federal or state securities law. “Transaction Documents” means, collectively,
this Agreement and each of the other agreements and instruments entered into or
delivered by any of the parties hereto in connection with the transactions
contemplated hereby and thereby, as may be amended from time to time.

 

Section 4.03    No Conflict. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Common Stock) will not (i) result in a violation of the articles
of association or other organizational documents of the Company or any
Subsidiary (with respect to consummation, as the same may be amended prior to
the date on which any of the transactions contemplated hereby are consummated),
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any Subsidiary is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or any Subsidiary or by which any property or asset of
the Company or any Subsidiary is bound or affected except, in the case of clause
(ii) or (iii) above, to the extent such violations that would not reasonably be
expected to have a Material Adverse Effect.

 

 - 11 - 

 

 

Section 4.04    SEC Documents; Financial Statements. The Company has filed all
supplementary and periodic information, documents and reports required to be
filed by it with the SEC pursuant to Section 15(d) of the Exchange Act for the
two years preceding the date hereof (or such shorter period as the Company was
required by law or regulation to file such material), and true and complete
copies of all such information, documents and reports are available through the
SEC’s website at http://www.sec.gov. As of their respective dates, (a) the most
recent annual report on Form 10-K filed by the Company and each other report
filed by the Company pursuant to Section 15(d) of the Exchange Act since the end
of the fiscal year for which such annual report was filed (the “SEC Documents”)
complied in all material respects with the requirements of the Exchange Act
applicable to the SEC Documents and (b) the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the respective dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).

 

Section 4.05    Equity Capitalization. The registered share capital of the
Company consists of 25,000,000 shares of Common Stock. All of outstanding shares
of Common Stock are duly authorized, validly issued, fully paid and
nonassessable. As of the date hereof, 7,228,184 shares of Common Stock are
issued and outstanding

 

Section 4.06    Intellectual Property Rights. The Company and the Subsidiaries
own or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted, except as would not cause a Material Adverse
Effect. The Company and the Subsidiaries do not have any knowledge of any
infringement by the Company or any Subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, or trade secrets, except as would not cause a
Material Adverse Effect. To the knowledge of the Company, there is no claim,
action or proceeding being made, brought or threatened, against the Company or
any Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement, except as would not
reasonably be expected to cause a Material Adverse Effect; and the Company is
not aware of any facts or circumstances which might give rise to any of the
foregoing.

 

Section 4.07    Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened, in each case
which is reasonably likely to cause a Material Adverse Effect.

 

 - 12 - 

 

 

Section 4.08    Environmental Laws. The Company and the Subsidiaries (i) are in
compliance in all material respects with all Environmental Laws (as defined
below), (ii) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such permit,
license or approval where, in each of the foregoing clauses (i), (ii) and (iii),
the failure to so comply would be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means
all applicable federal, state and local laws relating to pollution or protection
of human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

 

Section 4.09    Title. Except as set forth in the SEC Documents, except as would
not cause a Material Adverse Effect, the Company has good and marketable title
to its properties and material assets owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Company. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and the Subsidiaries.

 

Section 4.10    Insurance. The Company and each of the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and the Subsidiaries are
engaged. The Company has no reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

 

Section 4.11    Regulatory Permits. Except as would not cause a Material Adverse
Effect, the Company and the Subsidiaries possess all material certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permits.

 

Section 4.12    Internal Accounting Controls. The Company and each of the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

 

 - 13 - 

 

 

Section 4.13    Absence of Litigation. Except as set forth in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending against or affecting the Company, the Common Stock or any of the
Subsidiaries, wherein an unfavorable decision, ruling or finding would
reasonably be expected to have a Material Adverse Effect.

 

Section 4.14    Subsidiaries. Section 4.14 of the Disclosure Schedules sets
forth the name and jurisdiction of formation of each of the Subsidiaries and the
number and percentage of voting securities of each Subsidiary beneficially owned
by the Company.

 

Section 4.15    Tax Status. Each of the Company and the Subsidiaries (i) has
timely made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has timely paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith,
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company and the Subsidiaries know of no basis for any
such claim.

 

Section 4.16    Certain Transactions. Except as set forth in the SEC Documents,
none of the officers or directors of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer or
director, or to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer or director has a substantial
interest or is an officer, director, trustee or partner, other than any of the
foregoing that is not required to be disclosed in the SEC Documents.

 

Section 4.17    Fees and Rights of First Refusal. The Company is not obligated
to offer the Common Stock offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents or other third
parties.

 

Section 4.18    Dilution. The Company is aware and acknowledges that issuance of
Common Stock hereunder could cause dilution to existing shareholders and could
significantly increase the outstanding number of shares of Common Stock.

 

Section 4.19    No General Solicitation. Neither the Company nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Common Stock offered
hereby. None of the Company or the Subsidiary, or any of its or their affiliates
or any other Person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D)
in connection with the offer or sale of Common Stock hereunder. The Company
shall be responsible for the payment of any financial advisory fees or brokers’
commissions (other than for Persons engaged by or on behalf of the Investor or
its investment advisor) relating to or arising out of the transactions
contemplated hereby based upon arrangements made by or on behalf of the Company.
Neither the Company nor any of the Subsidiaries has engaged any placement agent
or other agent in connection with the offer or sale of Common Stock hereunder.

 

 - 14 - 

 

 

Section 4.20    Acknowledgment Regarding Investor’s Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length investor with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor’s purchase of the
Shares hereunder. The Company is aware and acknowledges that it shall not be
able to request Advances under this Agreement if the Registration Statement is
not effective or if any issuances of Shares pursuant to any Advances would
violate any rules of the Principal Market. The Company further is aware and
acknowledges that any fees paid or Commitment Fee Shares issued pursuant to
Section 13.05 hereunder shall be earned on the date hereof and are not
refundable or returnable under any circumstances.

 

Section 4.21    Sanctions. Neither the Company nor any Subsidiary of the
Company, nor, to the Company’s knowledge, any director, officer, agent, employee
or affiliate of the Company or any Subsidiary of the Company, is a Person that
is, or is owned or controlled by a Person that is:

 

  (a) on the list of Specially Designated Nationals and Blocked Persons
maintained by OFAC from time to time;

 

  (b) the subject of any Sanctions; or

 

  (c) has a place of business in, or is operating, organized, or resident or
doing business in a country or territory that is, or whose government is, the
subject of Sanctions Programs (including without limitation Crimea, Cuba, Iran,
North Korea, Sudan and Syria)..

 

 - 15 - 

 

 

Article V. Indemnification

 

The Investor and the Company represent to the other the following with respect
to itself:

 

Section 5.01    Indemnification by the Company. In consideration of the
Investor’s execution and delivery of this Agreement, and in addition to all of
the Company’s other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Investor, and all of its officers,
directors, partners, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement) and
each person who controls the Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the “Investor
Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and reasonable
and documented expenses in connection therewith (irrespective of whether any
such Investor Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and disbursements
(the “Indemnified Liabilities”), incurred by the Investor Indemnitees or any of
them as a result of, or arising out of, or relating to (a) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares as originally filed or in any
amendment thereof, or in any related prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Investor specifically for inclusion therein;
(b) any material misrepresentation or breach of any material representation or
material warranty made by the Company in this Agreement or any other
certificate, instrument or document contemplated hereby or thereby; (c) any
material breach of any material covenant, material agreement or material
obligation of the Company contained in this Agreement or any other certificate,
instrument or document contemplated hereby or thereby; or (d) any cause of
action, suit or claim brought or made against such Investor Indemnitee not
arising out of any action or inaction of the Investor Indemnitees, and arising
out of or resulting from the execution, delivery, performance or enforcement of
this Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Investor Indemnitees. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law.

 

Section 5.02    Indemnification by the Investor. In consideration of the
Company’s execution and delivery of this Agreement, and in addition to all of
the Investor’s other obligations under this Agreement, the Investor shall
defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, shareholders, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Company Indemnitees”) from and against any
and all Indemnified Liabilities incurred by the Company Indemnitees or any of
them as a result of, or arising out of, or relating to (a) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares as originally filed or in any
amendment thereof, or in any related prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Investor will only be liable for written information relating to the
Investor furnished to the Company by or on behalf of the Investor specifically
for inclusion in the documents referred to in the foregoing indemnity, and will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Investor by or on
behalf of the Company specifically for inclusion therein; (b) any
misrepresentation or breach of any representation or warranty made by the
Investor in this Agreement or any instrument or document contemplated hereby or
thereby executed by the Investor; (c) any breach of any covenant, agreement or
obligation of the Investor contained in this Agreement or any other certificate,
instrument or document contemplated hereby or thereby executed by the Investor;
or (d) any cause of action, suit or claim brought or made against such Company
Indemnitee not arising out of any action or inaction of any of the Company
Indemnitees and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Company Indemnitees. To the
extent that the foregoing undertaking by the Investor may be unenforceable for
any reason, the Investor shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.

 

 - 16 - 

 

 

Section 5.03    Notice of Claim. Promptly after receipt by an Investor
Indemnitee or Company Indemnitee of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving an
Indemnified Liability, such Investor Indemnitee or Company Indemnitee, as
applicable, shall, if a claim for an Indemnified Liability in respect thereof is
to be made against any indemnifying party under this Article V, deliver to the
indemnifying party a written notice of the commencement thereof; but the failure
to so notify the indemnifying party will not relieve it of liability under this
Article V except to the extent the indemnifying party is prejudiced by such
failure. The indemnifying party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually reasonably satisfactory to the indemnifying party and the
Investor Indemnitee or Company Indemnitee, as the case may be; provided,
however, that an Investor Indemnitee or Company Indemnitee shall have the right
to retain its own counsel with the reasonable fees and expenses of not more than
one counsel for such Investor Indemnitee or Company Indemnitee to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Investor
Indemnitee or Company Indemnitee and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Investor Indemnitee or Company Indemnitee and any other party represented by
such counsel in such proceeding. The Investor Indemnitee or Company Indemnitee
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Investor Indemnitee or Company Indemnitee which relates to such action or
claim. The indemnifying party shall keep the Investor Indemnitee or Company
Indemnitee fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Investor Indemnitee or Company
Indemnitee, consent to entry of any judgment or enter into any settlement or
other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Investor Indemnitee or Company
Indemnitee of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Investor Indemnitee
or Company Indemnitee with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The
indemnification required by this Article V shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received and payment therefor is due.

 

Section 5.04    Remedies. The remedies provided for in this Article V are not
exclusive and shall not limit any right or remedies which may otherwise be
available to any indemnified person at law or in equity. The obligations of the
parties to indemnify or make contribution under this Article V shall survive
expiration or termination of this Agreement for a period of three years.

 

 - 17 - 

 

 

Section 5.05    Limitation of Liability. Notwithstanding the foregoing, no party
shall be entitled to recover from the other party for punitive, indirect,
incidental or consequential damages.

 

Article VI.
Covenants of the Company

 

Section 6.01    Registration Statement.

 

  (a) Filing of a Registration Statement. The Company shall prepare and file
with the SEC, an initial Registration Statement covering the resale of the
Registrable Securities. The Company shall not have the ability to request any
Advances until the effectiveness of a Registration Statement. Each Registration
Statement shall contain the “Plan of Distribution” section in substantially the
form attached hereto as Exhibit C. The Company shall use its commercially
reasonable efforts to have such initial Registration Statement, and each other
Registration Statement required to be filed pursuant to the terms of this
Agreement, declared effective by the SEC as soon as practicable.

 

  (b) Maintaining a Registration Statement. The Company shall use its
commercially reasonably efforts to maintain the effectiveness of any
Registration Statement with respect to Registrable Securities that has been
declared effective at all times during the Commitment Period or, if earlier,
until such time as no Registrable Securities registered thereunder remain
outstanding (the “Registration Period”). Notwithstanding anything to the
contrary contained in this Agreement, the Company shall ensure that, when filed
and at all times while effective, each Registration Statement (including,
without limitation, all amendments and supplements thereto) and the prospectus
(including, without limitation, all amendments and supplements thereto) used in
connection with such Registration Statement shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading.

 

  (c) Filing Procedures. Not less than one Trading Day prior to the filing of a
Registration Statement and not less than one Trading Day prior to the filing of
any related amendments and supplements to all Registration Statements (except
for any amendments or supplements caused by the filing of any annual reports on
Form 10-K, current reports on Form 8-K, and any similar or successor reports),
the Company shall furnish to the Investor copies of all such documents proposed
to be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the reasonable and prompt review
of the Investor. The Investor shall furnish comments on a Registration Statement
and any related amendment and supplement to a Registration Statement to the
Company within 24 hours of the receipt thereof. If the Investor fails to provide
comments to the Company within such 24-hour period, then the Registration
Statement, related amendment or related supplement, as applicable, shall be
deemed accepted by the Investor in the form originally delivered by the Company
to the Investor.

 

 - 18 - 

 

 

  (d) Delivery of Final Documents. The Company shall furnish to the Investor
without charge, (i) at least one copy of each Registration Statement as declared
effective by the SEC and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, all
exhibits and each preliminary prospectus, (ii) at the request of the Investor,
10 copies of the final prospectus included in such Registration Statement and
all amendments and supplements thereto (or such other number of copies as the
Investor may reasonably request) and (iii) such other documents as the Investor
may reasonably request from time to time in order to facilitate the disposition
of the Registrable Securities owned by the Investor pursuant to a Registration
Statement. Filing of the forgoing with the SEC via its EDGAR system shall
satisfy the requirements of this section.

 

  (e) Amendments and Other Filings. The Company shall (i) use its commercially
reasonable efforts to keep a Registration Statement effective at all times
during the Registration Period, and in furtherance thereof shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the related prospectus used in
connection with such Registration Statement, which prospectus is to be filed
pursuant to Rule 424 promulgated under the Securities Act, and prepare and file
with the SEC such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related prospectus to be amended or supplemented by any required prospectus
supplement (subject to the terms of this Agreement), and as so supplemented or
amended to be filed pursuant to Rule 424; and (iii) provide the Investor copies
of all correspondence from and to the SEC relating to a Registration Statement
(provided that the Company may excise any information contained therein which
would constitute material non-public information). In the case of amendments and
supplements to a Registration Statement which are required to be filed pursuant
to this Agreement (including pursuant to this Section 6.01(e)) by reason of the
Company’s filing a report on Form 10-K, Form 10-Q, Form 8-K or any analogous
report under the Exchange Act, the Company shall incorporate such report by
reference into the Registration Statement, if applicable, or shall file such
amendments or supplements with the SEC either on the day on which the Exchange
Act report is filed which created the requirement for the Company to amend or
supplement the Registration Statement, if feasible, or otherwise promptly
thereafter.

 

  (f) Blue-Sky. The Company shall use its commercially reasonable efforts to, if
applicable, (i) register and qualify the Registrable Securities covered by a
Registration Statement under such other securities or “blue sky” laws of such
jurisdictions in the United States as the Investor reasonably requests,
(ii) prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (w) make any change to its Articles of
Incorporation or Bylaws, (x) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 6.01(f), (y)
subject itself to general taxation in any such jurisdiction, or (z) file a
general consent to service of process in any such jurisdiction. The Company
shall promptly notify the Investor of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or “blue sky”
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.

 

 - 19 - 

 

 

Section 6.02    Listing of Common Stock. The Company shall use its commercially
reasonable efforts to maintain the Common Stock’s authorization for quotation on
the Principal Market and shall notify the Investor promptly if the Common Stock
shall cease to be authorized for quotation on the Principal Market.

 

Section 6.03    Opinion of Counsel. Upon the signing of this Agreement, and in
any event prior to the initial Registration Statement is filed, the Company
shall cause its securities counsel to deliver to the Investor an opinion in a
form satisfactory to the Investor for a transaction of this type confirming that
the execution and delivery of this Agreement and the performance of this
Agreement by the Company does not conflict with or result in a violation of the
Certificate of Incorporation of the Company or any agreement or instrument to
which the Company is a party.

 

Section 6.04    Exchange Act Registration. The Company will file in a timely
manner all reports and other documents required of it as a reporting company
under the Exchange Act and will not take any action or file any document
(whether or not permitted by Exchange Act or the rules thereunder) to terminate
or suspend its reporting and filing obligations under the Exchange Act.

 

Section 6.05    Transfer Agent Instructions. Upon effectiveness of the
Registration Statement the Company shall (if required by the transfer agent for
the Common Stock) cause legal counsel for the Company to deliver to the transfer
agent for the Common Stock (with a copy to the Investor) confirmation that such
Registration Statement has been declared effective by the SEC and instructions
to issue Common Stock to the Investor free of restrictive legends upon each
Advance for so long as the Registration Statement remains in effect.

 

Section 6.06    Corporate Existence. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company during the
Commitment Period.

 

 - 20 - 

 

 

Section 6.07    Notice of Certain Events Affecting Registration; Suspension of
Right to Make an Advance. The Company will immediately notify the Investor, and
confirm in writing, upon its becoming aware of the occurrence of any of the
following events in respect of a Registration Statement or related prospectus
relating to an offering of Registrable Securities: (i) receipt of any request
for additional information by the SEC or any other Federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or related prospectus;
(ii) the issuance by the SEC or any other Federal governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or written threat of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus of any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not 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 not misleading, and that in the case of the related prospectus, it will
not 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 the light of the circumstances under which they were made, not
misleading, or of the necessity to amend the Registration Statement or
supplement a related prospectus to comply with the Securities Act or any other
law; and (v) the Company’s reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate (other than, in the
case of this clause (v), for routine post-effective amendments required in order
to maintain the effectiveness of a Registration Statement filed on Form S-1);
and the Company will promptly make available to the Investor any such supplement
or amendment to the related prospectus. The Company shall not deliver to the
Investor any Advance Notice, and the Investor shall not sell any Registrable
Securities pursuant to a Registration Statement, during the continuation of any
of the foregoing events (each of the events described in the immediately
preceding clauses (i) through (v), inclusive, a “Material Outside Event”).

 

Section 6.08    Consolidation. If an Advance Notice has been delivered to the
Investor, then the Company shall not effect any consolidation of the Company
with or into, or a transfer of all or substantially all the assets of the
Company to an entity other than a Subsidiary before the transaction contemplated
in such Advance Notice has been closed in accordance with Section 2.02 hereof.
The Company shall not give an Advance Notice if a shareholder meeting, or the
record date for any shareholder meeting, would fall during the period beginning
on the Advance Notice Date and ending 5 Trading Days following the closing of
such Advance.

 

Section 6.09    Issuance of the Company’s Common Stock. Assuming the accuracy of
the representations made by the Investor in Article III, the sale of the Shares
and the Commitment Fee Shares hereunder shall be made in accordance with the
provisions and requirements of Regulation D and any applicable state securities
laws.

 

Section 6.10    Market Activities. The Company will not, directly or indirectly,
take any action designed to cause or result in, or that constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company under Regulation M of the Exchange Act.

 

Section 6.11    Opinion of Counsel Concerning Resales. Provided that the
Investor’s resale of Common Stock received pursuant to this Agreement may be
freely sold by the Investor either pursuant to an effective Registration
Statement, in accordance with Rule 144, or otherwise, the Company shall obtain
for the Investor, at the Company’s expense, any and all opinions of counsel
which may be required by any party including the Company’s transfer agent, to
issue such shares free of restrictive legends, or to remove legends from such
shares.

 

 - 21 - 

 

 

Section 6.12    Expenses. The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is terminated, will pay
all expenses incident to the performance of its obligations hereunder, including
but not limited to (i) the preparation, printing and filing of the Registration
Statement and each amendment and supplement thereto, of each prospectus and of
each amendment and supplement thereto; (ii) the preparation, issuance and
delivery of any Shares issued pursuant to this Agreement, (iii) all fees and
disbursements of the Company’s counsel, accountants and other advisors, (iv) the
qualification of the Shares under securities laws in accordance with the
provisions of this Agreement, including filing fees in connection therewith, (v)
the printing and delivery of copies of any prospectus and any amendments or
supplements thereto, (vi) the fees and expenses incurred in connection with the
listing or qualification of the Shares for trading on the Principal Market, or
(vii) filing fees of the SEC and the Principal Market.

 

Section 6.13    Sales. Without the written consent of the Investor, the Company
will not, directly or indirectly, offer to sell, sell, contract to sell, grant
any option to sell or otherwise dispose of any Common Stock (other than the
Shares offered pursuant to the provisions of this Agreement, the issuance of
shares upon the exercise, conversion or exchange of outstanding options,
warrants or other securities of the Company or any of the Subsidiaries, and/or
the issuance of shares under publicly disclosed equity compensation plans of the
Company) or securities convertible into or exchangeable for Common Stock,
warrants or any rights to purchase or acquire, Common Stock (other than the
issuance of stock options and other equity award under publicly disclosed equity
compensation plans of the Company) during the period beginning on the 5th
Trading Day immediately prior to an Advance Notice Date and ending on the 5th
Trading Day immediately following the corresponding Advance Date.

 

Section 6.14    Current Report. The Company shall not, and the Company shall
cause the Subsidiaries and each of its and their respective officers, directors,
employees and agents not to, provide the Investor with any material, non-public
information regarding the Company or any of its Subsidiaries without the express
prior written consent of the Investor (which may be granted or withheld in the
Investor’s sole discretion). Notwithstanding anything contained in this
Agreement to the contrary, the Company expressly agrees that it shall publicly
disclose, no later than four (4) Trading Days following the date hereof, any
information communicated to the Investor by or, to the knowledge of the Company,
on behalf of the Company in connection with the transactions contemplated
herein, which, following the date hereof would, if not so disclosed, constitute
material, non-public information regarding the Company and the Subsidiaries.

 

Section 6.15    Black-out Periods. Notwithstanding any other provision of this
Agreement, the Company shall not deliver an Advance Notice during any Company
black-out periods or during any other period in which the Company is, or could
be deemed to be, in possession of material non-public information.

 

Section 6.16    Use of Proceeds. The Company will use the proceeds from the sale
of the Common Stock hereunder for working capital and other general corporate
purposes or, if different, in a manner consistent with the application thereof
described in the Registration Statement. The Company will not, directly or
indirectly, use the proceeds of the transactions contemplated herein, or lend,
contribute, facilitate or otherwise make available such proceeds to any Person,
(i) to fund, either directly or indirectly, any activities or business of or
with any Person that is identified on the list of Specially Designated Nationals
and Blocker Persons maintained by OFAC, or in any country or territory, that, at
the time of such funding, is, or whose government is, the subject of Sanctions
or Sanctions Programs, or (ii) in any other manner that will result in a
violation of Sanctions.

 

 - 22 - 

 

 

Section 6.17    Compliance with Laws. The Company shall comply with all material
Applicable Laws and will not take any action which will cause the Investor to be
in violation of any material Applicable Laws.

 

Article VII.
Conditions for Advance and Conditions to Closing

 

Section 7.01    Conditions Precedent to the Right of the Company to Deliver an
Advance Notice. The right of the Company to deliver an Advance Notice and the
obligations of the Investor hereunder with respect to an Advance is subject to
the satisfaction by the Company, on each Advance Notice Date (a “Condition
Satisfaction Date”), of each of the following conditions:

 

  (a) Accuracy of the Company’s Representations and Warranties. The
representations and warranties of the Company in this Agreement and each other
Transaction Document to which the Company is a party shall be true and correct
in all material respects.

 

  (b) Registration of the Common Stock with the SEC. There is an effective
Registration Statement pursuant to which the Investor is permitted to utilize
the prospectus thereunder to resell all of the Shares issuable pursuant to such
Advance Notice. The Company shall have filed with the SEC all reports, notices
and other documents required under the Exchange Act and applicable SEC
regulations during the twelve-month period immediately preceding the applicable
Condition Satisfaction Date.

 

  (c) Authority. The Company shall have obtained all permits and qualifications
required by any applicable state for the offer and sale of all of the Shares
issuable pursuant to such Advance Notice, or shall have the availability of
exemptions therefrom. The sale and issuance of such Shares shall be legally
permitted by all laws and regulations to which the Company is subject.

 

  (d) No Material Outside Event. No Material Outside Event shall have occurred
and be continuing.

 

  (e) Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the applicable Condition Satisfaction Date.

 

  (f) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
or directly and materially adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced that
may have a Material Adverse Effect.

 

 - 23 - 

 

 

  (g) No Suspension of Trading in or Delisting of Common Stock. The Common Stock
is quoted trading on a Principal Market and all of the Shares issuable pursuant
to such Advance Notice will be listed or quoted for trading on such Principal
Market and the Company believes, in good faith, that trading of the Common Stock
on a Principal Market will continue uninterrupted for the foreseeable future.
The issuance of Shares with respect to the applicable Advance Notice will not
violate the shareholder approval requirements of the Principal Market. The
Company shall not have received from the Principal Market any written notice
threatening the continued listing or quotation of the Common Stock on the
Principal Market.

 

  (h) Authorized. There shall be a sufficient number of authorized but unissued
and otherwise unreserved Common Stock for the issuance of all of the Shares
issuable pursuant to such Advance Notice.

 

  (i) Executed Advance Notice. The Investor shall have received the Advance
Notice executed by an officer of the Company and the representations contained
in such Advance Notice shall be true and correct as of the applicable Condition
Satisfaction Date.

 

  (j) Consecutive Advance Notices. Except with respect to the first Advance
Notice, the Company shall have delivered all Shares relating to all prior
Advances.

 

Article VIII.
Non-Disclosure of Non-Public Information

 

The Company covenants and agrees that it shall refrain from disclosing, and
shall cause its officers, directors, employees and agents to refrain from
disclosing, any material non-public information (as determined under the
Securities Act or the Exchange Act) to the Investor, unless prior to disclosure
of such information the Company identifies such information as being material
non-public information and provides the Investor with the opportunity to accept
or refuse to accept such material non-public information for review. Unless
specifically agreed to in writing, in no event shall the Investor have a duty of
confidentially, or be deemed to have agreed to maintain information in
confidence, with respect to (i) any information disclosed in violation of this
provision or (ii) the delivery of any Advance Notices.

 

Article IX.
Non Exclusive Agreement

 

Notwithstanding anything contained herein, this Agreement and the rights awarded
to the Investor hereunder are non-exclusive, and, subject to the provisions in
Section 6.13, the Company and the Subsidiaries may, at any time throughout the
term of this Agreement and thereafter, issue and allot, or undertake to issue
and allot, any shares and/or securities and/or convertible notes, bonds,
debentures, options to acquire shares or other securities and/or other
facilities which may be converted into, exchanged for or replaced by Common
Stock or other securities of the Company, and to extend, renew and/or recycle
any bonds and/or debentures, and/or grant any rights with respect to its
existing and/or future share capital.

 

 - 24 - 

 

 

Article X.
Choice of Law/Jurisdiction

 

This Agreement shall be governed by and interpreted in accordance with the laws
of the State of New York without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in New
York County, New York, and expressly consent to the jurisdiction and venue of
the Supreme Court of New York, sitting in New York County, New York and the
United States District Court of the Southern District of New York, sitting in
New York, New York, for the adjudication of any civil action asserted pursuant
to this paragraph.

 

Article XI. Assignment; Termination

 

Section 11.01    Assignment. Neither this Agreement nor any rights of the
parties hereto may be assigned to any other Person.

 

Section 11.02    Termination.

 

  (a) Unless earlier terminated as provided hereunder, this Agreement shall
terminate automatically on the earlier of (i) the second anniversary of the
Effective Date, or (ii) the date on which the Investor shall have made payment
of Advances pursuant to this Agreement in the aggregate amount of the Commitment
Amount

 

  (b) The Company may terminate this Agreement effective upon fifteen Trading
Days’ prior written notice to the Investor; provided that (i) there are no
outstanding Advance Notices, the Shares under which have yet to be issued, and
(ii) the Company has paid all amounts owed to the Investor pursuant to this
Agreement. This Agreement may be terminated at any time by the mutual written
consent of the parties, effective as of the date of such mutual written consent
unless otherwise provided in such written consent.

 

  (c) Nothing in this Section 11.02 shall be deemed to release the Company or
the Investor from any liability for any breach under this Agreement, or to
impair the rights of the Company and the Investor to compel specific performance
by the other party of its obligations under this Agreement prior to termination.
The indemnification provisions contained in Article V shall survive termination
hereunder.

 

 - 25 - 

 

 

Article XII. Notices

 

Any notices, consents, waivers, or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile or e-mail if sent on a Trading Day, or, if not
sent on a Trading Day, on the immediately following Trading Day, provided a copy
is mailed by U.S. certified mail, return receipt requested or overnight carrier;
(iii) 7 days after being sent by U.S. or Israeli certified mail, return receipt
requested, or (iv) 1 day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications, except for
Advance Notices which shall be delivered in accordance with Exhibit A hereof,
shall be:

 

If to the Company, to:

Micronet Enertec Technologies, Inc.

Attention: David Lucatz

 

28 West Grand Avenue, Suite 3 

Montvale, NL 07645

 

Telephone:    201-225-0190

Email:           david@micronet-enertec.com

   

With a copy to (which shall not

Constitute notice or delivery of process) to:

Zysman, Aharoni, Gayer and Sullivan & Worcester LLP

1633 Broadway New

York, NY 10019 

Attention: Oded Har-Even, Esq.

Telephone:    (212) 660-5002 

Email:            ohareven@zag-sw.com

    If to the Investor(s): YA II PN, Ltd.   1012 Springfield Avenue  
Mountainside, NJ 07092   Attention:      Mark Angelo                        
 Portfolio Manager   Telephone:    (201) 985-8300   Facsimile:   Email:
mangelo@yorkvilleadvisors.com     With a copy (which shall not constitute notice
or delivery of process) to:    

David Gonzalez, Esq.

1012 Springfield Avenue

  Mountainside, NJ 07092   Telephone:    (201) 985-8300   Facsimile:   Email:
            legal@yorkvilleadvisors.com

  

Either party may change its information contained in this Article XII by
delivering notice to the other party as set forth herein.

 

Article XIII. Miscellaneous

 

Section 13.01    Counterparts. This Agreement may be executed in identical
counterparts, both of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. Facsimile or other electronically scanned and
delivered signatures, including by e-mail attachment, shall be deemed originals
for all purposes of this Agreement.

 

 - 26 - 

 

 

Section 13.02    Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Investor, the Company, their
respective affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.

 

Section 13.03    Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.

 

Section 13.04    Structuring and Due Diligence Fee. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby.

 

Section 13.05    Commitment Fee. The Company shall pay a commitment fee in the
amount of $800,000 (the “Commitment Fee”) to YA Global II SPV, LLC, a wholly
owned subsidiary of the Investor. The Commitment Fee shall be paid in eight
equal quarterly installments of $100,000, with the first instalment due and
payable on the fifth Trading Day following the date hereof. Each installment of
the Commitment Fee shall be paid (a) in cash to the account designated by the
Investor, (b) by the issuance of such number of shares of Common Stock (each
issuance, the “Commitment Fee Shares”) based on the portion of the Commitment
Fee being paid divided by the average of the daily VWAPs over the 5 Trading Days
immediately prior to the due date of such portion of the Commitment Fee, or (c)
by a combination of cash and Common Stock in accordance with the foregoing, in
the Company’s option. If the Company elects to pay the Commitment Fee in the
form of Commitment Fee Shares (in whole or in part) then in no event shall the
number of shares issuable by the Company (i) cause the aggregate number of
shares of common stock beneficially owned (as calculated pursuant to Section
13(d) of the Exchange Act) by the Investor and its affiliates (for the avoidance
of doubt, including YA Global II SPV, LLC) to exceed 4.99% of the then
outstanding common stock, or (ii) cause the Company to breach the Nasdaq 20%
limitation or any Nasdaq rules and regulations.

 

Section 13.06    Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company, on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder’s fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.

 

 - 27 - 

 

 

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 - 28 - 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Standby Equity
Distribution Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.

 

  COMPANY:       Micronet Enertec Technologies, Inc.             By: /s/ David
Lucatz   Name: David Lucatz   Title: Authorized Signatory             INVESTOR:
      YA II PN, Ltd.             By: Yorkville Advisors Global, LP   Its:
Investment Manager           By: Yorkville Advisors Global II, LLC     Its:
General Partner               By: /s/ David Gonzalez       Name: David Gonzalez
      Title: Managing Member and General Counsel

 

 - 29 - 

 

 

EXHIBIT A
ADVANCE NOTICE

 

MICRONET ENERTEC TECHNOLOGIES, INC.

 

Dated: ______________ Advance Notice Number: _____

 

The undersigned, _______________________ hereby certifies, with respect to the
sale of Common Stock of MICRONET ENERTEC TECHNOLOGIES, INC. (the “Company”)
issuable in connection with this Advance Notice, delivered pursuant to that
certain Standby Equity Distribution Agreement, dated as of August ___, 2017 (the
“Agreement”), as follows:

 

1. The undersigned is the duly elected ______________ of the Company.

 

2. There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post-effective
amendment to the Registration Statement.

 

3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company and has complied in all material
respects with all obligations and conditions contained in the Agreement on or
prior to the Advance Notice Date, and shall continue to perform in all material
respects all covenants and agreements to be performed by the Company through the
applicable Advance Date. All conditions to the delivery of this Advance Notice
are satisfied as of the date hereof.

 

4. The Advance requested is _____________________.

 

5. The Minimum Acceptable Price with respect to this Advance Notice is _________
(85% of the closing price of the Common Stock on the Principal Market on (i) the
Advance Notice Date if this Advance Notice is delivered after the close of the
Principal Market, or (ii) the last Trading Day immediately prior to the Advance
Notice Date if the Advance Notice is delivered prior to the close of the
Principal Market).

 

6. The number of shares of Common Stock of the Company outstanding as of the
date hereof is ___________.

  

The undersigned has executed this Advance Notice as of the date first set forth
above.

 

  MICRONET ENERTEC TECHNOLOGIES, INC.         By:                      

 

 - 30 - 

 

 

EXHIBIT B

FORM OF SETTLEMENT DOCUMENT

 

VIA EMAIL

 

MICRONET ENERTEC TECHNOLOGIES, INC.

 

Attn:

 

Email:

 

  Below please find the settlement information with respect to the Advance
Notice Date of:   1. Amount of Advance Notice   2. Minimum Acceptable Price for
this Advance   3. Number of Excluded Days (if any)   4. Adjusted Advance Amount
(after taking into account any adjustments pursuant to Section 2.01 other than
any amount pursuant to Section 2.01(c)(ii)):   5. Market Price   6. Purchase
Price (Market Price x 98.5%) per share   7. Number of Shares due to Investor
(number 4 ÷ by number 6, rounded to nearest whole share)  

 

 If there were any Excluded Days then add the following (see Section 2.01(c)):

 

8. Number of Shares Sold by Investor on Excluded Days   9. Additional Amount to
be paid by Investor (Shares in number 8 x Minimum Acceptable Price)   10. Total
Amount to be paid to Company (number 4 + number 9):   11. Total Shares to be
issued to Investor (number 7 + number 10):  

 

Please issue the number of Shares due to the Investor to the account of the
Investor as follows:

 

Investor’s DTC participant #:

 

ACCOUNT NAME:

ACCOUNT NUMBER:

ADDRESS:

CITY:

COUNTRY:

Contact person:

 

 - 31 - 

 

 

Number and/or email:     Sincerely,   YA II PN, LTD.

 

Approved By MICRONET ENERTEC TECHNOLOGIES, INC.:

 

    Name:  

 

 - 32 - 

 

 

EXHIBIT C

 

PLAN OF DISTRIBUTION

  

The Selling Stockholder and any of its pledgees, assignees and
successors-in-interest may, from time to time, sell shares of common stock
offered by this prospectus, which we refer to as the resale shares, either on
the OTCQB or any other stock exchange, market or trading facility on which the
common stock is then traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholder may use any one or more of
the following methods when selling the resale shares:

 

  ● ordinary brokerage transactions and transactions in which a broker-dealer
solicits purchasers;

 

  ● block trades in which a broker-dealer attempts to sell resale shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;

 

  ● purchases by a broker-dealer as principal, for resale by the broker-dealer
for its account;

 

  ● an exchange distribution in accordance with the rules of the applicable
exchange;

 

  ● privately negotiated transactions;

 

  ● sale of a specified number of resale shares at a stipulated price per share,
as a broker-dealer may agree upon with the Selling Stockholder from time to
time;

 

  ● writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;

 

  ● a combination of any such methods of sale; or

 

  ● any other method permitted by applicable law.

 

The Selling Stockholder may sell resale shares in accordance with Rule 144 under
the Securities Act of 1933, or the Securities Act, rather than under this
prospectus.

 

Broker-dealers engaged by the Selling Stockholder may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholder (or, if any broker-dealer acts as
agent for the purchaser of resale shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with FINRA Rule 2121.

 

 - 33 - 

 

 

The Selling Stockholder is, and any broker-dealer or agent that is involved in
selling resale shares may be deemed to be, an “underwriter” within the meaning
of Section 2(a)(11) of the Securities Act in connection with such sales. In such
event, any commissions received by such a broker-dealer or agent and any profit
on the resale of the resale shares purchased by the broker-dealer may be deemed
to be underwriting commissions or discounts under the Securities Act. There is
no underwriter (other than the Selling Stockholder and any broker-dealer or
agent deemed to be an underwriter as described above) or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Stockholder. The Selling Stockholder has informed us that it does not have any
written or oral agreement or understanding, directly or indirectly, with any
person to distribute resale shares. In no event shall any broker-dealer receive
fees, commissions and markups that, in the aggregate, would exceed eight percent
(8%) of gross proceeds from a sale of resale shares.

 

Because the Selling Stockholder is an “underwriter” within the meaning of the
Securities Act, it is subject to the prospectus delivery requirements of the
Securities Act including Rule 172 thereunder.

 

We have agreed to keep this prospectus effective until the earlier of (i) the
date on which the resale shares may be resold by the Selling Stockholders
without registration and without regard to any time, volume or manner
limitations by reason of Rule 144 under the Securities Act or any other rule of
similar effect or (ii) all of the resale shares have been sold pursuant to this
prospectus or Rule 144 under the Securities Act or any other rule of similar
effect. The resale shares will be sold only through registered or licensed
brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is complied
with.

 

Expenses, Indemnification

 

We will not receive any of the proceeds from the sale of resale shares by the
Selling Stockholder and will bear all expenses related to the registration of
this offering, but will not pay for any commissions, fees or discounts, if any,
relating to the sale of resale shares by the Selling Stockholder. We have agreed
to indemnify the Selling Stockholder against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

 

Supplements

 

In the event of a material change in the plan of distribution disclosed in this
prospectus, the Selling Stockholder will not be able to effect transactions in
the resale shares pursuant to this prospectus until such time as a
post-effective amendment to the registration statement is filed with, and
declared effective by, the SEC.

 

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Regulation M

 

We have informed the Selling Stockholder that it is required to comply with
Regulation M promulgated under the Securities Exchange Act of 1934 with respect
to any purchase or sale of our common stock. In general, Rule 102 under
Regulation M prohibits any person connected with a distribution of our common
stock from directly or indirectly bidding for, or purchasing for any account in
which it has a beneficial interest, any of the resale shares or any right to
purchase the resale shares, for a period of one trading day before and after
completion of its participation in the distribution.

 

During any distribution period, Regulation M prohibits the Selling Stockholder
and any other persons engaged in the distribution from engaging in any
stabilizing bid or purchasing our common stock except for the purpose of
preventing or retarding a decline in the open market price of the common stock.
None of these persons may affect any stabilizing transaction to facilitate any
offering at the market.

 

We have also advised the Selling Stockholder that it should be aware that the
anti-manipulation provisions of Regulation M under the Exchange Act will apply
to purchases and sales of common stock by the Selling Stockholder, and that
there are restrictions on market-making activities by persons engaged in the
distribution of the resale shares. Under Regulation M, the Selling Stockholder
or its agents may not bid for, purchase, or attempt to induce any person to bid
for or purchase, shares of our common stock while the Selling Stockholder is
distributing resale shares. Regulation M may prohibit the Selling Stockholder
from covering short sales by purchasing resale shares while the distribution is
taking place, despite any contractual rights to do so under our agreement with
the Selling Stockholder. We have advised the Selling Stockholder that it should
consult with its own legal counsel to ensure compliance with Regulation M.

 

 

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