PLACEMENT AGENCY AGREEMENT

 

January 11, 2019

 

MagneGas Applied Technology Solutions, Inc.

11885 44th Street N.

Clearwater, Florida 33762

 

Ladies and Gentlemen:

 

This letter (the “Agreement”) constitutes the agreement among Maxim Group LLC
(“Maxim” or the “Placement Agent”) and MagneGas Applied Technology Solutions,
Inc. (the “Company”), that the Placement Agent shall serve as the exclusive lead
placement agent for the Company, on a “reasonable best efforts” basis, in
connection with the proposed placement (the “Placement”) of shares (the
“Shares”) of the Company’s common stock, par value $0.001 per share (the “Common
Stock”) and warrants to purchase shares of Common Stock (the “Warrants”). The
Shares, the Warrants and the shares of Common Stock underlying the Warrants (the
“Warrant Shares”) are hereinafter referred to collectively as the “Securities”).
The Shares are being offered pursuant to the registration statement on Form S-3
(File No. 333-207928)(the “Registration Statement”, and the prospectus contained
therein, the “Prospectus”) initially filed by the Company with the Securities
and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “Securities Act”), on November 11, 2015 and declared effective on June 15,
2016 (the “Effective Date”), and the prospectus supplement filed pursuant to
Rule 424(b)(5) promulgated under the Securities Act and dated January 11, 2019
(the “Prospectus Supplement”), and the Warrants are being offered in a
simultaneous private placement pursuant to Section 4(a)(2) under the Securities
Act (the offering of the Shares and the Warrants is collectively referred to
herein as the “Offering”). The terms of the Placement and the Securities shall
be mutually agreed upon by the Company and the purchasers (each, a “Purchaser”
and collectively, the “Purchasers”) and nothing herein shall be construed to
provide either that the Placement Agent has the power or authority to bind the
Company or any Purchaser or an obligation for the Company to issue any
Securities or complete the Placement. The Placement Agent will give the Company
advanced notice of any prospective Purchaser(s) it identifies for participation
in the Placement and the Company shall have the exclusive right to accept or
deny such prospective Purchaser(s) for participation in the Placement. This
Agreement and the documents executed and delivered by the Company and the
Purchasers in connection with the Placement shall be collectively referred to
herein as the “Transaction Documents.” The date of the closing of the Placement
(the “Closing”) shall be referred to herein as the “Closing Date.” The Company
expressly acknowledges and agrees that the Placement Agent’s obligations
hereunder are on a reasonable best efforts basis only and that the execution of
this Agreement does not constitute a commitment by the Placement Agent to
purchase the Securities and does not ensure the successful placement of the
Securities or any portion thereof or the success of the Placement Agent with
respect to securing any other financing on behalf of the Company. The Placement
Agent may retain other brokers or dealers to act as sub-agents or
selected-dealers on their behalf in connection with the Placement. The sale of
the Securities to any Purchaser will be evidenced by a purchase agreement (the
“Securities Purchase Agreement”) between the Company and such Purchasers in a
form reasonably acceptable to the Company and the Placement Agent. Capitalized
terms that are not otherwise defined herein have the meanings given to such
terms in the Securities Purchase Agreement. Prior to the signing of any
Securities Purchase Agreement, officers of the Company will be reasonably
available to answer inquiries from prospective Purchasers.

 

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Notwithstanding anything herein to the contrary, in the event the Placement
Agent determines that any of the terms provided for hereunder shall not comply
with a Financial Industry Regulatory Authority (“FINRA”) rule, including but not
limited to FINRA Rule 5110, then the Company shall agree to amend this Agreement
in writing upon the request of the Placement Agent to comply with any such
rules; provided that any such amendments shall not provide for terms that are
less favorable to the Company.

 

Section 1 COMPENSATION. As compensation for the services provided by the
Placement Agent hereunder, the Company agrees as follows:

 

(A) To pay to the Placement Agent a cash fee equal to 6.0% of the aggregate
gross proceeds raised in the Placement, which shall be paid at the Closing of
the Placement from the gross proceeds of the Securities sold and shall be paid
directly to the Placement Agent.

 

(B) Subject to compliance with FINRA Rule 5110(f)(2)(D), the Company also agrees
to reimburse the Placement Agent for all out-of-pocket expenses, including
without limitation the reasonable fees, costs and disbursements of legal counsel
and all reasonable travel and other out-of-pocket expenses in an amount not to
exceed $50,000.

 

Section 2 REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to
the Placement Agent as of the date of this letter and as of the Closing, as
follows:

 

(A) The Company meets the requirements for use of Form S-3 for registration
under the Securities Act, including the transaction requirements set forth in
General Instruction I.B.6 of that form. The Registration Statement (including
any Rule 462(b) Registration Statement) has been declared effective by the SEC
and no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has been instituted or is pending
or, to the knowledge of the Company, is threatened or contemplated by the SEC or
any other governmental entity. No order preventing or suspending the use of any
prospectus has been issued and no proceeding for that purpose has been
instituted or is pending or, to the knowledge of the Company, is threatened or
contemplated by the SEC or any other governmental entity. The Company has
complied with any request on the part of the SEC or other governmental entity
for additional information.

 

(B) At the Effective Date, at the date hereof, and at Closing, each of the
Registration Statement and any amendment or supplement thereto complied,
complies and will comply in all material respects with the requirements of the
Securities Act and the published rules and regulations thereunder (the “Rules”),
and did not, does not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. Neither the Prospectus nor any
amendment or supplement thereto, at the respective dates of the Prospectus or
such amendment or supplement, at the respective times that the Prospectus and
any such amendment or supplement were issued, and at Closing, included, includes
or will include an untrue statement of a material fact or omitted, omits or will
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.

 

(C) Each Prospectus filed as part of the Registration Statement as originally
filed or as part of any amendment thereto, or filed pursuant to Rule 424 under
the Securities Act, complied when so filed in all material respects with the
Securities Act and the Rules, and the Prospectus delivered to the Placement
Agent for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the SEC pursuant to EDGAR,
except to the extent permitted by Regulation S-T.

 

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(D) At Closing, the Prospectus and the Prospectus Supplement (the “General
Disclosure Package”), did not include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 

(E) (i) At the Effective Date, (ii) at the earliest time after the Effective
Date that the Company or another offering participant made a bona fide offer
(within the meaning of Rule 164(h)(2) of the Rules) of the Securities and (iii)
at the execution of this Agreement (with such time of execution being used as
the determination date for the purpose of this clause (iii)), the Company was
not and is not an “ineligible issuer,” as defined in Rule 405 of the Securities
Act (“Rule 405”), without taking account of any determination by the SEC
pursuant to Rule 405 that it is not necessary that the Company be considered an
ineligible issuer.

 

(F) The representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the General
Disclosure Package or any amendment or supplement thereto made in reliance upon
and in conformity with information furnished to the Company in writing by the
Placement Agent specifically for use therein; provided that the Company
acknowledges that the only information furnished in writing by the Placement
Agent for use therein consists solely of the disclosure contained in the “Plan
of Distribution” section of the Prospectus (the “Placement Agent Information”).

 

(G) The documents incorporated or deemed to be incorporated by reference in the
Registration Statement or the General Disclosure Package, at the time they were
or hereafter are filed with the SEC, complied and will comply in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, as applicable, and when read together with the other
information in the Registration Statement or the General Disclosure Package, as
the case may be, (i) at the Effective Date, (ii) at the earlier of the time the
Prospectus was first used and the date and time of the first contract of sale of
the Securities, and (iii) at Closing, did not and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

 

(H) The consolidated financial statements of the Company and its subsidiaries
(including all notes and schedules thereto) included or incorporated by
reference in the Registration Statement or the General Disclosure Package
present fairly the financial position of such entities at the dates indicated
and the statement of operations, stockholders’ equity and cash flows of, or such
other permitted financial statements for, such entities for the periods
specified, and related schedules and notes thereto, and the unaudited financial
information filed with the SEC as part of the Registration Statement, have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved, except in the case of
unaudited financials which are subject to normal year-end adjustments and do not
contain certain footnotes. Any pro forma financial statements and the related
notes thereto included in the Registration Statement and the General Disclosure
Package present fairly the information shown therein, have been prepared in all
material respects in accordance with the SEC’s rules and guidelines with respect
to pro forma financial statements and have been properly compiled on the bases
described therein, and subject to such rules and guidelines, the Company
believes the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein. Except as included therein, no historical or
pro forma financial statements or supporting schedules are required to be
included or incorporated by reference in the Registration Statement or the
General Disclosure Package under the Securities Act or the Rules promulgated
thereunder.

 

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(I) Marcum LLP (the “Auditor”), is and was during the period of its review of
any of the Company’s consolidated financial statements, an independent public
accounting firm as required by the Securities Act, the Rules and the rules and
regulations of the Public Company Accounting Oversight Board.

 

(J) The interactive data in eXtensible Business Reporting Language included or
incorporated by reference in the Registration Statement fairly presents the
information called for in all material respects and has been prepared in
accordance with the SEC’s rules and guidelines applicable thereto.

 

(K) The Company has been duly organized and is validly existing as a corporation
in good standing under the laws of the State of Delaware and has corporate power
and authority to own, lease, and operate its properties and to conduct its
business as described in the Registration Statement and the General Disclosure
Package and to enter into and perform its obligations under this Agreement and
the various other agreements required hereunder and thereunder to which it is a
party; and the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to so qualify individually or in the aggregate would not have a material
adverse effect on the assets, properties, condition, financial or otherwise, or
in the results of operations, business affairs or business prospects (as
described in the Registration Statement and the General Disclosure Package) of
the Company and its subsidiaries considered as a whole (a “Material Adverse
Effect”).

 

(L) Each subsidiary of the Company has been duly organized and is validly
existing in good standing under the laws of the jurisdiction of its
incorporation or organization, has corporate or similar power and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement and the General Disclosure Package and is duly
qualified to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to so
qualify would not have a Material Adverse Effect. Except as otherwise disclosed
in the Registration Statement or the General Disclosure Package, all the issued
and outstanding capital stock or equity interests of each subsidiary has been
duly authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of any
material security interest, mortgage, pledge, lien, encumbrance, claim or
equity. None of the outstanding shares of capital stock or equity interests of
any subsidiary was issued in violation of any preemptive or similar rights of
any securityholder of such subsidiary.

 

(M) The authorized, issued and outstanding shares of capital stock of the
Company are as set forth in the Registration Statement or the General Disclosure
Package. The outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable. To the best
knowledge of the Company, since January 1, 2017, all issuances of capital stock
by the Company have complied in all material respects with the Rules and
applicable state securities laws, except as set forth in the Registration
Statement or General Disclosure Package. None of the outstanding shares of
capital stock of the Company was issued in violation of any preemptive or other
similar rights of any securityholder of the Company. The Warrant Shares, when
issued and paid for in accordance with the terms of the Warrants, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer of the Warrants
provided for in the Transaction Documents or imposed by applicable securities
laws. The Company has reserved on its records from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to the
Securities Purchase Agreement. Except as disclosed in the Registration Statement
or the General Disclosure Package (or any document incorporated by reference
therein), (i) no shares of capital stock of the Company are reserved for any
purpose, (ii) no outstanding securities are convertible into or exchangeable for
any shares of capital stock of the Company, and (iii) there are no outstanding
options, rights (preemptive or otherwise) or warrants to purchase or subscribe
for shares of capital stock or any other securities of the Company.

 

 4 

 

 

(N) All necessary corporate action has been duly and validly taken by the
Company to authorize the execution, delivery and performance of the Transaction
Documents and the issuance and sale of the Shares, the Warrants and the Warrant
Shares. This Agreement has been duly authorized, executed and delivered by the
Company.

 

(O) The Securities have been duly authorized for issuance and sale pursuant to
the Securities Purchase Agreement, and when the Securities have been issued and
delivered by the Company pursuant to the Securities Purchase Agreement against
payment of the consideration set forth therein, such Securities will be validly
issued and fully paid and non-assessable; and the issuance of the Securities is
not subject to any preemptive or other similar rights of any securityholder of
the Company. The Securities conform in all material respects to all statements
relating thereto contained in the Registration Statement or the General
Disclosure Package and such description conforms in all material respects to the
rights set forth in the instruments defining the same; and no holder of the
Common Stock received at Closing, if any, will be subject to personal liability
by reason of being such a holder. The certificates, if any, to be used to
evidence the Common Stock will, at Closing, if any, be in due and proper form
and will comply in all material respects with all applicable legal requirements,
the requirements of the charter and by-laws of the Company and the requirements
of the Nasdaq Capital Market (“Nasdaq”) or FINRA and such consents, approvals,
authorizations registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase of the Securities.

 

(P) 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 (collectively, the “Permits”), to own, lease and license its assets and
properties and conduct its business as presently conducted, 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 Effect. The
Company and each of its subsidiaries are fulfilling, have fulfilled and/or are
performing or have performed in all material respects all their respective
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 such entity
thereunder. Except as may be required under the Securities Act, state and
foreign Blue-Sky laws and the rules of FINRA and Nasdaq, no other Permits are
required to enter into, deliver and perform the obligations of the Company under
this Agreement, including the obligation of the Company to issue and sell the
Securities in accordance with the terms hereof.

 

(Q) The Company and each of its subsidiaries owns or possesses, and will
continue to own or possess immediately following the Closing in all material
respects, legally enforceable rights to use all trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, software, know-how and other similar rights and proprietary knowledge
(collectively, “Intellectual Property”) necessary for the conduct of their
respective businesses. There are no third-party joint owners of any Intellectual
Property owned by the Company. To the Company’s knowledge, (i) none of the
conduct, the sale or the use of any product or service offered by the Company or
any of its subsidiaries infringes, misappropriates or violates any Intellectual
Property of a third party and (ii) no person or entity (including any current or
former employee or consultant of the Company) is infringing, violating or
misappropriating any of the Intellectual Property owned or licensed by the
Company.

 

 5 

 

 

(R) The Company and each of its subsidiaries have complied with their duty of
candor and disclosure to the United States Patent and Trademark Office and any
relevant foreign patent office with respect to all Intellectual Property
registrations filed by or on behalf of the Company or any of its subsidiaries
and have made no material misrepresentation in such applications. All
assignments of Intellectual Property owned by the Company and its subsidiaries
have been properly executed and recorded, except for such deficiencies as would
not materially affect the enforceability thereof. To the Company’s knowledge,
all Intellectual Property owned and licensed by the Company is valid and
enforceable. All issuance, renewal, maintenance and other payments that are or
have become due with respect to Intellectual Property owned by the Company have
been timely paid by or on behalf of the Company.

 

(S) Subsequent to the respective dates as of which information is given in the
Registration Statement or the General Disclosure Package: (i) no event has
occurred which would reasonably be expected to result in a Material Adverse
Effect; (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 would reasonably be expected
to result in a Material Adverse Effect. Except as disclosed in the Registration
Statement and the General Disclosure Package, since the date of the latest
balance sheet included in the Registration Statement and the General Disclosure
Package, neither the Company nor any of 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.

 

(T) There is no document, contract or other agreement required to be described
in the Registration Statement or the General Disclosure Package 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 General
Disclosure Package accurately reflects in all material respects the terms of the
underlying contract, document or other agreement. Each contract, document or
other agreement described in the Registration Statement or the General
Disclosure Package or filed as exhibits to the Registration Statement is, or
upon consummation of the Offering will be, in full force and effect and is valid
and enforceable in all material respects by and against the Company or any of
its subsidiaries, as the case may be, in accordance with its terms, except (i)
such contracts or other agreements that have terminated or expired in accordance
with their terms as disclosed in the Registration Statement or the General
Disclosure Package, and (ii) as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws relating to or affecting creditors’ rights and remedies generally,
and subject, as to enforceability, to general principles of equity and, with
respect to equitable relief, the discretion of the court before which any
proceeding therefor may be brought (regardless of whether enforcement is sought
in a proceeding at law or in equity), and with respect to indemnification
thereunder, except as rights may be limited by applicable law or policies
underlying such law. To the knowledge of the Company, neither the Company nor
any of its subsidiaries 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. No default exists, and no event has occurred which with notice or lapse
of time or both would constitute a default, in the due performance and
observance of any term, covenant or condition, by the Company or any of its
subsidiaries, if a subsidiary is a party thereto, of any other agreement or
instrument to which it is a party or by which it or its properties or business
may be bound or affected which default or event, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

 

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(U) The statistical and market related data included in the Registration
Statement or the General Disclosure Package are based on or derived from sources
that the Company believes to be reliable and accurate. The Company had a
reasonable basis for, and made in good faith, each “forward-looking statement”
(within the meaning of Section 27A of the Act or Section 21E of the Exchange
Act) contained or incorporated by reference in the Registration Statement or the
General Disclosure Package.

 

(V) Neither the Company nor any of its subsidiaries (i) is in violation of its
certificate or articles of incorporation, by-laws, certificate of limited
partnership, agreement of limited partnership, certificate of formation,
operating agreement or other organizational documents, (ii) 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 clause (ii) above) for violations or
defaults that could not (individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect.

 

(W) Neither the execution, delivery and performance of this Agreement by the
Company nor the consummation of any of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the Company of the
Securities) will 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 any of its
subsidiaries pursuant to the terms of: (i) any indenture, mortgage, deed of
trust or other agreement or instrument to which either of the Company or any of
its subsidiaries is a party or by which the Company or any of 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
either of the Company or any of its subsidiaries, or (ii) violate any provision
of certificate or articles of incorporation, by-laws, certificate of limited
partnership, agreement of limited partnership, certificate of formation,
operating agreement or other organizational documents of either of the Company
or any of its subsidiaries, except (a) in the case of clause (i) above, for
violations or defaults that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and (b) for such
consents or waivers which have already been obtained and are in full force and
effect.

 

(X) Except as otherwise set forth in the Registration Statement or the General
Disclosure Package, no holder of any security of the Company has any right,
which has not been waived or satisfied prior to the date hereof, to have any
security owned by such holder included in the Registration Statement or to
demand registration of any security owned by such holder.

 

(Y) Except as disclosed in the Registration Statement, the General Disclosure
Package (including documents incorporated by reference therein), there are no
legal or governmental proceedings pending to which either of 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; and, to the knowledge of the Company, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.

 

(Z) Neither the Company nor any of its subsidiaries is involved in any labor
dispute or, to the knowledge of the Company, is any such dispute threatened,
which dispute would reasonably be expected to result in a Material Adverse
Effect. The Company is not aware of any existing or imminent labor disturbance
by the employees of any of its or its subsidiaries, principal suppliers or
contractors which would reasonably be expected to result in a Material Adverse
Effect. The Company is not aware of any threatened or pending litigation between
either of the Company or any of its subsidiaries and any of its executive
officers and has no reason to believe that such officers will not remain in the
employment of the Company or its subsidiaries, as the case may be.

 

 7 

 

 

(AA) No transaction has occurred between or among either of the Company, its
subsidiaries and any of their officers or directors, or five percent
stockholders or any affiliate or affiliates of any such officer or director or
five percent stockholders that is required to be described in and is not
described in the Registration Statement or the General Disclosure Package.

 

(BB) Neither the Company nor any of its subsidiaries has 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 other security of the Company to facilitate the
sale or resale of any of Securities.

 

(CC) The Company and its subsidiaries have 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 the Company to the extent that the same are material and
have become due. There are no material tax audits or investigations pending; nor
are there any material proposed additional tax assessments against either the
Company or its subsidiaries.

 

(DD) A Listing of Additional Shares Notification Form (the “Additional Shares
Notification Form”) for the Common Stock was submitted to Nasdaq prior to the
date of this Agreement and, as of the date of this Agreement, the Company has
received confirmation in writing from Nasdaq that the review of the Additional
Shares Notification Form has been completed. At Closing no stockholder or other
approval is required pursuant to Nasdaq Listing Rule 5635(d).

 

(EE) The Company has not taken any action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or the listing of the Common Stock on Nasdaq, nor has the Company received
any notification that the SEC or Nasdaq is contemplating terminating such
registration or listing, other than as disclosed in the Registration Statement
or the General Disclosure Package (or any document incorporated by reference
therein).

 

(FF) The books, records and accounts of the Company and its subsidiaries
accurately and fairly reflect, in all material respects, the transactions in,
and dispositions of, the assets of, and the results of operations of, the
Company and its subsidiaries. Except as disclosed in the Registration Statement
or the General Disclosure Package (or any document incorporated by reference
therein), the Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management’s general or specific
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) Except as disclosed in the Registration Statement or the General Disclosure
Package (or any document incorporated by reference therein), 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, except as disclosed in the Registration
Statement or the General Disclosure Package (or any document incorporated by
reference therein); or (ii) any fraud, whether or not material, that involves
management or other employees who have a role in the Company’s internal
controls.

 

 8 

 

 

(HH) Except as described in the Registration Statement or the General Disclosure
Package (or any document incorporated by reference therein) 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).

 

(II) Except as described in the Registration Statement or the General Disclosure
Package (or any document incorporated by reference therein), 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.

 

(JJ) The Company’s Board of Directors has validly established an audit committee
whose composition satisfies the requirements of Nasdaq Listing Rule 5605(c)(2)
and the Board of Directors and/or the audit committee of the Board of Directors
has adopted a charter that satisfies the requirements of Nasdaq Listing Rule
Listing Rule 5605(c)(1).

 

(KK) The Company’s Board of Directors has validly established a compensation
committee whose composition satisfies, and upon completion of the Offering will
satisfy, the requirements of Nasdaq Listing Rule 5605(d)(2) and the Board of
Directors and/or the compensation committee of the Board of Directors has
adopted a charter that satisfies the requirements of Nasdaq Listing Rule
5605(d)(1).

 

(LL) The Company has taken all necessary actions to ensure that it is in
compliance in all material respects with all provisions of the Sarbanes-Oxley
Act of 2002 and all rules and regulations promulgated thereunder or implementing
the provisions thereof that are then in effect and with which the Company is
required to comply. The Company has not, directly or indirectly, including
through any subsidiary, extended credit, arranged to extend credit, or renewed
any extension of credit, in the form of a personal loan, to or for any executive
officer of the Company or any of its subsidiaries, or to or for any family
member or affiliate of any director or executive officer of the Company or any
of its subsidiaries.

 

(MM) The Company and its subsidiaries carry or are entitled to the benefits of
insurance, with financially sound and reputable insurers, in such amounts and
covering such risks as is generally maintained by companies of established
repute engaged in the same or similar business, and all such insurance is in
full force and effect. The Company does not have any reason to believe that it
or any of its subsidiaries will not be able (A) to renew, if desired, its
existing insurance coverage as and when such policies expire or (B) to obtain
comparable coverage from similar institutions as may be necessary or appropriate
to conduct its business as now conducted and not at a cost that is materially
more significant. Neither the Company nor any of its subsidiaries has been
denied any insurance coverage that it has sought or for which it has applied.

 

(NN) There are no claims, payments, issuances, arrangements or understandings
for services in the nature of a finder’s, consulting or origination fee with
respect to the introduction of the Company to the Placement Agent or the sale of
the Securities hereunder or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company that may affect the Placement
Agent’s compensation, as determined by FINRA.

 

(OO) Except as disclosed in the Registration Statement or the General Disclosure
Package (or any document incorporated by reference therein), the Company has not
made any direct or indirect payments (in cash, securities or otherwise) to: (i)
any person, as a finder’s fee, investing fee or otherwise, in consideration of
such person raising capital for the Company or introducing to the Company
persons who provided capital to the Company, (ii) any FINRA member, or (iii) any
person or entity that, to the Company’s knowledge, has any direct or indirect
affiliation or association with any FINRA member within the 12-month period
prior to the date on which the Registration Statement was filed with the SEC
(“Filing Date”) or thereafter.

 

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(PP) None of the net proceeds of the Offering will be paid by the Company to any
participating FINRA member or any affiliate or associate of any participating
FINRA member, except as specifically authorized herein.

 

(QQ) To the knowledge of the Company, no: (i) officer or director of the Company
or its subsidiaries, (ii) owner of 5% or more of the Company’s unregistered
securities or (iii) owner of any amount of the Company’s unregistered securities
acquired within the 180-day period prior to the Filing Date, has any direct or
indirect affiliation or association with any FINRA member. The Company will
advise the Placement Agent and its counsel if it becomes aware that any officer,
director or stockholder of the Company or its subsidiaries is or becomes an
affiliate or associated person of a FINRA member participating in the Offering.

 

(RR) Except as disclosed in the Registration Statement or the General Disclosure
Package (or any document incorporated by reference therein): (i) 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
Laws”) which are applicable to its business; (ii) neither the Company nor any of
its subsidiaries has received any notice from any governmental authority or
third party of an asserted claim under Environmental Laws; (iii) 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 in all material respects with all terms and conditions of any
such permit, license or approval; (iv) to the knowledge of the Company, no facts
currently exist that will require either Company or 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 either of 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 its subsidiaries has been named as a “potentially responsible
party” under CERCLA.

 

(SS) The Company is not and, after giving effect to the Offering, the sale of
Securities and the application of proceeds thereof as described in the General
Disclosure Package, will not be an “investment company” within the meaning of
the Investment Company Act of 1940, as amended.

 

(TT) Neither the Company nor any other person associated with it or acting on
its behalf including, without limitation, any director, officer, agent or
employee of the Company or its subsidiaries, has, directly or indirectly, while
acting on behalf of the Company or its subsidiaries: (i) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; (iii) violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made
any other unlawful payment.

 

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

 

 10 

 

 

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

 

(WW) Neither the Company nor any of its directors or officers or, to the best
knowledge of the Company, any agent, employee, affiliate or other person acting
on behalf of the Company has engaged in any activities sanctionable under the
Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, the
Iran Sanctions Act of 1996, the National Defense Authorization Act for Fiscal
Year 2012, the Iran Threat Reduction and Syria Human Rights Act of 2012 or any
Executive Order relating to any of the foregoing (collectively, and as each may
be amended from time to time, the “Iran Sanctions”); and the Company will not
directly or indirectly use the proceeds of the Offering, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint venture partner
or other person or entity, for the purpose of engaging in any activities
sanctionable under the Iran Sanctions.

 

(XX) Except as described in the Registration Statement or the General Disclosure
Package or as provided by the Company to the Placement Agent, 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. Neither the Company nor any of its affiliates (as such term is defined
under Rule 144 of the Securities Act) has, prior to the date hereof, made any
offer or sales of any securities which are required to be “integrated” pursuant
to the Securities Act or the Rules with the offer and sale of the Securities
pursuant to the Registration Statement.

 

(YY) The Company 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 ERISA) has occurred with
respect to any “Pension Plan” (as defined in ERISA) for which the Company could
have any liability. The execution of this Agreement or consummation of the
Offering does not constitute a triggering event under any plan or any other
employment contract, whether or not legally enforceable, which (either alone or
upon the occurrence of any additional or subsequent event) will or may result in
any payment (of severance pay or otherwise), acceleration, increase in vesting,
or increase in benefits to any current or former participant, employee or
director of the Company or any of its subsidiaries.

 

(ZZ) The statements in the Registration Statement and the General Disclosure
Package under the headings “Risk Factors,” “Description of Securities We are
Offering,” and “Our Company” insofar as such statements summarize legal matters,
agreements, documents or proceedings discussed therein, are accurate and fair
summaries of such legal matters, agreements, documents or proceedings in all
material respects.

 

 11 

 

 

(AAA) The Company and its subsidiaries own or lease all such properties as are
necessary to the conduct of its business as presently operated and as proposed
to be operated as described in the Registration Statement or the General
Disclosure Package (and any document incorporated by reference therein). The
Company and its subsidiaries have good and marketable title to all personal
property owned by them, free and clear of all liens except such as are described
in the Registration Statement or the General Disclosure Package or any document
incorporated by reference therein or such as do not (individually or in the
aggregate) materially affect the business or prospects of the Company or its
subsidiaries. Any real property and buildings held under lease or sublease by
the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material to, and do not
interfere with, the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries. Neither the Company nor any of
its subsidiaries has received any notice of any claim adverse to its ownership
of any real or personal property or of any claim against the continued
possession of any real property, whether owned or held under lease or sublease
by the Company or its subsidiaries.

 

(BBB) Except as disclosed in the Registration Statement or the General
Disclosure Package (or any document incorporated by reference therein), there is
no judicial, regulatory, arbitral or other legal or governmental proceeding or
other litigation or arbitration, domestic or foreign, pending to which the
Company or any of its subsidiaries is a party (“Litigation”) or of which any
property, operations or assets of the Company or any of its subsidiaries is the
subject that would be required to be described pursuant to Rule 103 under
Regulation S-K. To the Company’s knowledge, no such Litigation is threatened or
contemplated. The Company has established reasonable reserves for all Litigation
to the extent required by GAAP as set forth in the Company’s consolidated
balance sheet. The Company considers any such reserves to be adequate to cover
all reasonably anticipated liabilities with respect to any outstanding
Litigation.

 

(CCC) To the Company’s knowledge, the disclosure concerning the Company’s named
executive officers included under Part III of the Company’s annual report on
Form 10-K for the fiscal year ended December 31, 2017, filed on April 16, 2018
and definitive proxy statement on Schedule 14A, filed on November 7, 2018, is
complete and accurate in all material respects.

 

(DDD) Since January 1, 2018, the Company has not effected a business
combination, as described in Rule 8-04 of Regulation S-X, as to which any of the
conditions specified in paragraph (b) of Rule 8-04 exceeds 20%.

 

Section 3 REPRESENTATIONS OF THE PLACEMENT AGENT. The Placement Agent represents
and warrants and/or agrees (as the case may be) as of the date of this letter
and as of the Closing, that it:

 

(A) is a member in good standing of FINRA;

 

(B) is registered as a broker/dealer under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”);

 

(C) is licensed as a broker/dealer under the laws of the States applicable to
the offers and sales of Securities by such Placement Agent;

 

(D) is and will be a limited liability company duly formed and validly existing
under the laws of the State of Delaware;

 

(E) has full power and authority to enter into and perform its obligations under
this Agreement;

 

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(F) has a substantive, preexisting relationship with each Purchaser introduced
by such Placement Agent;

 

(G) has not had and will not have any discussions with any person that is not a
party to this Agreement on the basis of which such person would be able to
assert a claim for a finder’s fee or similar fee in connection with Placement of
the Securities; and

 

(H) agrees to comply in all material respects with applicable provisions of the
Securities Act and any regulations thereunder and any applicable laws, rules,
regulations and requirements (including, without limitation, all U.S. state
laws).

 

Section 4 INDEMNIFICATION. The Placement Agent and the Company agree to the
indemnification and other agreements set forth in the Indemnification Provisions
(the “Indemnification Provisions”) attached hereto as Addendum A, the provisions
of which are incorporated herein by reference and shall survive the termination
or expiration of this Agreement as set forth therein.

 

Section 5 ENGAGEMENT TERM. The Placement Agent’s engagement hereunder will
expire on the earlier of (i) the final Closing Date of the Placement or (ii)
January 18, 2019 (such date, the “Termination Date”). In the event, however, in
the course of the Placement Agent’s performance of due diligence they deem it
necessary to terminate the engagement, the Placement Agent may do so prior to
the Termination Date and upon immediate written notice. If, within six months
after December 31, 2018, the Company completes any financing of equity,
equity-linked or debt or other capital raising activity of the Company (other
than the exercise by any person or entity of any options, warrants or other
convertible securities in effect prior to the date of this Agreement) with any
of the purchasers who were first introduced to the Company in connection with
the Placement by the Placement Agent, then the Company will pay to the Placement
Agent upon the closing or receipt of gross proceeds from such financing the
compensation set forth in Section 1 herein. Notwithstanding anything to the
contrary contained herein, the provisions concerning confidentiality,
indemnification, contribution and the Company’s obligations to pay fees and
reimburse expenses contained herein and the Company’s representations and
warranties and obligations contained in the Indemnification Provisions will
survive any expiration or termination of this Agreement, irrespective of whether
a closing occurs. All such fees and reimbursements due shall be paid to the
Placement Agent from gross proceeds received by the Company from the Placement
either (a) on or before the Termination Date (in the event such fees and
reimbursements are earned or owed as of the Termination Date) or (b) upon the
closing of the Placement or any applicable portion thereof (in the event such
fees are due pursuant to the terms of Section 1 hereof). The Placement Agent
agrees not to use any confidential information concerning the Company provided
to them by the Company for any purposes other than those contemplated under this
Agreement.

 

Section 6 PLACEMENT AGENT’S INFORMATION. The Company agrees that any information
or advice rendered by the Placement Agent in connection with this engagement is
for the confidential use of the Company only in its evaluation of the Placement
and, except as otherwise required by law, the Company will not disclose or
otherwise refer to the advice or information (other than references to the
historical fact of the Placement) in any manner without the Placement Agent’s
prior written consent.

 

Section 7 NO FIDUCIARY RELATIONSHIP. This Agreement does not create, and shall
not be construed as creating rights enforceable by any person or entity not a
party hereto, except those entitled hereto by virtue of the Indemnification
Provisions hereof. The Company acknowledges and agrees that the Placement Agent
is not and shall not be construed as a fiduciary of the Company and shall have
no duties or liabilities to the equity holders or the creditors of the Company
or any other person by virtue of this Agreement or the retention of the
Placement Agent hereunder, all of which are hereby expressly waived.

 

 13 

 

 

Section 8 CLOSING. The obligations of the Placement Agent, and the closing of
the sale of the Securities hereunder, are subject to the accuracy, when made and
on the Closing Date, of the representations and warranties on the part of the
Company and its subsidiaries contained herein and in the Securities Purchase
Agreement, to the accuracy of the statements of the Company and its subsidiaries
made in any certificates pursuant to the provisions hereof, to the performance
by the Company and its subsidiaries of their obligations hereunder, and to each
of the following additional terms and conditions:

 

(A) The Company has filed all reports, schedules, forms, statements or other
documents required to be filed by the Company under the Securities Act or
Exchange Act, during the two years preceding the date hereof (the foregoing
materials filed during such two-year period, including the exhibits thereto and
documents incorporated by reference therein, the “SEC Reports”) on a timely
basis or has received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension; as of their
respective filing or amendment dates, the SEC Reports complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder; and as of their respective filing or
amendment dates, the SEC Reports did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

 

(B) All corporate proceedings and other legal matters incident to the
authorization, form, execution, delivery and validity of each of this Agreement,
the Placement, the Transaction Documents and the Securities, and all other legal
matters relating to this Agreement and the transactions contemplated hereby
shall be reasonably satisfactory in all material respects to counsel for the
Placement Agent, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.

 

(C) The Placement Agent shall have received as of the Closing Date a certificate
of the Secretary of the Company (i) certifying, as complete and accurate as of
the Closing, attached copies of the certificate of incorporation and bylaws of
the Company, (ii) certifying, as complete and accurate as of the Closing,
attached copies of the certificate of incorporation or articles of organization,
as applicable, of each of the Company’s subsidiaries, (iii) certifying and
attaching all requisite resolutions or actions of the Company’s board of
directors and shareholders approving the execution and delivery of this
Agreement, the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, (iv) certifying and attaching a short form
Certificate of Good Standing, dated within four business days of the Closing
Date, of the Company and each of its subsidiaries, certified by the Secretary of
State or other appropriate public official of the state of incorporation or
organization of the Company and each of its subsidiaries and (v) certifying to
the incumbency and signatures of the authorized representatives of the Company
executing this Agreement and any other document relating to the transactions
contemplated hereby.

 

(D) The Placement Agent shall have received as of the Closing Date the favorable
opinions of legal counsel to the Company with respect to (i) the Company’s
corporate authority to enter into the Transaction Documents and ability to
perform its obligations thereunder, among other things, and (ii) the Company’s
ownership of its subsidiaries, among other things, dated as of such Closing
Date, addressed to the Placement Agent in form and substance reasonably
satisfactory to the Placement Agent.

 

(E) The Placement Agent shall have received the opinion of intellectual property
counsel to the Company dated as of such Closing Date, addressed to the Placement
Agent in form and substance reasonably satisfactory to the Placement Agent.

 

 14 

 

 

(F) The Placement Agent shall have received a cold comfort letter from Marcum
LLP, addressed to the Placement Agent in form and substance reasonably
satisfactory in all material respects to the Placement Agent.

 

(G) Since the date of the latest audited or unaudited financial statements
included or incorporated by reference in the SEC Reports, there shall not have
been any change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any change, or any development involving a prospective
change, in or affecting the business, general affairs, management, financial
position, stockholders’ equity, results of operations or prospects of the
Company and its subsidiaries, otherwise than as set forth in or contemplated by
the SEC Reports, the effect of which is, in the judgment of the Placement Agent,
so material and adverse as to make it impracticable or inadvisable to proceed
with the sale or delivery of the Securities on the terms and in the manner
contemplated by the Securities Purchase Agreement.

 

(H) The Common Stock is registered under the Exchange Act and, as of the Closing
Date, the Common Stock shall be listed, admitted and authorized for trading on
the Nasdaq. The Company shall issue the Warrants and the Warrant Shares pursuant
to an exemption from registration under the Securities Act. The Company shall
have taken no action designed to, or likely to have the effect of terminating
the registration of the Common Stock under the Exchange Act or delisting or
suspending from trading the Common Stock from the Nasdaq, nor has the Company
received any information suggesting that the SEC or Nasdaq is contemplating
terminating such registration or listing.

 

(I) Subsequent to the execution and delivery of this Agreement and up to the
Closing Date, there shall not have occurred any of the following: (i) trading in
securities generally on the Nasdaq shall have been suspended or minimum or
maximum prices or maximum ranges for prices shall have been established
generally on any such exchange or such market by the SEC or by such exchange or
by any other regulatory body or governmental authority having jurisdiction, (ii)
a banking moratorium shall have been declared by federal or state authorities or
a material disruption has occurred in commercial banking or securities
settlement or clearance services in the United States, (iii) the United States
shall have become engaged in hostilities in which it is not currently engaged,
the subject of an act of terrorism, there shall have been an escalation in
hostilities involving the United States, or there shall have been a declaration
of a national emergency or war by the United States, or (iv) there shall have
occurred any other calamity or crisis or any change in general economic,
political or financial conditions in the United States or elsewhere, if the
effect of any such event in clause (iii) or (iv) makes it, in the sole judgment
of the Placement Agent, impracticable or inadvisable to proceed with the sale or
delivery of the Securities on the terms and in the manner contemplated by the
Securities Purchase Agreement.

 

(J) No action shall have been taken and no statute, rule, regulation or order
shall have been enacted, adopted or issued by any governmental agency or body
which would, as of the Closing Date, prevent the issuance or sale of the
Securities or materially and adversely affect or potentially and adversely
affect the business or operations of the Company; and no injunction, restraining
order or order of any other nature by any federal, state or foreign court of
competent jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance or sale of the Securities or materially and adversely
affect the business or operations of the Company.

 

(K) The Company shall have prepared and filed with the SEC a Current Report on
Form 8-K with respect to the Placement, including as an exhibit thereto this
Agreement.

 

(L) The Company shall have entered into a Securities Purchase Agreement with
each of the Purchasers and such agreements shall be in full force and effect and
shall contain representations, warranties and covenants of the Company as agreed
between the Company and the Purchasers.

 

 15 

 

 

(M) Prior to the Closing Date, the Company shall have furnished to the Placement
Agent such further information, certificates and documents as the Placement
Agent may reasonably request.

 

(N) All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Placement Agent.

 

(O) FINRA shall have raised no objection to the fairness and reasonableness of
the terms and arrangements of this Agreement. In addition, the Company shall, if
requested by the Placement Agent, make or authorize Placement Agent’s counsel to
make on the Company’s behalf, an Issuer Filing with FINRA pursuant to FINRA Rule
5110 with respect to the Registration Statement and pay all filing fees required
in connection therewith.

 

If any of the conditions specified in this Section 8 shall not have been
fulfilled when and as required by this Agreement, the obligations of the
Placement Agent to consummate the Closing hereunder may be cancelled by the
Placement Agent after notice of such cancellation shall have be given to the
Company in writing and the Company shall have been given a reasonable period of
time to satisfy such condition (if such condition is capable of being
satisfied).

 

Section 9 GOVERNING LAW. This Agreement, and any dispute, claim or action
arising under or in any way relating to this Agreement, will be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements made and to be performed entirely in such State. This Agreement may
not be assigned by any party without the prior written consent of the other
parties. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns. Any right
to trial by jury with respect to any dispute arising under this Agreement or any
transaction or conduct in connection herewith is knowingly, voluntarily and
irrevocably waived to the fullest extent permitted by applicable law. Each of
the Placement Agent and the Company: (i) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement and/or the transactions
contemplated hereby shall be instituted exclusively in New York Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York, (ii) waives any objection which it may have or hereafter
to the venue of any such suit, action or proceeding, and (iii) irrevocably
consents to the jurisdiction of the New York Supreme Court, County of New York,
and the United States District Court for the Southern District of New York in
any such suit, action or proceeding. Each of the Placement Agent and the Company
further agrees to accept and acknowledge service of any and all process which
may be served in any such suit, action or proceeding in the New York Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agrees that service of process upon the
Company mailed by certified mail to the Company’s address shall be deemed in
every respect effective service of process upon the Company, in any such suit,
action or proceeding, and service of process upon the Placement Agent mailed by
certified mail to such Placement Agent’s address shall be deemed in every
respect effective service process upon such Placement Agent, in any such suit,
action or proceeding. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law.

 

 16 

 

 

Section 10 ENTIRE AGREEMENT/MISC. This Agreement (including the attached
Indemnification Provisions) embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings, relating to the subject matter hereof. If any provision of this
Agreement is determined to be invalid or unenforceable in any respect, such
determination will not affect such provision in any other respect or any other
provision of this Agreement, which will remain in full force and effect. This
Agreement may not be amended or otherwise modified or waived except by an
instrument in writing signed by both the Placement Agent and the Company. The
representations, warranties, agreements and covenants contained herein shall
survive the closing of the Placement and delivery and/or exercise of the
Securities, as applicable. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or a .pdf format file, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile
or .pdf signature page were an original thereof, subject to the consent of its
release by the respective party. The Company agrees that the Placement Agent may
rely upon, and each is a third-party beneficiary of, the representations and
warranties, and applicable covenants set forth in any such purchase,
subscription or other agreement with the Purchasers in the Placement. All
amounts stated in this Agreement are in United States dollars unless expressly
stated otherwise.

 

Section 11 NOTICES. All notices and communications hereunder shall be in writing
and mailed or delivered or by email if subsequently confirmed in writing, and
shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is sent to the email address
specified on the signature pages attached hereto prior to 6:30 p.m. (New York
City time) on a business day, (b) the next business day after the date of
transmission, if such notice or communication is sent to the email address on
the signature pages attached hereto on a day that is not a business day or later
than 6:30 p.m. (New York City time) on any business day, (c) the third business
day following the date of mailing, if sent by U.S. internationally recognized
air courier service, or (d) upon actual receipt by the party to whom such notice
is required to be given. The address for such notices and communications shall
be as follows: (a) if to the Placement Agent, c/o Maxim Group LLC, 405 Lexington
Avenue, New York, New York 10174, Attention: Equity Capital Markets, with a copy
to Maxim Group LLC, 405 Lexington Avenue, New York, New York 10174, Attention:
General Counsel, and to Harter Secrest & Emery LLP, 1600 Bausch & Lomb Place,
Rochester, NY 14604, Attention: Alexander R. McClean, and (b) if to the Company,
to the address set forth above, Attention: Tyler B. Wilson, Esq., General
Counsel.

 

[The remainder of this page has been intentionally left blank.]

 

 17 

 

 

Please confirm that the foregoing correctly sets forth our agreement by signing
and returning to the Placement Agent the enclosed copy of this Agreement.

 

  Very truly yours,         MAXIM GROUP LLC         By: /s/ Clifford Teller  
Name:  Clifford Teller   Title: Executive Managing Director of Investment
Banking

 

[Signature Page to Placement Agency Agreement]

 

 18 

 

 

Accepted and Agreed to as of

the date first written above:

 

MAGNEGAS APPLIED TECHNOLOGY SOLUTIONS, INC.       By: /s/ Scott Mahoney   Name: 
Scott Mahoney   Title: Chief Executive Officer  

 

[Signature Page to Placement Agency Agreement]

 

 19 

 

 

ADDENDUM A

 

INDEMNIFICATION PROVISIONS

 

In connection with the engagement of Maxim Group LLC (“Maxim” or the “Placement
Agent”) by MagneGas Applied Technology Solutions, Inc. (the “Company”) pursuant
to this Placement Agent Agreement (the “Agreement”), the Company hereby agrees
as follows:

 

1. To the extent permitted by law, the Company hereby agrees to indemnify and
hold the Placement Agent, each of its respective officers, directors,
principals, employees, affiliates, and stockholders, and their successors and
assigns, harmless from and against any and all loss, claim, damage, liability,
deficiencies, actions, suits, proceedings, costs and legal expenses or expense
whatsoever (including, but not limited to, reasonable legal fees and other
expenses and reasonable disbursements incurred in connection with defending any
action, suit or proceeding, including any inquiry or investigation, commenced or
threatened, or any claim whatsoever, or in appearing or preparing for appearance
as witness in any proceeding, including any pretrial proceeding such as a
deposition) (collectively the “Losses”) arising out of, based upon, or in any
way related or attributable to, (i) any breach of a representation, warranty or
covenant by the Company contained in this Agreement; or (ii) any activities or
services performed hereunder by the Placement Agent, unless it is finally
judicially determined (and not subject to appeal) in a court of competent
jurisdiction that such Losses were the primary and direct result of the bad
faith, willful misconduct or gross negligence of the Placement Agent in
performing the services hereunder.     2. The Company agrees to notify the
Placement Agent promptly of the assertion against it or any other person of any
claim or the commencement of any legal action, suit or proceeding relating to a
transaction contemplated by the Agreement. If the Placement Agent receives
written notice of the commencement of any legal action, suit or proceeding with
respect to which the Company is or may be obligated to provide indemnification
pursuant to this Addendum A, the Placement Agent shall, within twenty days of
the receipt of such written notice, give the Company written notice thereof (a
“Claim Notice”). Failure to give such Claim Notice within such twenty day period
shall not constitute a waiver by the Placement Agent of its right to indemnity
hereunder with respect to such action, suit or proceeding; provided, however,
the indemnification hereunder may be limited by any such failure to provide a
Claim Notice to the Company that materially prejudices the Company. Upon receipt
by the Company of a Claim Notice from the Placement Agent with respect to any
claim for indemnification which is based upon a claim made by a third party
(“Third-Party Claim”), the Company may assume the defense of the Third-Party
Claim with counsel of its own choosing, as described below. The Placement Agent
shall cooperate in the defense of the Third-Party Claim and shall furnish such
records, information and testimony and attend all such conferences, discovery
proceedings, hearings, trial and appeals as may be reasonably required in
connection therewith. The Placement Agent shall have the right to employ their
own counsel in any such action which shall be at the Company’s expense if (i)
the Company shall have failed in a timely manner to assume the defense and
employ counsel or experts reasonably satisfactory to the Placement Agent in such
litigation or proceeding or (ii) the named parties to any such litigation or
proceeding (including any impleaded parties) include the Company and the
Placement Agent and representation of the Company and the Placement Agent by the
same counsel or experts would, in the reasonable opinion of the Placement Agent,
be inappropriate due to actual or potential differing interests between the
Company and the Placement Agent. The Company shall not satisfy or settle any
Third-Party Claim for which indemnification has been sought and is available
hereunder, without the prior written consent of the Placement Agent, which
consent shall not be conditioned or delayed and which shall not be required if
the Placement Agent is granted a release in connection therewith. The
indemnification provisions hereunder shall survive the termination or expiration
of this Agreement for the applicable statute of limitations.

 

 A-1 

 

 

3. The Company further agrees, upon demand by the Placement Agent, to promptly
reimburse the Placement Agent for, or pay, any loss, claim, damage, liability or
expense as to which the Placement Agent has been indemnified herein with such
reimbursement to be made currently as any loss, damage, liability or expense is
incurred by the Placement Agent. Notwithstanding the provisions of the
aforementioned Indemnification, any such reimbursement or payment by the Company
of fees, expenses, or disbursements incurred by the Placement Agent shall be
repaid by the Placement Agent in the event of any proceeding in which a final
judgment (after all appeals or the expiration of time to appeal) is entered in a
court of competent jurisdiction against the Placement Agent based solely upon
its bad faith, gross negligence or willful misconduct in the performance of its
duties hereunder, and provided further, that the Company shall not be required
to make reimbursement or payment for any settlement effected without the
Company’s prior written consent (which consent shall not be unreasonably
withheld or delayed).     4. If for any reason the foregoing indemnification is
unavailable or is insufficient to hold such indemnified party harmless, the
Company agrees to contribute the amount paid or payable by such indemnified
party in such proportion as to reflect not only the relative benefits received
by the Company, as the case may be, on the one hand, and the Placement Agent, on
the other hand, but also the relative fault of the Company and the Placement
Agent as well as any relevant equitable considerations. In no event shall the
Placement Agent contribute in excess of the fees actually received by them
pursuant to the terms of this Agreement.     5. For purposes of this Agreement,
each officer, director, stockholder, and employee or affiliate of the Placement
Agent and each person, if any, who controls the Placement Agent (or any
affiliate) within the meaning of either Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended, shall have the same rights as the Placement Agent with respect to
matters of indemnification by the Company hereunder.

 

  MAXIM GROUP LLC         By: /s/ Clifford Teller   Name:  Clifford Teller  
Title: Executive Managing Director of Investment Banking

 

[Signature Page to Indemnification Provisions

Pursuant to Placement Agency Agreement]

 

 A-2 

 

 

Accepted and Agreed to as of

the date first written above:

 

MAGNEGAS APPLIED TECHNOLOGY SOLUTIONS, INC.       By: /s/ Scott Mahoney   Name: 
Scott Mahoney   Title: Chief Executive Officer  

 

[Signature Page to Indemnification Provisions

Pursuant to Placement Agency Agreement]

 

 A-3