Exhibit 10.1

 

WORKHORSE GROUP INC.

 

$25,000,000 SHARES

 

COMMON STOCK

 

AT-THE-MARKET OFFERING PROGRAM

SALES AGREEMENT

 

June 22, 2017

 

Cowen and Company, LLC 

599 Lexington Avenue 

New York, NY 10022

 

Ladies and Gentlemen:

 

Workhorse Group Inc. (the “Company”), confirms its agreement (this “Agreement”)
with Cowen and Company, LLC (“Cowen”), as follows:

 

1. Issuance and Sale of Shares. The Company agrees that, from time to time
during the term of this Agreement, on the terms and subject to the conditions
set forth herein, it may issue and sell through Cowen, acting as agent and/or
principal, shares (the “Placement Shares”) of the Company’s common stock, par
value $0.001 per share (the “Common Stock”), having an aggregate offering price
of up to $25,000,000. Notwithstanding anything to the contrary contained herein,
the parties hereto agree that compliance with the limitation set forth in this
Section 1 on the number of shares of Common Stock issued and sold under this
Agreement shall be the sole responsibility of the Company, and Cowen shall have
no obligation in connection with such compliance. The issuance and sale of
Common Stock through Cowen will be effected pursuant to the Registration
Statement (as defined below) filed by the Company and declared effective by the
Securities and Exchange Commission (the “Commission”), although nothing in this
Agreement shall be construed as requiring the Company to use the Registration
Statement (as defined below) to issue the Common Stock.

 

 

 

 

The Company has filed, in accordance with the provisions of the Securities Act
of 1933, as amended, and the rules and regulations thereunder (collectively, the
“Securities Act”), with the Commission a registration statement on Form S-3
(File No. 333-213100), including a base prospectus, relating to certain
securities, including the Common Stock, to be issued from time to time by the
Company, and which incorporates by reference documents that the Company has
filed or will file in accordance with the provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (collectively,
the “Exchange Act”). The Company has prepared a prospectus supplement
specifically relating to the Placement Shares (the “Prospectus Supplement”) to
the base prospectus included as part of such registration statement. The Company
has furnished to Cowen, for use by Cowen, copies of the prospectus included as
part of such registration statement, as supplemented by the Prospectus
Supplement, relating to the Placement Shares. Except where the context otherwise
requires, such registration statement, as amended when it became effective,
including all documents filed as part thereof or incorporated by reference
therein, and including any information contained in a Prospectus (as defined
below) subsequently filed with the Commission pursuant to Rule 424(b) under the
Securities Act or deemed to be a part of such registration statement pursuant to
Rule 430B or 462(b) of the Securities Act, is herein called the “Registration
Statement.” The base prospectus, including all documents incorporated therein by
reference, included in the Registration Statement, as it may be supplemented by
the Prospectus Supplement, in the form in which such prospectus and/or
Prospectus Supplement have most recently been filed by the Company with the
Commission pursuant to Rule 424(b) under the Securities Act, together with any
“issuer free writing prospectus,” as defined in Rule 433 of the Securities Act
regulations (“Rule 433”), relating to the Placement Shares that (i) is required
to be filed with the Commission by the Company or (ii) is exempt from filing
pursuant to Rule 433(d)(5)(i), in each case in the form filed or required to be
filed with the Commission or, if not required to be filed, in the form retained
in the Company’s records pursuant to Rule 433(g), is herein called the
“Prospectus.” Any reference herein to the Registration Statement, the Prospectus
or any amendment or supplement thereto shall be deemed to refer to and include
the documents incorporated by reference therein, and any reference herein to the
terms “amend,” “amendment” or “supplement” with respect to the Registration
Statement or the Prospectus shall be deemed to refer to and include the filing
after the execution hereof of any document with the Commission deemed to be
incorporated by reference therein. For purposes of this Agreement, all
references to the Registration Statement, the Prospectus or to any amendment or
supplement thereto shall be deemed to include any copy filed with the Commission
pursuant to the Electronic Data Gathering Analysis and Retrieval System
(“EDGAR”).

 

2. Placements. Each time that the Company wishes to issue and sell the Placement
Shares hereunder (each, a “Placement”), it will notify Cowen by email notice (or
other method mutually agreed to in writing by the parties) (a “Placement
Notice”) containing the parameters in accordance with which it desires the
Placement Shares to be sold, which shall at a minimum include the number of
Placement Shares to be issued, the time period during which sales are requested
to be made, any limitation on the number of Placement Shares that may be sold in
any one Trading Day (as defined in Section 3) and any minimum price below which
sales may not be made, a form of which containing such minimum sales parameters
necessary is attached hereto as Schedule 1. The Placement Notice shall originate
from any of the individuals from the Company set forth on Schedule 2 (with a
copy to each of the other individuals from the Company listed on such schedule),
and shall be addressed to each of the individuals from Cowen set forth on
Schedule 2, as such Schedule 2 may be amended from time to time. The Placement
Notice shall be effective upon receipt by Cowen unless and until (i) in
accordance with the notice requirements set forth in Section 4, Cowen declines
to accept the terms contained therein for any reason, in its sole discretion,
(ii) the entire amount of the Placement Shares have been sold, (iii) in
accordance with the notice requirements set forth in Section 4, the Company
suspends or terminates the Placement Notice for any reason in its sole
discretion, (iv) the Company issues a subsequent Placement Notice with
parameters superseding those on the earlier dated Placement Notice, or (v) this
Agreement has been terminated under the provisions of Section 11. The amount of
any discount, commission or other compensation to be paid by the Company to
Cowen in connection with the sale of the Placement Shares shall be calculated in
accordance with the terms set forth in Schedule 3. It is expressly acknowledged
and agreed that neither the Company nor Cowen will have any obligation
whatsoever with respect to a Placement or any Placement Shares unless and until
the Company delivers a Placement Notice to Cowen and Cowen does not decline such
Placement Notice pursuant to the terms set forth above, and then only upon the
terms specified therein and herein. In the event of a conflict between the terms
of this Agreement and the terms of a Placement Notice, the terms of the
Placement Notice will control.

 

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3. Sale of Placement Shares by Cowen. Subject to the terms and conditions herein
set forth, upon the Company’s delivery of a Placement Notice, and unless the
sale of the Placement Shares described therein has been declined, suspended, or
otherwise terminated in accordance with the terms of this Agreement, Cowen, for
the period specified in the Placement Notice, will use its commercially
reasonable efforts consistent with its normal trading and sales practices and
applicable state and federal laws, rules and regulations and the rules of the
Nasdaq Stock Market, Inc. (“Nasdaq”) to sell such Placement Shares up to the
amount specified in such Placement Notice, and otherwise in accordance with the
terms of such Placement Notice. Cowen will provide written confirmation to the
Company (including by email correspondence to each of the individuals of the
Company set forth on Schedule 2, if receipt of such correspondence is actually
acknowledged by any of the individuals to whom the notice is sent, other than
via auto-reply) no later than the opening of the Trading Day (as defined below)
immediately following the Trading Day on which it has made sales of Placement
Shares hereunder setting forth the number of Placement Shares sold on such day,
the volume-weighted average price of the Placement Shares sold, and the Net
Proceeds (as defined below) payable to the Company. Cowen may sell Placement
Shares by any method permitted by law deemed to be an “at the market” offering
as defined in Rule 415 of the Securities Act, including without limitation sales
made through Nasdaq or on any other existing trading market for the Common
Stock. If expressly authorized by the Company in a Placement Notice, Cowen may
also sell Placement Shares in negotiated transactions. Notwithstanding the
provisions of Section 6(ii), Cowen shall not purchase Placement Shares for its
own account as principal unless expressly authorized to do so by the Company in
a Placement Notice. The Company acknowledges and agrees that (i) there can be no
assurance that Cowen will be successful in selling Placement Shares, and (ii)
Cowen will incur no liability or obligation to the Company or any other person
or entity if it does not sell Placement Shares for any reason other than a
failure by Cowen to use its commercially reasonable efforts consistent with its
normal trading and sales practices to sell such Placement Shares as required
under this Section 3. For the purposes hereof, “Trading Day” means any day on
which the Company’s Common Stock is purchased and sold on the principal market
on which the Common Stock is listed or quoted.

 

4. Suspension of Sales.

 

(a) The Company or Cowen may, upon notice to the other party in writing
(including by email correspondence to each of the individuals of the other party
set forth on Schedule 2, if receipt of such correspondence is actually
acknowledged by any of the individuals to whom the notice is sent, other than
via auto-reply) or by telephone (confirmed immediately by verifiable facsimile
transmission or email correspondence to each of the individuals of the other
party set forth on Schedule 2), suspend any sale of Placement Shares; provided,
however, that such suspension shall not affect or impair either party’s
obligations with respect to any Placement Shares sold hereunder prior to the
receipt of such notice. Each of the parties agrees that no such notice under
this Section 4 shall be effective against the other unless it is made to one of
the individuals named on Schedule 2 hereto, as such schedule may be amended from
time to time.

 

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(b) Notwithstanding any other provision of this Agreement, during any period in
which the Company is in possession of material non-public information, the
Company and Cowen agree that (i) no sale of Placement Shares will take place,
(ii) the Company shall not request the sale of any Placement Shares, and (iii)
Cowen shall not be obligated to sell or offer to sell any Placement Shares.

 

(c) If either Cowen or the Company has reason to believe that the exemptive
provisions set forth in Rule 101(c)(1) of Regulation M under the Exchange Act
are not satisfied with respect to the Common Stock, it shall promptly notify the
other party, and Cowen may, at its sole discretion, suspend sales of the
Placement Shares under this Agreement.

 

(d) The Registration Statement was declared effective on December 23, 2016.
Notwithstanding any other provision of this Agreement, during any period in
which the Registration Statement is no longer effective under the Securities
Act, the Company shall promptly notify Cowen, the Company shall not request the
sale of any Placement Shares, and Cowen shall not be obligated to sell or offer
to sell any Placement Shares.

 

5. Settlement.

 

(a) Settlement of Placement Shares. Unless otherwise specified in the applicable
Placement Notice, settlement for sales of Placement Shares will occur on the
third (3rd) Trading Day (or such earlier day as is industry practice for
regular-way trading) following the date on which such sales are made (each, a
“Settlement Date” and the first such settlement date, the “First Delivery
Date”). The amount of proceeds to be delivered to the Company on a Settlement
Date against receipt of the Placement Shares sold (the “Net Proceeds”) will be
equal to the aggregate sales price received by Cowen at which such Placement
Shares were sold, after deduction for (i) Cowen’s commission, discount or other
compensation for such sales payable by the Company pursuant to Section 2 hereof,
(ii) any other amounts due and payable by the Company to Cowen hereunder
pursuant to Section 7(g) (Expenses) hereof, and (iii) any transaction fees
imposed by any governmental or self-regulatory organization in respect of such
sales.

 

(b) Delivery of Placement Shares. On or before each Settlement Date, the Company
will, or will cause its transfer agent to, electronically transfer the Placement
Shares being sold by crediting Cowen’s or its designee’s account (provided Cowen
shall have given the Company written notice of such designee prior to the
Settlement Date) at The Depository Trust Company through its Deposit and
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 shall be freely
tradeable, transferable, registered shares in good deliverable form. On each
Settlement Date, Cowen will deliver the related Net Proceeds in same day funds
to an account designated by the Company on, or prior to, the Settlement Date.
The Company agrees that if the Company, or its transfer agent (if applicable),
defaults in its obligation to deliver duly authorized Placement Shares on a
Settlement Date, the Company agrees that in addition to and in no way limiting
the rights and obligations set forth in Section 9(a) (Indemnification and
Contribution) hereto, it will (i) hold Cowen harmless against any loss, claim,
damage, or reasonable and documented expense (including reasonable and
documented legal fees and expenses), as incurred, arising out of or in
connection with such default by the Company and (ii) pay to Cowen any
commission, discount, or other compensation to which it would otherwise have
been entitled absent such default.

 

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6. Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, Cowen that as of the date of this Agreement, each
Representation Date (as defined in Section 7.(m.)), each date on which a
Placement Notice is given, and any date on which Placement Shares are sold
hereunder:

 

(a) The Registration Statement and any Rule 462(b) Registration Statement have
been declared effective by the Commission under the Securities Act. The Company
has complied to the Commission’s satisfaction with all requests of the
Commission for additional or supplemental information. No stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, contemplated or
threatened by the Commission. The Company meets the requirements for use of Form
S-3 under the Securities Act. The sale of the Placement Shares hereunder meets
the requirements or General Instruction I.B.1. of Form S-3.

 

(b) The Prospectus when filed complied and, as amended or supplemented, if
applicable, will comply in all material respects with the Securities Act. Each
of the Registration Statement, any Rule 462(b) Registration Statement, the
Prospectus and any post-effective amendments or supplements thereto, at the time
it became effective or its date, as applicable, complied and as of each of the
Settlement Dates, if any, complied in all material respects with the Securities
Act and did not and, as of each Settlement Date, if any, did not and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Prospectus, as amended or supplemented, as of its date, did not
and, as of each of the Settlement Dates, if any, will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The representations and warranties set forth in
the two immediately preceding sentences do not apply to statements in or
omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to Cowen furnished to the Company in writing by Cowen
expressly for use therein. There are no contracts or other documents required to
be described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.

 

(c) The Company has delivered to Cowen one complete copy of the Registration
Statement and a copy of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and the Prospectus, as amended or supplemented, in such quantities and at such
places as Cowen has reasonably requested.

 

(d) [Reserved]

 

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(e) The Company currently is not an “ineligible issuer,” as defined in Rule 405
of the rules and regulation of the Commission. The Company agrees to notify
Cowen promptly upon the Company becoming an “ineligible issuer.”

 

(f) The Company has not distributed and will not distribute, prior to the
completion of Cowen’s distribution of the Placement Shares, any offering
material in connection with the offering and sale of the Placement Shares other
than the Prospectus or the Registration Statement.

 

(g) This Agreement has been duly authorized, executed and delivered by, and is a
valid and binding agreement of, the Company, enforceable in accordance with its
terms, except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.

 

(h) The Placement Shares, when issued and delivered, will be duly authorized for
issuance and sale pursuant to this Agreement and, when issued and delivered by
the Company against payment therefor pursuant to this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable.

 

(i) There are no persons with registration or other similar rights to have any
equity or debt securities registered for sale under the Registration Statement
or included in the offering contemplated by this Agreement, except for such
rights as have been duly waived.

 

(j) Except as otherwise disclosed in the Prospectus, subsequent to the
respective dates as of which information is given in the Prospectus: (i) there
has been no material adverse change, or any development that could reasonably be
expected to result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether or not
arising from transactions in the ordinary course of business, of the Company and
its subsidiaries, considered as one entity (any such change is called a
“Material Adverse Change”); (ii) the Company and its subsidiaries, considered as
one entity, have not incurred any material liability or obligation, indirect,
direct or contingent, not in the ordinary course of business nor entered into
any material transaction or agreement not in the ordinary course of business:
and (iii) there has been no dividend or distribution of any kind declared, paid
or made by the Company or, except for regular quarterly dividends publicly
announced by the Company or dividends paid to the Company or other subsidiaries,
by any of its subsidiaries on any class of capital stock or repurchase or
redemption by the Company or any of its subsidiaries of any class of capital
stock.

 

(k) Clark, Schaefer, Hackett & Co. (the “Auditor”) whose reports are filed with
the Commission as a part of the Registration Statement and included in the
Prospectus, are and, during the periods covered by their reports, were
independent public accountants as required by the Securities Act and the Rules.

 

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(l) The financial statements of the Company (including all notes and schedules
thereto) included in the Registration Statement and Prospectus present fairly
the financial position of the Company and its consolidated subsidiaries at the
dates indicated and the statement of operations, stockholders’ equity and cash
flows of the Company and its consolidated subsidiaries for the periods
specified; and such financial statements and related schedules and notes
thereto, and the unaudited financial information filed with the Commission as
part of the Registration Statement, have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved. The summary and selected financial data included in the
Prospectus present fairly the information shown therein as at the respective
dates and for the respective periods specified and have been presented on a
basis consistent with the consolidated financial statements set forth in the
Prospectus and other financial information.

 

(m) The Company and each of its subsidiaries, including each entity
(corporation, partnership, joint venture, association or other business
organization) owned or controlled directly or indirectly by the Company (each, a
“subsidiary”), is duly organized, validly existing and in good standing under
the laws of their respective jurisdictions of incorporation or organization and
each such entity has all requisite power and authority to carry on its business
as is currently being conducted as described in the Prospectus, and to own,
lease and operate its properties. All of the issued shares of capital stock of,
or other ownership interests in, each subsidiary have been duly and validly
authorized and issued and are fully paid and non-assessable and are owned,
directly or indirectly, by the Company, free and clear of any lien, charge,
mortgage, pledge, security interest, claim, limitation on voting rights, equity,
trust or other encumbrance, preferential arrangement, defect or restriction of
any kind whatsoever. The Company and each of its subsidiaries is duly qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted by it or location of
the assets or properties owned, leased or licensed by it requires such
qualification, except for such jurisdictions where the failure to so qualify
individually or in the aggregate would not have a Material Adverse Change; and
to the Company’s knowledge, no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification. The Company does not own,
lease or license any asset or property or conduct any business outside the
United States of America.

 

(n) The Registration Statement initially became effective within three years of
the date hereof. If, immediately prior to the third anniversary of the initial
effective date of the Registration Statement, any of the Placement Shares remain
unsold by the Underwriters, the Company will, prior to that third anniversary
file, if it has not already done so, a new shelf registration statement relating
to the Placement Shares, in a form satisfactory to the Representatives, will use
its best efforts to cause such registration statement to be declared effective
within 180 days after that third anniversary, and will take all other action
necessary or appropriate to permit the public offering and sale of the Placement
Shares to continue as contemplated in the expired Registration Statement.
References herein to the registration statement relating to the Placement Shares
shall include such new shelf registration statement.

 

(o) The Company and each of its subsidiaries has good and marketable title in
fee simple to all real property, and good and marketable title to all other
property owned by it, in each case free and clear of all liens, encumbrances,
claims, security interests and defects, except such as do not materially affect
the value of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company and its subsidiaries and
except as disclosed in the Prospectus. All property held under lease by the
Company and its subsidiaries is held by them under valid, existing and
enforceable leases, free and clear of all liens, encumbrances, claims, security
interests and defects, except such as are not material and do not materially
interfere with the use made or proposed to be made of such property by the
Company and its subsidiaries.

 

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(p) Subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there has not been any event
which could have a Material Adverse Change; (ii) neither the Company nor any of
its subsidiaries has sustained any loss or interference with its assets,
businesses or properties (whether owned or leased) from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree which could have a Material Adverse Change; and (iii) since the
date of the latest balance sheet included in the Registration Statement and the
Prospectus, neither the Company nor its subsidiaries has (A) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money, except such liabilities or obligations incurred in the ordinary
course of business, (B) entered into any transaction not in the ordinary course
of business or (C) declared or paid any dividend or made any distribution on any
shares of its stock or redeemed, purchased or otherwise acquired or agreed to
redeem, purchase or otherwise acquire any shares of its capital stock.

 

(q) There is no document, contract or other agreement required to be described
in the Registration Statement or the Prospectus or to be filed as an exhibit to
the Registration Statement which is not described or filed as required by the
Securities Act or Rules. Each description of a contract, document or other
agreement in the Registration Statement or the Prospectus accurately reflects in
all respects the terms of the underlying contract, document or other agreement.
Each contract, document or other agreement described in the Registration
Statement or the Prospectus or listed in the Exhibits to the Registration
Statement or incorporated by reference is in full force and effect and is valid
and enforceable by and against the Company or its subsidiary, as the case may
be, in accordance with its terms, and the Company has no reason to believe that
any other party to any such contract or other agreement intends to terminate
such contract or agreement in the foreseeable future. Neither the Company nor
any of its subsidiaries, if a subsidiary is a party, nor to the Company’s
knowledge, any other party is in default in the observance or performance of any
term or obligation to be performed by it under any such agreement, and no event
has occurred which with notice or lapse of time or both would constitute such a
default, in any such case which default or event, individually or in the
aggregate, would have a Material Adverse Change. No default exists, and no event
has occurred which with notice or lapse of time or both would constitute a
default, in the due performance and observance of any term, covenant or
condition, by the Company or its subsidiary, if a subsidiary is a party thereto,
of any other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which Company or its properties or business or a
subsidiary or its properties or business may be bound or affected which default
or event, individually or in the aggregate, would have a Material Adverse
Change.

 

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(r) All Necessary Permits, etc. The Company and each of its subsidiaries has all
requisite corporate power and authority, and all necessary authorizations,
approvals, consents, orders, licenses, certificates and permits of and from all
governmental or regulatory bodies or any other person or entity (collectively,
the “Permits”), to own, lease and license its assets and properties and conduct
its business, all of which are valid and in full force and effect, except where
the lack of such Permits, individually or in the aggregate, would not have a
Material Adverse Change. The Company and each of its subsidiaries has fulfilled
and performed in all material respects all of its obligations with respect to
such Permits and no event has occurred that allows, or after notice or lapse of
time would allow, revocation or termination thereof or results in any other
material impairment of the rights of the Company thereunder. Except as may be
required under the Securities Act and state and foreign Blue Sky laws, no other
Permits are required to enter into, deliver and perform this Agreement and to
issue and sell the Placement Shares.

 

(s) The statistical and market related data included in the Registration
Statement and the Prospectus are based on or derived from sources that the
Company believes to be reliable and accurate.

 

(t) Neither the Company nor any subsidiary (i) is in violation of its
certificate or articles of incorporation, by-laws, certificate of formation,
limited liability company agreement, partnership agreement or other
organizational documents, (ii) is in default under, and no event has occurred
which, with notice or lapse of time, or both, would constitute a default under,
or result in the creation or imposition of any lien, charge, mortgage, pledge,
security interest, claim, limitation on voting rights, equity, trust or other
encumbrance, preferential arrangement, defect or restriction of any kind
whatsoever, upon, any property or assets of the Company or any subsidiary
pursuant to, any bond, debenture, note, indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its properties or assets is subject or (iii) is in
violation of any statute, law, rule, regulation, ordinance, directive, judgment,
decree or order of any judicial, regulatory or other legal or governmental
agency or body, foreign or domestic, except (in the case of clauses (ii) and
(iii) above) for violations or defaults that could not (individually or in the
aggregate) reasonably be expected to have a Material Adverse Change.

 

(u) The execution, delivery and performance of this Agreement by the Company or
the consummation of any of the transactions contemplated hereby or thereby
(including, without limitation, the issuance and sale by the Company of the
Placement Shares) will not give rise to a right to terminate or accelerate the
due date of any payment due under, or conflict with or result in the breach of
any term or provision of, or constitute a default (or an event which with notice
or lapse of time or both would constitute a default) under, or require any
consent or waiver under, or result in the execution or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company or its
subsidiaries pursuant to the terms of, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which either the Company or its subsidiaries or any of their
properties or businesses is bound, or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation applicable to the Company or any of
its subsidiaries or violate any provision of the charter or by-laws of the
Company or any of its subsidiaries, except for such consents or waivers which
have already been obtained and are in full force and effect.

 

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(v)  The Company has authorized and outstanding capital stock as set forth under
the caption “Capitalization” in the Prospectus. The certificates evidencing the
Placement Shares are in due and proper legal form and have been duly authorized
for issuance by the Company. All of the issued and outstanding shares of Common
Stock have been duly and validly issued and are fully paid and nonassessable.
There are no statutory preemptive or other similar rights to subscribe for or to
purchase or acquire any shares of Common Stock of the Company or any of its
subsidiaries or any such rights pursuant to its Certificate of Incorporation or
by-laws or any agreement or instrument to or by which the Company or any of its
subsidiaries is a party or bound. The Placement Shares, when issued and sold
pursuant to this Agreement will be duly and validly issued, fully paid and
nonassessable and none of them will be issued in violation of any preemptive or
other similar right. Except as disclosed in the Registration Statement and the
Prospectus, there is no outstanding option, warrant or other right calling for
the issuance of, and there is no commitment, plan or arrangement to issue, any
share of stock of the Company or any of its subsidiaries or any security
convertible into, or exercisable or exchangeable for, such stock. All grants of
each option to acquire Common Stock (each, a “Company Stock Option”) were
validly issued and properly approved by the Board of Directors of the Company in
material compliance with all applicable laws and the terms of the plans under
which such Company Stock Options were issued and were recorded on the Company
Financial Statements, including the SEC Documents, in accordance with GAAP, and
no such grants involved any “back dating”, “forward dating,” “spring loading” or
similar practices with respect to the effective date of grant. The Placement
Shares conform in all material respects to all statements in relation thereto
contained in the Registration Statement and the Prospectus. All outstanding
shares of capital stock of each of the Company’s subsidiaries have been duly
authorized and validly issued, and are fully paid and nonassessable and are
owned directly by the Company or by another wholly-owned subsidiary of the
Company free and clear of any security interests, liens, encumbrances, equities
or claims, other than those described in the Prospectus.

 

(w)  No holder of any security of the Company has any right, which has not been
waived, to have any security owned by such holder included in the Registration
Statement or to demand registration of any security owned by such holder for a
period of 90 days after the date of this Agreement.

 

(x)  There are no legal or governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries could individually or in the aggregate have a
Material Adverse Change; and, to the knowledge of the Company, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.

 

(y)  All necessary corporate action has been duly and validly taken by the
Company to authorize the execution, delivery and performance of this Agreement
and the issuance and sale of the Placement Shares by the Company.

 

(z)  Neither the Company nor any of its subsidiaries is involved in any labor
dispute nor, to the knowledge of the Company, is any such dispute threatened,
which dispute would have a Material Adverse Change. The Company is not aware of
any existing or imminent labor disturbance by the employees of any of its
principal suppliers or contractors which would have a Material Adverse Change.
The Company is not aware of any threatened or pending litigation between the
Company or its subsidiaries and any of its executive officers which, if
adversely determined, could have a Material Adverse Change and has no reason to
believe that such officers will not remain in the employment of the Company.

 

- 10 -

 

 

(aa) No transaction has occurred between or among the Company and any of its
officers or directors, shareholders or any affiliate or affiliates of any such
officer or director or shareholder that is required to be described in and is
not described in the Registration Statement and the Prospectus.

 

(bb) The Company has not taken, nor will it take, directly or indirectly, any
action designed to or which might reasonably be expected to cause or result in,
or which has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of the Common Stock or any
security of the Company to facilitate the sale or resale of any of the Placement
Shares.

 

(cc) The Company and each of its subsidiaries has filed all Federal, state,
local and foreign tax returns which are required to be filed through the date
hereof, which returns are true and correct in all material respects or has
received timely extensions thereof, and has paid all taxes shown on such returns
and all assessments received by it to the extent that the same are material and
have become due. There are no tax audits or investigations pending, which if
adversely determined would have a Material Adverse Change; nor are there any
material proposed additional tax assessments against the Company or any of its
subsidiaries.

 

(dd) The Placement Shares have been duly authorized for quotation on the
National Association of Securities Dealers Automated Quotation (“Nasdaq”)
National Market System.

 

(ee)  The Company has taken no action designed to, or likely to have the effect
of, terminating the registration of the Common Stock under the Exchange Act or
the quotation of the Common Stock on the Nasdaq National Market, nor has the
Company received any notification that the Commission or the Nasdaq National
Market is contemplating terminating such registration or quotation.

 

(ff)  The books, records and accounts of the Company and its subsidiaries
accurately and fairly reflect, the transactions in, and dispositions of, the
assets of, and the results of operations of, the Company and its subsidiaries.
The Company and each of its subsidiaries maintains a system of internal
accounting controls sufficient to provide reasonable assurances 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 accordance 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.

 

(gg)  The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 under the Exchange Act),
which: (i) are designed to ensure that material information relating to the
Company is made known to the Company’s principal executive officer and its
principal financial officer by others within the Company, particularly during
the periods in which the periodic reports required under the Exchange Act are
required to be prepared; (ii) provide for the periodic evaluation of the
effectiveness of such disclosure controls and procedures at the end of the
periods in which the periodic reports are required to be prepared; and (iii) are
effective in all material respects to perform the functions for which they were
established.

 

- 11 -

 

 

(hh) Based on the evaluation of its disclosure controls and procedures, the
Company is not aware of (i) any material weakness or significant deficiency in
the design or operation of internal controls which could adversely affect the
Company’s ability to record, process, summarize and report financial data or any
material weaknesses in internal controls; or (ii) any fraud, whether or not
material, that involves management or other employees who have a role in the
Company’s internal controls.

 

(ii) Except as described in the Prospectus and as preapproved in accordance with
the requirements set forth in Section 10A of the Exchange Act, the Auditor has
not been engaged by the Company to perform any “prohibited activities” (as
defined in Section 10A of the Exchange Act).

 

(jj) Except as described in the Prospectus, there are no material off-balance
sheet arrangements (as defined in Item 303 of Regulation S-K) that have or are
reasonably likely to have a material current or future effect on the Company’s
financial condition, revenues or expenses, changes in financial condition,
results of operations, liquidity, capital expenditures or capital resources.

 

(kk) The Company’s Board of Directors has validly appointed an audit committee
whose composition satisfies the requirements of Rule 5605 of the NASDAQ Stock
Market and the Board of Directors and/or the audit committee has adopted a
charter that satisfies the requirements of Rule 5605 of the NASDAQ Stock Market.
The audit committee has reviewed the adequacy of its charter within the past
twelve months.

 

(ll) There is and has been no failure on the part of the Company or any of its
directors or officers, in their capacities as such, to comply with any provision
of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), any
related rules and regulations promulgated by the Commission and corporate
governance requirements under applicable NASDAQ regulations, including, without
limitation, Section 402 related to loans and Sections 302 and 906 related to
certifications.

 

(mm) The Company and its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are customary in the businesses in which they are engaged or propose to engage
after giving effect to the transactions described in the Prospectus; all
policies of insurance and fidelity or surety bonds insuring the Company or any
of its subsidiaries or the Company’s or its subsidiaries’ respective businesses,
assets, employees, officers and directors are in full force and effect; the
Company and each of its subsidiaries are in compliance with the terms of such
policies and instruments in all material respects; and neither the Company nor
any subsidiary of the Company has any 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 is not materially greater than the current cost.
Neither the Company nor any of its subsidiaries has been denied any insurance
coverage which it has sought or for which it has applied.

 

- 12 -

 

 

(nn)  Each approval, consent, order, authorization, designation, declaration or
filing of, by or with any regulatory, administrative or other governmental body
necessary in connection with the execution and delivery by the Company of this
Agreement and the consummation of the transactions herein contemplated required
to be obtained or performed by the Company (except such additional steps as may
be required by the Financial Industry Regulatory Authority (“FINRA”) or may be
necessary to qualify the Placement Shares for public offering by the
Underwriters under the state securities or Blue Sky laws) has been obtained or
made and is in full force and effect.

 

(oo)  There are no affiliations with FINRA among the Company’s officers,
directors or, to the best of the knowledge of the Company, any five percent or
greater stockholder of the Company, except as set forth in the Registration
Statement or otherwise disclosed in writing to the Representatives.

 

(pp)  The Company does not expect to be a Passive Foreign Investment Company
(“PFIC”) within the meaning of Section 1297(a) of the United States Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder for the year ending December 31, 2017, and has no
plan or intention to conduct its business in a manner that would be reasonably
expected to result in the Company becoming a PFIC in the future under current
laws and regulations.

 

(qq)  (i) Each of the Company and each of its subsidiaries is in compliance in
all material respects with all rules, laws and regulation relating to the use,
treatment, storage and disposal of toxic substances and protection of health or
the environment (“Environmental Law”) which are applicable to its business; (ii)
neither the Company nor its subsidiaries has received any notice from any
governmental authority or third party of an asserted claim under Environmental
Laws; (iii) each of the Company and each of its subsidiaries has received all
permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its business and is in compliance with all terms
and conditions of any such permit, license or approval; (iv) to the Company’s
knowledge, no facts currently exist that will require the Company or any of its
subsidiaries to make future material capital expenditures to comply with
Environmental Laws; and (v) no property which is or has been owned, leased or
occupied by the Company or its subsidiaries has been designated as a Superfund
site pursuant to the Comprehensive Environmental Response, Compensation of
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et. seq.) (“CERCLA”)
or otherwise designated as a contaminated site under applicable state or local
law. Neither the Company nor any of its subsidiaries has been named as a
“potentially responsible party” under CERCLA.

 

(rr)  In the ordinary course of its business, the Company periodically reviews
the effect of Environmental Laws on the business, operations and properties of
the Company and its subsidiaries, in the course of which the Company identifies
and evaluates associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws, or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a Material Adverse Change.

 

- 13 -

 

 

(ss)  Except as described in the Prospectus, the Company has not sold or issued
any shares of Common Stock during the six-month period preceding the date of the
Prospectus, including any sales pursuant to Rule 144A under, or Regulations D or
S of, the Securities Act, other than shares issued pursuant to employee benefit
plans, qualified stock options plans or other employee compensation plans or
pursuant to outstanding options, rights or warrants.

 

(tt)  The Company has fulfilled its obligations, if any, under the minimum
funding standards of Section 302 of the U.S. Employee Retirement Income Security
Act of 1974 (“ERISA”) and the regulations and published interpretations
thereunder with respect to each “plan” as defined in Section 3(3) of ERISA and
such regulations and published interpretations in which its employees are
eligible to participate and each such plan is in compliance in all material
respects with the presently applicable provisions of ERISA and such regulations
and published interpretations. No “Reportable Event” (as defined in 12 ERISA)
has occurred with respect to any “Pension Plan” (as defined in ERISA) for which
the Company could have any liability.

 

(uu) Neither the Company nor any of its subsidiaries nor, to the Company’s
knowledge, any director, officer, employee, agent, affiliate or other person
acting on behalf of the Company or any subsidiary has (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government officials or employees,
political parties or campaigns, political party officials, or candidates for
political office from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any
applicable anti-corruption laws, rules, or regulations of any other jurisdiction
in which the Company or any subsidiary conducts business; or (iv) made any other
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any person.

 

(vv) The operations of the Company and its subsidiaries are and have been
conducted at all times in compliance with all applicable financial recordkeeping
and reporting requirements, including those of the U.S. Bank Secrecy Act, as
amended by Title III of the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA
PATRIOT Act), and the applicable anti-money laundering statutes of jurisdictions
where the Company and its subsidiaries conduct business, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Anti-Money Laundering Laws”), and no action, suit or
proceeding by or before any court or governmental agency, authority, body or any
arbitrator involving the Company or any of its subsidiaries with respect to
Anti-Money Laundering Laws is pending, or to the knowledge of the Company,
threatened.

 

(ww) Compliance with OFAC.

 

  (A) Neither the Company nor any of its subsidiaries, nor any director, officer
or employee thereof, nor to the Company’s knowledge, any agent, affiliate,
representative, or other person acting on behalf of the Company or any of its
subsidiaries, is an individual or entity (“Person”) that is, or is owned or
controlled by a Person that is: (i) the subject of any sanctions administered or
enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control
(“OFAC”), the United Nations Security Council (“UNSC”), the European Union
(“EU”), Her Majesty’s Treasury (“HMT”), or other relevant sanctions authority
(collectively, “Sanctions”), nor (ii) located, organized, or resident in a
country or territory that is the subject of a U.S. government embargo
(including, without limitation, Cuba, Iran, North Kora, Sudan, Syria and the
Crimea).

 

- 14 -

 

 

  (B) The Company will not, directly or indirectly, use the Net Proceeds, or
lend, contribute or otherwise make available such Net Proceeds to any
subsidiary, joint venture partner or other Person: (i) to fund or facilitate any
activities or business of or with any Person that, at the time of such funding
or facilitation, is the subject of Sanctions, or in any country or territory
that, at the time of such funding or facilitation, is the subject of a U.S.
government embargo; or (ii) in any other manner that will result in a violation
of Sanctions by any Person (including Cowen)

 

  (C) For the past five (5) years, the Company and its subsidiaries have not
knowingly engaged in, are not now knowingly engaged in, and will not engage in,
any direct or indirect dealings or transactions with any Person that at the time
of the dealing or transaction is or was the subject of Sanctions or any country
or territory that, at the time of the dealing or transaction is or was the
subject of a U.S. government embargo.

 

(xx) The Company and its subsidiaries own or possess the valid right to use all
(i) valid and enforceable patents, patent applications, trademarks, trademark
registrations, service marks, service mark registrations, Internet domain name
registrations, copyrights, copyright registrations, licenses, trade secret
rights (“Intellectual Property Rights”) and (ii) inventions, software, works of
authorships, trademarks, service marks, trade names, databases, formulae, know
how, Internet domain names and other intellectual property (including trade
secrets and other unpatented and/or unpatentable proprietary confidential
information, systems, or procedures) (collectively, “Intellectual Property
Assets”) necessary to conduct their respective businesses as currently
conducted, and as proposed to be conducted and described in the Prospectus. The
Company and its subsidiaries have not received any opinion from their legal
counsel concluding that any activities of their respective businesses infringe,
misappropriate, or otherwise violate, valid and enforceable Intellectual
Property Rights of any other person, and have not received written notice of any
challenge, which is to their knowledge still pending, by any other person to the
rights of the Company and its subsidiaries with respect to any Intellectual
Property Rights or Intellectual Property Assets owned or used by the Company or
its subsidiaries. To the Company’s knowledge, the Company and its subsidiaries’
respective businesses as now conducted do not give rise to any infringement of,
any misappropriation of, or other violation of, any valid and enforceable
Intellectual Property Rights of any other person. All licenses for the use of
the Intellectual Property Rights described in the Prospectus are valid, binding
upon, and enforceable by or against the parties thereto in accordance to its
terms. The Company has complied in all material respects with, and is not in
breach nor has received any asserted or threatened claim of breach of any
Intellectual Property license, and the Company has no knowledge of any breach or
anticipated breach by any other person to any Intellectual Property license.
Except as described in the Prospectus, no claim has been made against the
Company alleging the infringement by the Company of any patent, trademark,
service mark, trade name, copyright, trade secret, license in or other
intellectual property right or franchise right of any person. The Company has
taken all reasonable steps to protect, maintain and safeguard its Intellectual
Property Rights, including the execution of appropriate nondisclosure and
confidentiality agreements. The consummation of the transactions contemplated by
this Agreement will not result in the loss or impairment of or payment of any
additional amounts with respect to, nor require the consent of any other person
in respect of, the Company's right to own, use, or hold for use any of the
Intellectual Property Rights as owned, used or held for use in the conduct of
the business as currently conducted.

 

- 15 -

 

 

(yy)  The Company acknowledges and agrees that Cowen has informed the Company
that Cowen may, to the extent permitted under the Securities Act and the
Exchange Act, purchase and sell shares of Common Stock for its own account while
this Agreement is in effect.

 

Any certificate signed by an officer of the Company and delivered to Cowen or to
counsel for Cowen shall be deemed to be a representation and warranty by the
Company to Cowen as to the matters set forth therein.

 

The Company acknowledges that Cowen and, for purposes of the opinions to be
delivered pursuant to Section 7 hereof, counsel to the Company and counsel to
Cowen, will rely upon the accuracy and truthfulness of the foregoing
representations and hereby consents to such reliance.

 

7. Covenants of the Company. The Company covenants and agrees with Cowen that:

 

(a) Registration Statement Amendments. After the date of this Agreement and
during any period in which a Prospectus relating to any Placement Shares is
required to be delivered by Cowen under the Securities Act (including in
circumstances where such requirement may be satisfied pursuant to Rule 172 under
the Securities Act), (i) the Company will notify Cowen promptly of the time when
any subsequent amendment to the Registration Statement, other than documents
incorporated by reference, has been filed with the Commission and/or has become
effective or any subsequent supplement to the Prospectus has been filed and of
any request by the Commission for any amendment or supplement to the
Registration Statement or Prospectus or for additional information (in each
case, insofar as it relates to the transactions contemplated hereby), (ii) the
Company will prepare and file with the Commission, promptly upon Cowen’s
request, any amendments or supplements to the Registration Statement or
Prospectus that, in Cowen’s reasonable opinion, may be necessary or advisable in
connection with the distribution of the Placement Shares by Cowen (provided,
however, that the failure of Cowen to make such request shall not relieve the
Company of any obligation or liability hereunder, or affect Cowen’s right to
rely on the representations and warranties made by the Company in this Agreement
and the Company has no obligation to provide Cowen any advance copy of such
filing or to provide Cowen an opportunity to object to such filing if the filing
does not name Cowen and does not relate in any way to the transactions
contemplated by this Agreement); (iii) the Company will not file any amendment
or supplement to the Registration Statement or Prospectus, other than documents
incorporated by reference, relating to the Placement Shares or a security
convertible into the Placement Shares unless a copy thereof has been submitted
to Cowen within a reasonable period of time before the filing and Cowen has not
reasonably objected thereto (provided, however, that the failure of Cowen to
make such objection shall not relieve the Company of any obligation or liability
hereunder, or affect Cowen’s right to rely on the representations and warranties
made by the Company in this Agreement) and the Company will furnish to Cowen at
the time of filing thereof a copy of any document that upon filing is deemed to
be incorporated by reference into the Registration Statement or Prospectus,
except for those documents available via EDGAR; (iv) the Company will cause each
amendment or supplement to the Prospectus, other than documents incorporated by
reference, to be filed with the Commission as required pursuant to the
applicable paragraph of Rule 424(b) of the Securities Act; and (v) prior to the
termination of this Agreement, the Company will notify Cowen promptly if at any
time the Registration Statement shall no longer be effective as a result of the
passage of time pursuant to Rule 415 under the Securities Act or otherwise.

 

- 16 -

 

 

(b) Notice of Commission Stop Orders. The Company will advise Cowen, promptly
after it receives notice or obtains knowledge thereof, of the issuance or
threatened issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement, of the suspension of the
qualification of the Placement Shares for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceeding for any such purpose; and
it will promptly use its commercially reasonable efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such a stop order should be
issued.

 

(c) Delivery of Prospectus; Subsequent Changes. During any period in which a
Prospectus relating to the Placement Shares is required to be delivered by Cowen
under the Securities Act with respect to a pending sale of the Placement Shares,
(including in circumstances where such requirement may be satisfied pursuant to
Rule 172 under the Securities Act), the Company will comply with all
requirements imposed upon it by the Securities Act, as from time to time in
force, and to file on or before their respective due dates all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other
provision of or under the Exchange Act. If during such period any event occurs
as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or
supplement the Registration Statement or Prospectus to comply with the
Securities Act, the Company will promptly notify Cowen to suspend the offering
of Placement Shares during such period and the Company will promptly amend or
supplement the Registration Statement or Prospectus (at the expense of the
Company) so as to correct such statement or omission or effect such compliance;
provided, however, that the Company may delay any such amendment or supplement
if, as a result of a pending transaction or other development with respect to
the Company in the reasonable judgment of the Company, it is in the best
interest of the Company to do so, provided that no Placement Notice is in effect
during such time.

 

(d) Listing of Placement Shares. During any period in which the Prospectus
relating to the Placement Shares is required to be delivered by Cowen under the
Securities Act with respect to a pending sale of the Placement Shares (including
in circumstances where such requirement may be satisfied pursuant to Rule 172
under the Securities Act), the Company will use its commercially reasonable
efforts to cause the Placement Shares to be listed on Nasdaq and to qualify the
Placement Shares for sale under the securities laws of such jurisdictions as
Cowen reasonably designates and to continue such qualifications in effect so
long as required for the distribution of the Placement Shares; provided,
however, that the Company shall not be required in connection therewith to
qualify as a foreign corporation or dealer in securities or file a general
consent to service of process in any jurisdiction.

 

- 17 -

 

 

(e) Delivery of Registration Statement and Prospectus. The Company will furnish
to Cowen and its counsel (at the expense of the Company) copies of the
Registration Statement, the Prospectus (including all documents incorporated by
reference therein) and all amendments and supplements to the Registration
Statement or Prospectus that are filed with the Commission during any period in
which a Prospectus relating to the Placement Shares is required to be delivered
under the Securities Act (including all documents filed with the Commission
during such period that are deemed to be incorporated by reference therein), in
each case as soon as reasonably practicable and in such quantities as Cowen may
from time to time reasonably request and, at Cowen’s request, will also furnish
copies of the Prospectus to each exchange or market on which sales of the
Placement Shares may be made; provided, however, that the Company shall not be
required to furnish any document (other than the Prospectus) to Cowen to the
extent such document is available on EDGAR.

 

(f) Earnings Statement. The Company will make generally available to its
security holders as soon as practicable, but in any event not later than 15
months after the end of the Company’s current fiscal quarter, an earnings
statement covering a 12-month period that satisfies the provisions of Section
11(a) and Rule 158 of the Securities Act.

 

(g) Expenses. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated, in accordance with
the provisions of Section 11 hereunder, will pay the following expenses all
incident to the performance of its obligations hereunder, including, but not
limited to, expenses relating 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 the Placement Shares, (iii) the qualification of the
Placement Shares under securities laws in accordance with the provisions of
Section 7(d) of this Agreement, including filing fees (provided, however, that
any fees or disbursements of counsel for Cowen in connection therewith shall be
paid by Cowen except as set forth in (vii) below), (iv) the printing and
delivery to Cowen of copies of the Prospectus and any amendments or supplements
thereto, and of this Agreement, (v) the fees and expenses incurred in connection
with the listing or qualification of the Placement Shares for trading on Nasdaq,
(vi) the filing fees and expenses, if any, of the Commission, (vii) the filing
fees and associated legal expenses of Cowen’s outside counsel for filings with
the FINRA Corporate Financing Department, such legal expense reimbursement not
to exceed $10,000 and, (viii) the reasonable fees and disbursements of Cowen’s
counsel in an amount not to exceed $50,000, provided, however, in no event shall
the total compensation paid to Cowen exceed 8.0% of the gross proceeds to the
Company from the sale of Placement Shares.

 

(h) Use of Proceeds. The Company will use the Net Proceeds as described in the
Prospectus in the section entitled “Use of Proceeds.”

 

- 18 -

 

 

(i) Notice of Other Sales. During the pendency of any Placement Notice given
hereunder, and for five (5) trading days following the termination of any
Placement Notice given hereunder, the Company shall provide Cowen notice as
promptly as reasonably possible before it offers to sell, contracts to sell,
sells, grants any option to sell or otherwise disposes of any shares of Common
Stock (other than Placement Shares offered pursuant to the provisions of this
Agreement) or securities convertible into or exchangeable for Common Stock,
warrants or any rights to purchase or acquire Common Stock; provided, that such
notice shall not be required in connection with the (i) issuance, grant or sale
of Common Stock, options or warrants to purchase shares of Common Stock,
restricted shares of Common Stock, restricted stock units or other equity awards
or Common Stock issuable upon the exercise of options or other equity awards
pursuant to the any stock option, stock bonus or other stock plan or arrangement
described in the Prospectus, (ii) the issuance of securities in connection with
an acquisition, merger or sale or purchase of assets or (iii) the issuance or
sale of Common Stock pursuant to any dividend reinvestment plan that the Company
may adopt from time to time provided the implementation of such is disclosed to
Cowen in advance or (iv) any shares of common stock issuable upon the exchange,
conversion or redemption of securities or the exercise of warrants, options or
other rights in effect or outstanding.

 

(j) Change of Circumstances. The Company will, at any time during a fiscal
quarter in which the Company intends to tender a Placement Notice or sell
Placement Shares, advise Cowen promptly after it shall have received notice or
obtained knowledge thereof, of any information or fact that would alter or
affect in any material respect any opinion, certificate, letter or other
document provided to Cowen pursuant to this Agreement.

 

(k) Due Diligence Cooperation. During the term of this Agreement, the Company
will cooperate with any reasonable due diligence review conducted by Cowen or
its agents in connection with the transactions contemplated hereby, including,
without limitation, providing information and making available documents and
senior corporate officers, during regular business hours and at the Company’s
principal offices, as Cowen may reasonably request.

 

(l) Required Filings Relating to Placement of Placement Shares. The Company
agrees that on such dates as the Securities Act shall require with respect to
the Placement Shares, the Company will (i) file a prospectus supplement with the
Commission under the applicable paragraph of Rule 424(b) under the Securities
Act (each and every filing under Rule 424(b), a “Filing Date”), which prospectus
supplement will set forth, within the relevant period, the amount of Placement
Shares sold through Cowen, the Net Proceeds to the Company and the compensation
payable by the Company to Cowen with respect to such Placement Shares, and (ii)
deliver such number of copies of each such prospectus supplement to each
exchange or market on which such sales were effected as may be required by the
rules or regulations of such exchange or market.

 

(m) Representation Dates; Certificate. On or prior to the First Delivery Date
and each time the Company (i) files the Prospectus relating to the Placement
Shares or amends or supplements the Registration Statement or the Prospectus
relating to the Placement Shares (other than a prospectus supplement filed in
accordance with Section 7(l) of this Agreement) by means of a post-effective
amendment, sticker, or supplement but not by means of incorporation of
document(s) by reference to the Registration Statement or the Prospectus
relating to the Placement Shares; (ii) files an annual report on Form 10-K under
the Exchange Act; (iii) files its quarterly reports on Form 10-Q under the
Exchange Act; or (iv) files a report on Form 8-K containing amended financial
information (other than an earnings release) under the Exchange Act (each date
of filing of one or more of the documents referred to in clauses (i) through
(iv) shall be a “Representation Date”); the Company shall furnish Cowen with a
certificate, in the form attached hereto as Exhibit 7(m) within three (3)
Trading Days of any Representation Date if requested by Cowen. The requirement
to provide a certificate under this Section 7(m) shall be waived for any
Representation Date occurring at a time at which no Placement Notice is pending,
which waiver shall continue until the earlier to occur of the date the Company
delivers a Placement Notice hereunder (which for such calendar quarter shall be
considered a Representation Date) and the next occurring Representation Date;
provided, however, that such waiver shall not apply for any Representation Date
on which the Company files its annual report on Form 10-K. Notwithstanding the
foregoing, if the Company subsequently decides to sell Placement Shares
following a Representation Date when the Company relied on such waiver and did
not provide Cowen with a certificate under this Section 7(m), then before the
Company delivers the Placement Notice or Cowen sells any Placement Shares, the
Company shall provide Cowen with a certificate, in the form attached hereto as
Exhibit 7(m), dated the date of the Placement Notice.

 

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(n) Legal Opinion. On or prior to the First Delivery Date and within three (3)
Trading Days of each Representation Date with respect to which the Company is
obligated to deliver a certificate in the form attached hereto as Exhibit 7(m)
for which no waiver is applicable, the Company shall cause to be furnished to
Cowen a written opinion of Fleming PLLC (“Company Counsel”), or other counsel
satisfactory to Cowen, in form and substance satisfactory to Cowen and its
counsel, dated the date that the opinion is required to be delivered, modified,
as necessary, to relate to the Registration Statement and the Prospectus as then
amended or supplemented; provided, however, that in lieu of such opinions for
subsequent Representation Dates, counsel may furnish Cowen with a letter (a
“Reliance Letter”) to the effect that Cowen may rely on a prior opinion
delivered under this Section 7(n) to the same extent as if it were dated the
date of such letter (except that statements in such prior opinion shall be
deemed to relate to the Registration Statement and the Prospectus as amended or
supplemented at such Representation Date).

 

(o) Comfort Letter. On or prior to the First Delivery Date and within three (3)
Trading Days of each Representation Date with respect to which the Company is
obligated to deliver a certificate in the form attached hereto as Exhibit 7(m)
for which no waiver is applicable, the Company shall cause its Auditor to
furnish Cowen letters (the “Comfort Letters”), dated the date the Comfort Letter
is delivered, in form and substance satisfactory to Cowen, (i) confirming that
they are an independent registered public accounting firm within the meaning of
the Securities Act and the PCAOB, (ii) stating, as of such date, the conclusions
and findings of such firm with respect to the financial information and other
matters ordinarily covered by accountants’ “comfort letters” to Cowen in
connection with registered public offerings (the first such letter, the “Initial
Comfort Letter”) and (iii) updating the Initial Comfort Letter with any
information that would have been included in the Initial Comfort Letter had it
been given on such date and modified as necessary to relate to the Registration
Statement and the Prospectus, as amended and supplemented to the date of such
letter.

 

(p) Market Activities. The Company will not, directly or indirectly, (i) 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 to facilitate the sale or resale of the
Placement Shares or (ii) sell, bid for, or purchase the Common Stock to be
issued and sold pursuant to this Agreement, or pay anyone any compensation for
soliciting purchases of the Placement Shares other than Cowen; provided,
however, that the Company may bid for and purchase shares of its common stock in
accordance with Rule 10b-18 under the Exchange Act.

 

- 20 -

 

 

(q) Insurance. The Company and its subsidiaries shall maintain, or cause to be
maintained, insurance in such amounts and covering such risks as is reasonable
and customary for the business for which it is engaged.

 

(r) Compliance with Laws. The Company and each of its subsidiaries shall
maintain, or cause to be maintained, all material environmental permits,
licenses and other authorizations required by federal, state and local law in
order to conduct their businesses as described in the Prospectus, and the
Company and each of its subsidiaries shall conduct their businesses, or cause
their businesses to be conducted, in substantial compliance with such permits,
licenses and authorizations and with applicable environmental laws, except where
the failure to maintain or be in compliance with such permits, licenses and
authorizations could not reasonably be expected to result in a Material Adverse
Change.

 

(s) Investment Company Act. The Company will conduct its affairs in such a
manner so as to reasonably ensure that neither it nor its subsidiaries will be
or become, at any time prior to the termination of this Agreement, an
“investment company,” as such term is defined in the Investment Company Act,
assuming no change in the Commission’s current interpretation as to entities
that are not considered an investment company.

 

(t) Securities Act and Exchange Act. The Company will use its best efforts to
comply with all requirements imposed upon it by the Securities Act and the
Exchange Act as from time to time in force, so far as necessary to permit the
continuance of sales of, or dealings in, the Placement Shares as contemplated by
the provisions hereof and the Prospectus.

 

(u) No Offer to Sell. Other than a free writing prospectus (as defined in Rule
405 under the Securities Act) approved in advance by the Company and Cowen in
its capacity as principal or agent hereunder, neither Cowen nor the Company
(including its agents and representatives, other than Cowen in its capacity as
such) will make, use, prepare, authorize, approve or refer to any written
communication (as defined in Rule 405 under the Securities Act), required to be
filed with the Commission, that constitutes an offer to sell or solicitation of
an offer to buy Common Stock hereunder.

 

(v) Sarbanes-Oxley Act. The Company and its subsidiaries will use their best
efforts to comply with all effective applicable provisions of the Sarbanes-Oxley
Act.

 

8. Conditions to Cowen’s Obligations. The obligations of Cowen hereunder with
respect to a Placement will be subject to the continuing accuracy and
completeness of the representations and warranties made by the Company herein,
to the due performance by the Company of its obligations hereunder, to the
completion by Cowen of a due diligence review satisfactory to Cowen in its
reasonable judgment, and to the continuing satisfaction (or waiver by Cowen in
its sole discretion) of the following additional conditions:

 

(a) Registration Statement Effective. The Registration Statement shall be
effective and shall be available for (i) all sales of Placement Shares issued
pursuant to all prior Placement Notices and (ii) the sale of all Placement
Shares contemplated to be issued by any Placement Notice.

 

- 21 -

 

 

(b) No Material Notices. None of the following events shall have occurred and be
continuing: (i) receipt by the Company or any of its subsidiaries of any request
for additional information from the Commission or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement, the response to which would require any post-effective amendments or
supplements to the Registration Statement or the Prospectus; (ii) the issuance
by the Commission or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Placement Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; or (iv) the occurrence of any event that makes any material statement
made in the Registration Statement or the Prospectus or any material 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 such documents so that, in the case of the
Registration Statement, it will not contain any materially 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 Prospectus, it will not contain any materially 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.

 

(c) No Misstatement or Material Omission. Cowen shall not have advised the
Company that the Registration Statement or Prospectus, or any amendment or
supplement thereto, contains an untrue statement of fact that in Cowen’s
reasonable opinion is material, or omits to state a fact that in Cowen’s opinion
is material and is required to be stated therein or is necessary to make the
statements therein not misleading.

 

(d) Material Changes. Except as contemplated in the Prospectus, or disclosed in
the Company’s reports filed with the Commission, there shall not have been any
material adverse change, on a consolidated basis, in the authorized capital
stock of the Company or any Material Adverse Change or any development that
could reasonably be expected to result in a Material Adverse Change, or any
downgrading in or withdrawal of the rating assigned to any of the Company’s
securities (other than asset backed securities) by any rating organization or a
public announcement by any rating organization that it has under surveillance or
review its rating of any of the Company’s securities (other than asset backed
securities), the effect of which, in the case of any such action by a rating
organization described above, in the reasonable judgment of Cowen (without
relieving the Company of any obligation or liability it may otherwise have), is
so material as to make it impracticable or inadvisable to proceed with the
offering of the Placement Shares on the terms and in the manner contemplated in
the Prospectus.

 

(e) Company Counsel Legal Opinion. Cowen shall have received the opinions of
Company Counsel required to be delivered pursuant to Section 7(n) on or before
the date on which such delivery of such opinion is required pursuant to Section
7(n).

 

- 22 -

 

 

(f) Cowen Counsel Legal Opinion. Cowen shall have received from Proskauer Rose
LLP, counsel for Cowen, such opinion or opinions, on or before the date on which
the delivery of the Company Counsel legal opinion is required pursuant to
Section 7(n), with respect to such matters as Cowen may reasonably require, and
the Company shall have furnished to such counsel such documents as they request
for enabling them to pass upon such matters.

 

(g) Comfort Letter. Cowen shall have received the Comfort Letter required to be
delivered pursuant to Section 7(o) on or before the date on which such delivery
of such Comfort Letter is required pursuant to Section 7(o).

 

(h) Representation Certificate. Cowen shall have received the certificate
required to be delivered pursuant to Section 7(m) on or before the date on which
delivery of such certificate is required pursuant to Section 7(m).

 

(i) Secretary’s Certificate. On or prior to the First Delivery Date, Cowen shall
have received a certificate, signed on behalf of the Company by its corporate
Secretary, in form and substance satisfactory to Cowen and its counsel.

 

(j) No Suspension. Trading in the Common Stock shall not have been suspended on
Nasdaq.

 

(k) Other Materials. On each date on which the Company is required to deliver a
certificate pursuant to Section 7(m), the Company shall have furnished to Cowen
such appropriate further information, certificates and documents as Cowen may
have reasonably requested. All such opinions, certificates, letters and other
documents shall have been in compliance with the provisions hereof. The Company
will furnish Cowen with such conformed copies of such opinions, certificates,
letters and other documents as Cowen shall have reasonably requested.

 

(l) Securities Act Filings Made. All filings with the Commission required by
Rule 424 under the Securities Act with respect to the Placement Shares to have
been filed prior to the issuance of any Placement Notice hereunder shall have
been made within the applicable time period prescribed for such filing by Rule
424.

 

(m) Approval for Listing. The Placement Shares shall either have been (i)
approved for listing on Nasdaq, subject only to notice of issuance, or (ii) the
Company shall have filed an application for listing of the Placement Shares on
Nasdaq at, or prior to, the issuance of any Placement Notice.

 

(n) No Termination Event. There shall not have occurred any event that would
permit Cowen to terminate this Agreement pursuant to Section 11(a).

 

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9. Indemnification and Contribution.

 

(a) Company Indemnification. The Company agrees to indemnify and hold harmless
Cowen, the directors, officers, partners, employees and agents of Cowen and each
person, if any, who (i) controls Cowen within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, or (ii) is controlled by or is
under common control with Cowen (a “Cowen Affiliate”) from and against any and
all losses, claims, liabilities, expenses and damages (including, but not
limited to, any and all reasonable investigative, legal and other expenses
incurred in connection with, and any and all amounts paid in settlement (in
accordance with Section 9(c)) of, any action, suit or proceeding between any of
the indemnified parties and any indemnifying parties or between any indemnified
party and any third party, or otherwise, or any claim asserted), as and when
incurred, to which Cowen, or any such person, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based, directly or
indirectly, on (x) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus or in
any free writing prospectus or in any application or other document executed by
or on behalf of the Company or based on written information furnished by or on
behalf of the Company filed in any jurisdiction in order to qualify the Common
Stock under the securities laws thereof or filed with the Commission, (y) the
omission or alleged omission to state in any such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading or (z) any breach by any of the indemnifying parties of any of their
respective representations, warranties and agreements contained in this
Agreement; provided, however, that this indemnity agreement shall not apply to
the extent that such loss, claim, liability, expense or damage arises from the
sale of the Placement Shares pursuant to this Agreement and is caused directly
or indirectly by an untrue statement or omission made in reliance upon and in
conformity with the Agent’s Information. This indemnity agreement will be in
addition to any liability that the Company might otherwise have.

 

(b) Cowen Indemnification. Cowen agrees to indemnify and hold harmless the
Company and its directors and each officer of the Company that signed the
Registration Statement, and each person, if any, who (i) controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act or (ii) is controlled by or is under common control with the
Company (a “Company Affiliate”) against any and all loss, liability, claim,
damage and expense described in the indemnity contained in Section 9(a), as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendments thereto) or the Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with the Agent’s Information.

 

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(c) Procedure. Any party that proposes to assert the right to be indemnified
under this Section 9 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 9, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve the indemnifying party from (i) any liability that it might have to any
indemnified party otherwise than under this Section 9 and (ii) any liability
that it may have to any indemnified party under the foregoing provision of this
Section 9 unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If any
such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled
to participate in and, to the extent that it elects by delivering written notice
to the indemnified party promptly after receiving notice of the commencement of
the action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own counsel
in any such action, but the fees, expenses and other charges of such counsel
will be at the expense of such indemnified party unless (1) the employment of
counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded (based on
advice of counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based on
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All such
fees, disbursements and other charges will be reimbursed by the indemnifying
party promptly after the indemnifying party receives a written invoice relating
to fees, disbursements and other charges. An indemnifying party will not, in any
event, be liable for any settlement of any action or claim effected without its
written consent. No indemnifying party shall, without the prior written consent
of each indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated by this Section 9 (whether or not any indemnified party
is a party thereto), unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising or
that may arise out of such claim, action or proceeding.

 

- 25 -

 

 

(d) Contribution. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 9 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or Cowen, the Company and
Cowen will contribute to the total losses, claims, liabilities, expenses and
damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company from persons other than Cowen, such as persons who
control the Company within the meaning of the Securities Act, officers of the
Company who signed the Registration Statement and directors of the Company, who
also may be liable for contribution) to which the Company and Cowen may be
subject in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and Cowen on the other. The
relative benefits received by the Company on the one hand and Cowen on the other
hand shall be deemed to be in the same proportion as the total Net Proceeds from
the sale of the Placement Shares (before deducting expenses) received by the
Company bear to the total compensation received by Cowen from the sale of
Placement Shares on behalf of the Company. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate to
reflect not only the relative benefits referred to in the foregoing sentence but
also the relative fault of the Company, on the one hand, and Cowen, on the
other, with respect to the statements or omission that resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as
any other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or Cowen, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Cowen agree that it would not be just and equitable if
contributions pursuant to this Section 9(d) were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense, or
damage, or action in respect thereof, referred to above in this Section 9(d)
shall be deemed to include, for the purpose of this Section 9(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim to the extent consistent
with Section 9(c) hereof. Notwithstanding the foregoing provisions of this
Section 9(d), Cowen shall not be required to contribute any amount in excess of
the commissions received by it under this Agreement and no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 9(d),
any person who controls a party to this Agreement within the meaning of the
Securities Act, and any officers, directors, partners, employees or agents of
Cowen, will have the same rights to contribution as that party, and each officer
of the Company who signed the Registration Statement will have the same rights
to contribution as the Company, subject in each case to the provisions hereof.
Any party entitled to contribution, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim for
contribution may be made under this Section 9(d), will notify any such party or
parties from whom contribution may be sought, but the omission to so notify will
not relieve that party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 9(d) except to the
extent that the failure to so notify such other party materially prejudiced the
substantive rights or defenses of the party from whom contribution is sought.
Except for a settlement entered into pursuant to the last sentence of Section
9(c) hereof, no party will be liable for contribution with respect to any action
or claim settled without its written consent if such consent is required
pursuant to Section 9(c) hereof.

 

10. Representations and Agreements to Survive Delivery. The indemnity and
contribution agreements contained in Section 9 of this Agreement and all
representations and warranties of the Company herein or in certificates
delivered pursuant hereto shall survive, as of their respective dates,
regardless of (i) any investigation made by or on behalf of Cowen, any
controlling persons, or the Company (or any of their respective officers,
directors or controlling persons), (ii) delivery and acceptance of the Placement
Shares and payment therefor or (iii) any termination of this Agreement.

 

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11. Termination.

 

(a) Cowen shall have the right by giving notice as hereinafter specified at any
time to terminate this Agreement if (i) any Material Adverse Change, or any
development that could reasonably be expected to result in a Material Adverse
Change has occurred that, in the reasonable judgment of Cowen, may materially
impair the ability of Cowen to sell the Placement Shares hereunder, (ii) the
Company shall have failed, refused or been unable to perform any agreement on
its part to be performed hereunder; provided, however, in the case of any
failure of the Company to deliver (or cause another person to deliver) any
certification, opinion, or letter required under Sections 7(m), 7(n), or 7(o),
Cowen’s right to terminate shall not arise unless such failure to deliver (or
cause to be delivered) continues for more than thirty (30) days from the date
such delivery was required; or (iii) any other condition of Cowen’s obligations
hereunder is not fulfilled, or (iv), any suspension or limitation of trading in
the Placement Shares or in securities generally on Nasdaq shall have occurred.
Any such termination shall be without liability of any party to any other party
except that the provisions of Section 7(g) (Expenses), Section 9
(Indemnification and Contribution), Section 10 (Representations and Agreements
to Survive Delivery), Section 16 (Applicable Law; Consent to Jurisdiction) and
Section 17 (Waiver of Jury Trial) hereof shall remain in full force and effect
notwithstanding such termination. If Cowen elects to terminate this Agreement as
provided in this Section 11(a), Cowen shall provide the required notice as
specified in Section 12 (Notices).

 

(b) The Company shall have the right, by giving ten (10) days notice as
hereinafter specified to terminate this Agreement in its sole discretion at any
time after the date of this Agreement. Any such termination shall be without
liability of any party to any other party except that the provisions of Section
7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in
full force and effect notwithstanding such termination.

 

(c) Cowen shall have the right, by giving ten (10) days notice as hereinafter
specified to terminate this Agreement in its sole discretion at any time after
the date of this Agreement. Any such termination shall be without liability of
any party to any other party except that the provisions of Section 7(g), Section
9, Section 10, Section 16 and Section 17 hereof shall remain in full force and
effect notwithstanding such termination.

 

(d) Unless earlier terminated pursuant to this Section 11, this Agreement shall
automatically terminate upon the issuance and sale of all of the Placement
Shares through Cowen on the terms and subject to the conditions set forth
herein; provided that the provisions of Section 7(g), Section 9, Section 10,
Section 16 and Section 17 hereof shall remain in full force and effect
notwithstanding such termination.

 

(e) This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 11(a), (b), (c), or (d) above or otherwise by mutual
agreement of the parties; provided, however, that any such termination by mutual
agreement shall in all cases be deemed to provide that Section 7(g), Section 9,
Section 10, Section 16 and Section 17 shall remain in full force and effect.

 

(f) Any termination of this Agreement shall be effective on the date specified
in such notice of termination; provided, however, that such termination shall
not be effective until the close of business on the date of receipt of such
notice by Cowen or the Company, as the case may be. If such termination shall
occur prior to the Settlement Date for any sale of Placement Shares, such
Placement Shares shall settle in accordance with the provisions of this
Agreement.

 

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12. Notices. All notices or other communications required or permitted to be
given by any party to any other party pursuant to the terms of this Agreement
shall be in writing, unless otherwise specified in this Agreement, and if sent
to Cowen, shall be delivered to Cowen at Cowen and Company, LLC, 599 Lexington
Avenue, New York, NY 10022, fax no. 646-562-1124, Attention: General Counsel; or
if sent to the Company, shall be delivered to Workhorse Group Inc., 100 Commerce
Drive, Loveland, OH 45150, Attention: Chief Financial Officer with a copy to
Fleming PLLC, attention: Stephen Fleming, 49 Front Street, Suite 206, Rockville
Center, NY 11570. Each party to this Agreement may change such address for
notices by sending to the parties to this Agreement written notice of a new
address for such purpose. Each such notice or other communication shall be
deemed given (i) when delivered personally or by verifiable facsimile
transmission (with an original to follow) on or before 4:30 p.m., New York City
time, on a Business Day (as defined below), or, if such day is not a Business
Day on the next succeeding Business Day, (ii) on the next Business Day after
timely delivery to a nationally-recognized overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid). For purposes of
this Agreement, “Business Day” shall mean any day on which the Nasdaq and
commercial banks in the City of New York are open for business.

 

13. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the Company and Cowen and their respective successors and the
affiliates, controlling persons, officers and directors referred to in Section 9
hereof. References to any of the parties contained in this Agreement shall be
deemed to include the successors and permitted assigns of such party. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and permitted assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. Neither party may
assign its rights or obligations under this Agreement without the prior written
consent of the other party; provided, however, that Cowen may assign its rights
and obligations hereunder to an affiliate of Cowen without obtaining the
Company’s consent.

 

14. Adjustments for Share Splits. The parties acknowledge and agree that all
share-related numbers contained in this Agreement shall be adjusted to take into
account any share split, share dividend or similar event effected with respect
to the Common Stock.

 

15. Entire Agreement; Amendment; Severability. This Agreement (including all
schedules and exhibits attached hereto and Placement Notices issued pursuant
hereto) constitutes the entire agreement and supersedes all other prior and
contemporaneous agreements and undertakings, both written and oral, among the
parties hereto with regard to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended except pursuant to a written instrument
executed by the Company and Cowen. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable as written by a court of competent
jurisdiction, then such provision shall be given full force and effect to the
fullest possible extent that it is valid, legal and enforceable, and the
remainder of the terms and provisions herein shall be construed as if such
invalid, illegal or unenforceable term or provision was not contained herein,
but only to the extent that giving effect to such provision and the remainder of
the terms and provisions hereof shall be in accordance with the intent of the
parties as reflected in this Agreement.

 

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16. Applicable Law; Consent to Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New York
without regard to the principles of conflicts of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection with any transaction
contemplated hereby, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof (certified or registered mail, return
receipt requested) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.

 

17. Waiver of Jury Trial. The Company and Cowen each hereby irrevocably waives
any right it may have to a trial by jury in respect of any claim based upon or
arising out of this Agreement or any transaction contemplated hereby.

 

18. Absence of Fiduciary Relationship. The Company acknowledges and agrees that:

 

(a) Cowen has been retained solely to act as sales agent in connection with the
sale of the Common Stock and that no fiduciary, advisory or agency relationship
between the Company and Cowen has been created in respect of any of the
transactions contemplated by this Agreement, irrespective of whether Cowen has
advised or is advising the Company on other matters;

 

(b) the Company is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated by this
Agreement;

 

(c) the Company has been advised that Cowen and its affiliates are engaged in a
broad range of transactions which may involve interests that differ from those
of the Company and that Cowen has no obligation to disclose such interests and
transactions to the Company by virtue of any fiduciary, advisory or agency
relationship; and

 

(d) the Company waives, to the fullest extent permitted by law, any claims it
may have against Cowen, for breach of fiduciary duty or alleged breach of
fiduciary duty in connection with the transactions contemplated by this
Agreement and agrees that Cowen shall have no liability (whether direct or
indirect) to the Company in respect of such a fiduciary claim or to any person
asserting a fiduciary duty claim on behalf of or in right of the Company,
including stockholders, partners, employees or creditors of the Company.

 

19. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Delivery of an executed Agreement by one
party to the other may be made by facsimile transmission.

 

20. Definitions. As used in this Agreement, the following term has the meaning
set forth below:

 

(a) “Applicable Time” means the date of this Agreement, each Representation
Date, the date on which a Placement Notice is given, and any date on which
Placement Shares are sold hereunder.

 

(b) “Agent’s Information” means, solely the following information in the
Prospectus: the eighth paragraph under the caption “Plan of Distribution” in the
Prospectus.

 

[Remainder of Page Intentionally Blank]

 

- 29 -

 

 

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

 

    Very truly yours,           COWEN AND COMPANY, LLC             By: /s/ Bill
Follis     Name: Bill Follis     Title: Managing Director             ACCEPTED
as of the date     first-above written:             WORKHORSE GROUP INC.        
    By:   /s/ Julio Rodriguez     Name:   Julio Rodriguez     Title:   Chief
Financial Officer

 

[Signature Page to Sales Agreement]

 

 

 

SCHEDULE 1

 

form of PLACEMENT NOTICE

 

From: [                               ] Cc: [                               ]
To: [ ] Subject: Cowen at the Market Offering—Placement Notice

 

Gentlemen:

 

Pursuant to the terms and subject to the conditions contained in the Sales
Agreement between Workhorse Group Inc. (the “Company”), and Cowen and Company,
LLC (“Cowen”) dated June [●], 2017 (the “Agreement”), I hereby request on behalf
of the Company that Cowen sell up to [ ] shares of the Company’s common stock,
par value $0.001 per share, at a minimum market price of $_______ per share.
Sales should begin on the date of this Notice and shall continue until [DATE]
[all shares are sold].

 

 

 

 

SCHEDULE 2

 

Workhorse Group Inc.

Stephen Burns, Chief Executive Officer

Julio Rodriguez, Chief Financial Officer

 

Cowen and Company, LLC

Rob Sine, Managing Director

Sam Herzig, Analyst

 

 

 

 

SCHEDULE 3

 

Compensation

 

Cowen shall be paid compensation equal to 3.0% of the gross proceeds from the
sales of Common Stock pursuant to the terms of this Agreement.

 

 

 

 

SCHEDULE 4

 

Schedule Of Subsidiaries

 

Workhorse Properties Inc., an Ohio corporation

Workhorse Technologies Inc., an Ohio corporation

Workhorse Motor Works Inc., an Indiana corporation

 

 

 

 

Exhibit 7(m)

 

OFFICER CERTIFICATE

 

The undersigned, the duly qualified and elected _______________________, of
Workhorse Group Inc. (“Company”), a Nevada corporation, does hereby certify in
such capacity and on behalf of the Company, pursuant to Section 7(m) of the
Sales Agreement dated June [●], 2017 (the “Sales Agreement”) between the Company
and Cowen and Company, LLC, that to the best of the knowledge of the
undersigned.

 

(i)       The representations and warranties of the Company in Section 6 of the
Sales Agreement (A) to the extent such representations and warranties are
subject to qualifications and exceptions contained therein relating to
materiality or Material Adverse Change, are true and correct on and as of the
date hereof with the same force and effect as if expressly made on and as of the
date hereof, except for those representations and warranties that speak solely
as of a specific date and which were true and correct as of such date, and (B)
to the extent such representations and warranties are not subject to any
qualifications or exceptions, are true and correct in all material respects as
of the date hereof as if made on and as of the date hereof with the same force
and effect as if expressly made on and as of the date hereof except for those
representations and warranties that speak solely as of a specific date and which
were true and correct as of such date; and

 

(ii)       The Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied pursuant to the Sales
Agreement at or prior to the date hereof.

 

  By:       Name:     Title:

 

Date: