Document:

Exhibit 10.1

 

Execution Version

 

PLUG POWER INC.

 

Common Stock

(par value $0.01 per share)

 

At Market Issuance Sales Agreement

 

April 3, 2017

 

FBR Capital Markets & Co.

1300 North 17th Street

Suite 1400

Arlington, Virginia 22209

 

Ladies and Gentlemen:

 

Plug Power Inc., a Delaware corporation (the “Company”), confirms its agreement (this “Agreement”) with FBR Capital Markets & Co. (“FBR”) 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 FBR, shares of common stock (the “Placement Shares”) of the Company, par value $0.01 per share (the “Common Stock”); provided, however, that in no event shall the Company issue or sell through FBR such number of Placement Shares that (a) exceeds the number of shares or dollar amount of Common Stock registered on the effective Registration Statement (as defined below) pursuant to which the offering is being made or (b) exceeds the number of shares or dollar amount registered on the Prospectus Supplement (as defined below) (the lesser of (a) or (b) the “Maximum Amount”). Notwithstanding anything to the contrary contained herein, the parties hereto agree that compliance with the limitations set forth in this Section 1 on the number or dollar amount of Placement Shares issued and sold under this Agreement shall be the sole responsibility of the Company and that FBR shall have no obligation in connection with such compliance. The issuance and sale of Placement Shares through FBR will be effected pursuant to the Registration Statement (as defined below), although nothing in this Agreement shall be construed as requiring the Company to use the Registration Statement to issue any Placement Shares.

 

The Company has filed, in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder (the “Securities Act”), with the Securities and Exchange Commission (the “Commission”), a registration statement on Form S-3 (File No. 333-214737), including a base prospectus, relating to certain securities, including the Placement Shares 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 (the “Exchange Act”). The Company has prepared a prospectus supplement to the base prospectus included as part of such registration statement specifically relating to the Placement Shares (the “Prospectus Supplement”). The Company will furnish to FBR, for use by FBR, copies of the base 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, and any post-effective amendment thereto, 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 of the Securities Act, is herein called the “Registration Statement.”  The base prospectus, including all documents incorporated or deemed incorporated therein by reference to the extent such information has not been superseded or modified in accordance with Rule 412 under the Securities Act (as qualified by Rule 430B(g) of the Securities Act), included in the Registration Statement, as it may be supplemented by the Prospectus Supplement, in the form in which such base 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, 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 incorporated by reference therein (the “Incorporated Documents”).

 

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 the most recent copy filed with the Commission pursuant to its Electronic Data Gathering Analysis and Retrieval System, or if applicable, the Interactive Data Electronic Application system when used by the Commission (collectively, “EDGAR”).

 

2.                                      Placements. Each time that the Company wishes to issue and sell Placement Shares hereunder (each, a “Placement”), it will notify FBR by electronic mail (or other method mutually agreed to in writing by the parties) of the number of Placement Shares to be sold, 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 day and any minimum price below which sales may not be made (a “Placement Notice”), the form of which is attached hereto as Schedule 1. The Placement Notice shall originate from any of the individuals from the Company set forth on Schedule 3 (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 FBR set forth on Schedule 3, as such Schedule 3 may be amended from time to time. The Placement Notice shall be effective immediately upon receipt by FBR unless and until (i) FBR declines to accept the terms contained therein for any reason, in its sole discretion, (ii) the entire amount of the Placement Shares thereunder has been sold, (iii) the Company suspends or terminates the Placement Notice, which suspension and termination rights may be exercised by the Company in its sole discretion, or (iv) this Agreement has been terminated under the provisions of Section 13. The amount of any discount, commission or other compensation to be paid by the Company to FBR in connection with the sale of the Placement Shares shall be calculated in accordance with the terms set forth in Schedule 2.  It is expressly acknowledged and agreed that neither the Company nor FBR will have any obligation whatsoever with respect to a Placement or any Placement Shares unless and until the Company delivers a Placement Notice to FBR and FBR 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 Sections 2 or 3 of this

 

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Agreement and the terms of a Placement Notice, the terms of the Placement Notice will control.

 

3.                                      Sale of Placement Shares by FBR.  Subject to the terms and conditions of this Agreement, for the period specified in a Placement Notice, FBR 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 Capital Market (the “Exchange”), to sell the Placement Shares up to the amount specified in, and otherwise in accordance with the terms of, such Placement Notice. FBR will provide written confirmation to the Company 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 compensation payable by the Company to FBR pursuant to Section 2 with respect to such sales, and the Net Proceeds (as defined below) payable to the Company, with an itemization of the deductions made by FBR (as set forth in Section 5(b)) from the gross proceeds that it receives from such sales. Subject to the terms of a Placement Notice, FBR may sell Placement Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act. “Trading Day” means any day on which shares of Common Stock are purchased and sold on the Exchange.

 

4.                                      Suspension of Sales. The Company or FBR 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 3, 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 3), suspend any sale of Placement Shares (a “Suspension”); provided, however, that such Suspension shall not affect or impair any party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of such notice. While a Suspension is in effect, any obligation under Sections 7(l), 7(m), and 7(n) of this Agreement with respect to the delivery of certificates, opinions, or comfort letters to FBR, shall be waived. Each of the parties agrees that no such notice under this Section 4 shall be effective against any other party unless it is made to one of the individuals named on Schedule 3 hereto, as such Schedule may be amended from time to time.

 

5.                                      Sale and Delivery to FBR; Settlement.

 

a.                                      Sale of Placement Shares. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, unless FBR declines to accept the terms 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, FBR, 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 Exchange to sell such Placement Shares up to the amount specified in, and otherwise in accordance with the terms of, such Placement Notice. The Company acknowledges and agrees that (i) there can be no assurance that FBR will be successful in selling Placement Shares, (ii) FBR 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 FBR to use its commercially reasonable efforts consistent

 

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with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the Exchange to sell such Placement Shares as required under this Agreement and (iii) FBR shall be under no obligation to purchase Placement Shares on a principal basis pursuant to this Agreement, except as otherwise agreed by FBR and the Company.

 

b.                                      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”). FBR shall notify the Company of each sale of Placement Shares no later than the opening of the Trading Day immediately following the Trading Day that FBR sold Placement Shares. 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 FBR, after deduction for (i) FBR’s commission, discount or other compensation for such sales payable by the Company pursuant to Section 2 hereof, and (ii) any transaction fees imposed by any governmental or self-regulatory organization in respect of such sales.

 

c.                                       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 FBR’s or its designee’s account (provided FBR shall have given the Company written notice of such designee and such designee’s account information at least one Trading Day 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 tradable, transferable, registered shares in good deliverable form. On each Settlement Date, FBR 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 Placement Shares on a Settlement Date through no fault of FBR, then in addition to and in no way limiting the rights and obligations set forth in Section 11(a) hereto, it will (i) hold FBR harmless against any loss, claim, damage, or reasonable, documented expense (including reasonable and documented legal fees and expenses), as incurred, arising out of or in connection with such default by the Company or its transfer agent (if applicable) and (ii) pay to FBR (without duplication) any commission, discount, or other compensation to which it would otherwise have been entitled absent such default.

 

d.                                      Limitations on Offering Size. Under no circumstances shall the Company cause or request the offer or sale of any Placement Shares if, after giving effect to the sale of such Placement Shares, the aggregate gross sale proceeds of such Placement Shares sold pursuant to this Agreement would exceed the lesser of (A) together with all sales of Placement Shares under this Agreement, the Maximum Amount, (B) the amount available for offer and sale under the currently effective Registration Statement and (C) the amount authorized from time to time to be issued and sold under this Agreement by the Company’s board of directors, a duly authorized committee thereof or a duly authorized executive committee, and notified to FBR in writing.  Under no circumstances shall the Company cause or request the offer or sale of any Placement Shares pursuant to this Agreement at a price lower than the minimum price authorized from time to time by the Company’s board of directors, a duly authorized committee thereof or a

 

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duly authorized executive committee, and notified to FBR in writing.

 

6.                                      Representations and Warranties of the Company. Except as disclosed in the Registration Statement or Prospectus (including the Incorporated Documents), the Company represents and warrants to, and agrees with FBR that as of the date of this Agreement and as of each Applicable Time (as defined below), unless such representation, warranty or agreement specifies a different date or time:

 

a.                                      Registration Statement and Prospectus. The transactions contemplated by this Agreement meet the requirements for and comply with the conditions for the use of Form S-3 under the Securities Act. The Registration Statement has been filed with the Commission and has been declared effective by the Commission under the Securities Act. The Prospectus Supplement will name FBR as the agent in the section entitled “Plan of Distribution.” The Company has not received, and has no notice of, any order of the Commission preventing or suspending the use of the Registration Statement, or threatening or instituting proceedings for that purpose. The Registration Statement and the offer and sale of Placement Shares as contemplated hereby meet the requirements of Rule 415 under the Securities Act and comply in all material respects with said Rule. Any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement have been so described or filed, as applicable. Copies of the Registration Statement, the Prospectus, and any such amendments or supplements and all documents incorporated by reference therein that were filed with the Commission on or prior to the date of this Agreement have been delivered, or are available through EDGAR, to FBR and its counsel. The Company has not distributed and, prior to the later to occur of each Settlement Date and completion of the distribution of the Placement Shares, will not distribute any offering material in connection with the offering or sale of the Placement Shares other than the Registration Statement and the Prospectus and any Issuer Free Writing Prospectus (as defined below) to which FBR has consented, which consent will not be unreasonably withheld, conditioned or delayed, or that is required by applicable law or the listing maintenance requirements of the Exchange. The Common Stock is currently quoted on the Exchange under the trading symbol “PLUG.” The Company has not, in the 12 months preceding the date hereof, received notice from the Exchange to the effect that the Company is not in compliance with the listing or maintenance requirements of the Exchange. To the Company’s knowledge, it is in compliance with all such listing and maintenance requirements.

 

b.                                      No Misstatement or Omission. At each Settlement Date, the Registration Statement and the Prospectus, as of such date, will conform in all material respects with the requirements of the Securities Act. The Registration Statement, when it became or becomes effective, 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 not misleading. The Prospectus and any amendment and supplement thereto, on the date thereof and at each Applicable Time (defined below), did not or will not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Incorporated Documents did not, and any further Incorporated Documents filed and incorporated by reference therein will not, when filed with the Commission, contain an untrue statement of a material fact or omit to state a material fact required to be stated in such document or necessary to make the statements

 

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in such document, in light of the circumstances under which they were made, not misleading. The foregoing shall not apply to statements in, or omissions from, any such document made in reliance upon, and in conformity with, information furnished to the Company by FBR specifically for use in the preparation thereof.

 

c.                                       Conformity with Securities Act and Exchange Act. The Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or any amendment or supplement thereto, and the Incorporated Documents, when such documents were or are filed with the Commission under the Securities Act or the Exchange Act or became or become effective under the Securities Act, as the case may be, conformed or will conform in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable.

 

d.                                      Financial Information. The consolidated financial statements of the Company included or incorporated by reference in the Registration Statement, the Prospectus and the Issuer Free Writing Prospectuses, if any, together with the related notes and schedules, present fairly, in all material respects, the consolidated financial position of the Company and the Subsidiaries (as defined below) as of the dates indicated and the consolidated results of operations, cash flows and changes in stockholders’ equity of the Company and the Subsidiaries for the periods specified (subject, in the case of unaudited statements, to normal year-end audit adjustments) and have been prepared in compliance with the published requirements of the Securities Act and Exchange Act, as applicable, and in conformity with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis (except (i) for such adjustments to accounting standards and practices as are noted therein and (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) during the periods involved; the other financial and statistical data with respect to the Company and the Subsidiaries contained or incorporated by reference in the Registration Statement, the Prospectus and the Issuer Free Writing Prospectuses, if any, are accurately and fairly presented and prepared on a basis consistent with the financial statements and books and records of the Company; there are no financial statements (historical or pro forma) that are required to be included or incorporated by reference in the Registration Statement, the Prospectus or the Issuer Free Writing Prospectuses, if any, that are not included or incorporated by reference as required; the Company and the Subsidiaries do not have any material liabilities or obligations, direct or contingent (including any off balance sheet obligations), not described in the Registration Statement, and the Prospectus which are required to be described in the Registration Statement or  Prospectus; and all disclosures contained or incorporated by reference in the Registration Statement, the Prospectus, and the Issuer Free Writing Prospectuses, if any, regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply in all material respects with Regulation G of the Exchange Act and Item 10 of Regulation S-K under the Securities Act, to the extent applicable.

 

e.                                       Conformity with EDGAR Filing. The Prospectus delivered to FBR for use in connection with the sale of the Placement Shares pursuant to this Agreement will be identical to the versions of the Prospectus created to be transmitted to the Commission for filing via EDGAR, except to the extent permitted by Regulation S-T.

 

f.                                        Organization. The Company and any subsidiary that is a significant

 

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subsidiary (as such term is defined in Rule 1-02 of Regulation S-X promulgated by the Commission) (each, a “Subsidiary,” collectively, the “Subsidiaries”), are, and will be, duly organized, validly existing as a corporation and in good standing under the laws of their respective jurisdictions of organization. The Company and the Subsidiaries are duly licensed or qualified as a foreign corporation for transaction of business and in good standing under the laws of each other jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such license or qualification, and have all corporate power and authority necessary to own or hold their respective properties and to conduct their respective businesses as described in the Registration Statement and the Prospectus, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, have a material adverse effect on the assets, business, operations, earnings, properties, condition (financial or otherwise), prospects, stockholders’ equity or results of operations of the Company and the Subsidiaries taken as a whole, or prevent the consummation of the transactions contemplated hereby (a “Material Adverse Effect”).

 

g.                                       Subsidiaries.  As of the date hereof, the Company’s only Subsidiaries are set forth on Schedule 6(g).  The Company owns directly or indirectly, all of the equity interests of the Subsidiaries free and clear of any lien, charge, security interest, encumbrance, right of first refusal or other restriction, and all the equity interests of the Subsidiaries are validly issued and are fully paid, nonassessable and free of preemptive and similar rights.

 

h.                                      No Violation or Default. Neither the Company nor any Subsidiary is (i) in violation of its charter or by-laws or similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other similar agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or to which any of the property or assets of the Company or any Subsidiary is subject; or (iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of each of clauses (ii) and (iii) above, for any such violation or default that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To the Company’s knowledge, no other party under any material contract or other agreement to which it or any Subsidiary is a party is in default in any respect thereunder where such default would have a Material Adverse Effect.

 

i.                                          No Material Adverse Effect. Since the date of the most recent financial statements of the Company included or incorporated by reference in the Registration Statement, the Prospectus and the Issuer Free Writing Prospectuses, if any, there has not been (i) any Material Adverse Effect, (ii) any transaction which is material to the Company and the Subsidiaries taken as a whole, (iii) any obligation or liability, direct or contingent (including any off-balance sheet obligations), incurred by the Company or the Subsidiaries, which is material to the Company and the Subsidiaries taken as a whole, (iv) any material change in the Company’s capital stock (other than (A) the grant of additional options and other equity awards under the Company’s existing stock option plans, (B) changes in the number of outstanding Common Stock of the Company due to the issuance of shares upon the exercise or conversion of securities exercisable for, or convertible into, Common Stock outstanding on the date hereof, (C) as a result

 

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of the issuance of Placement Shares, (D) any repurchases of capital stock of the Company, (E) as described in a proxy statement filed on Schedule 14A or a Registration Statement on Form S-4, (F) dividends on the Company’s Series C Preferred Stock in accordance with the terms of such stock paid in shares of Common Stock or (G) otherwise publicly announced) or outstanding long-term indebtedness of the Company or the Subsidiaries or (v) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or any Subsidiary, other than in each case above in the ordinary course of business, dividends on the Company’s Series C Preferred Stock in accordance with the terms of such stock or as otherwise disclosed in the Registration Statement or Prospectus (including any document incorporated by reference therein).

 

j.                                         Capitalization. The issued and outstanding shares of capital stock of the Company have been validly issued, are fully paid and non-assessable and, other than as disclosed in the Registration Statement or the Prospectus, are not subject to any preemptive rights, rights of first refusal or similar rights. The Company has an authorized, issued and outstanding capitalization as set forth in the Registration Statement and the Prospectus as of the dates referred to therein (other than (i) the grant of additional options or other equity awards under the Company’s existing stock option plans, (ii) changes in the number of outstanding Common Stock of the Company due to the issuance of shares upon the exercise or conversion of securities exercisable for, or convertible into, Common Stock outstanding on the date hereof, (iii) as a result of the issuance of Placement Shares, or (iv) any repurchases of capital stock of the Company) and such authorized capital stock conforms to the description thereof set forth in the Registration Statement and the Prospectus. The description of the Common Stock in the Registration Statement and the Prospectus is complete and accurate in all material respects. Except as disclosed in or contemplated by the Registration Statement or the Prospectus, the Company did not have outstanding any options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or exchangeable for, or any contracts or commitments to issue or sell, any shares of capital stock or other securities.

 

k.                                      S-3 Eligibility.  (i) At the time of filing the Registration Statement and (ii) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the Securities Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), the Company met the then applicable requirements for use of Form S-3 under the Securities Act, including compliance with General Instruction I.B.1 of Form S-3, as applicable. The Company is not a shell company (as defined in Rule 405 under the Securities Act) and has not been a shell company for at least 12 calendar months previously and if it has been a shell company at any time previously, has filed current Form 10 information (as defined in General Instruction I.B.6 of Form S-3) with the Commission at least 12 calendar months previously reflecting its status as an entity that is not a shell company.

 

l.                                          Authorization; Enforceability. The Company has full legal right, power and authority to enter into this Agreement and perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that (i) enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights

 

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generally and by general equitable principles and (ii) the indemnification and contribution provisions of Section 11 hereof may be limited by federal or state securities laws and public policy considerations in respect thereof.

 

m.                                  Authorization of Placement Shares. The Placement Shares, when issued and delivered pursuant to the terms approved by the board of directors of the Company or a duly authorized committee thereof, or a duly authorized executive committee, against payment therefor as provided herein, will be duly and validly authorized and issued and fully paid and nonassessable, free and clear of any pledge, lien, encumbrance, security interest or other claim (other than any pledge, lien, encumbrance, security interest or other claim arising from an act or omission of FBR or a purchaser), including any statutory or contractual preemptive rights, resale rights, rights of first refusal or other similar rights, and will be registered pursuant to Section 12 of the Exchange Act. The Placement Shares, when issued, will conform in all material respects to the description thereof set forth in or incorporated into the Prospectus.

 

n.                                      No Consents Required. No consent, approval, authorization, order, registration or qualification of or with any court or arbitrator or any governmental or regulatory authority is required for the execution, delivery and performance by the Company of this Agreement, and the issuance and sale by the Company of the Placement Shares as contemplated hereby, except for such consents, approvals, authorizations, orders and registrations or qualifications (i) as may be required under applicable state securities laws or by the by-laws and rules of the Financial Industry Regulatory Authority (“FINRA”) or the Exchange, including any notices that may be required by the Exchange, in connection with the sale of the Placement Shares by FBR, (ii) as may be required under the Securities Act and (iii) as have been previously obtained by the Company.

 

o.                                      No Preferential Rights. (i) No person, as such term is defined in Rule 1-02 of Regulation S-X promulgated under the Securities Act (each, a “Person”), has the right, contractual or otherwise, to cause the Company to issue or sell to such Person any Common Stock or shares of any other capital stock or other securities of the Company (other than upon the exercise of options or warrants to purchase Common Stock, the conversion of convertible securities, or upon the exercise of options or other equity awards that may be granted from time to time under the Company’s stock option plans), (ii) no Person has any preemptive rights, rights of first refusal, or any other rights (whether pursuant to a “poison pill” provision or otherwise) to purchase any Common Stock or shares of any other capital stock or other securities of the Company from the Company which have not been duly waived with respect to the offering contemplated hereby, (iii) no Person has the right to act as an underwriter or as a financial advisor to the Company in connection with the offer and sale of the Placement Shares, and (iv) no Person has the right, contractual or otherwise, to require the Company to register under the Securities Act any Common Stock or shares of any other capital stock or other securities of the Company, or to include any such shares or other securities in the Registration Statement or the offering contemplated thereby, whether as a result of the filing or effectiveness of the Registration Statement or the sale of the Placement Shares as contemplated thereby or otherwise, except in each case for such rights as have been waived on or prior to the date hereof.

 

p.                                      Independent Public Accountant. KPMG LLP (the “Accountant”), whose report on the consolidated financial statements of the Company is filed with the Commission as

 

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part of the Company’s most recent Annual Report on Form 10-K filed with the Commission and incorporated into the Registration Statement, are and, during the periods covered by their report, were independent public accountants within the meaning of the Securities Act and the Public Company Accounting Oversight Board (United States). To the Company’s knowledge, the Accountant is not in violation of the auditor independence requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) with respect to the Company.

 

q.                                      Enforceability of Agreements. All agreements between the Company and third parties expressly referenced in the Prospectus, other than such agreements that have expired by their terms or whose termination is disclosed in documents filed by the Company on EDGAR, are legal, valid and binding obligations of the Company and, to the Company’s knowledge, enforceable in accordance with their respective terms, except to the extent that (i) enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles and (ii) the indemnification provisions of certain agreements may be limited by federal or state securities laws or public policy considerations in respect thereof, and except for any unenforceability that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

r.                                         No Litigation. There are no legal or governmental proceedings pending or, to the Company’s knowledge, threatened to which the Company or any Subsidiary is a party or to which any of the properties of the Company or any Subsidiary is subject (i) other than proceedings accurately described in all material respects in the Prospectus and proceedings that would not reasonably be expected to have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole, or on the power or ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated by the Prospectus or (ii) that are required to be described in the Registration Statement or the Prospectus and are not so described; and there are no statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required.

 

s.                                        Licenses and Permits. The Company and the Subsidiaries possess or have obtained, all licenses, certificates, consents, orders, approvals, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as currently conducted, as described in the Registration Statement and the Prospectus (the “Permits”), except where the failure to possess, obtain or make the same would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has received written notice of any proceeding relating to revocation or modification of any such Permit or has any reason to believe that such Permit will not be renewed in the ordinary course, except where the failure to obtain any such renewal would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

t.                                         No Material Defaults. Neither the Company nor any Subsidiary has defaulted on any installment on indebtedness for borrowed money or on any rental on one or more long-term leases, which defaults, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. The Company has not filed a report pursuant to

 

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Section 13(a) or 15(d) of the Exchange Act since the filing of its last Annual Report on Form 10-K, indicating that it (i) has failed to pay any dividend or sinking fund installment on preferred stock or (ii) has defaulted on any installment on indebtedness for borrowed money or on any rental on one or more long-term leases, which defaults, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

u.                                      Certain Market Activities. Neither the Company, nor any Subsidiary, nor, to the knowledge of the Company, any of their respective directors, officers or controlling persons has taken, directly or indirectly, any action designed, or that has constituted or would reasonably be expected to cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Placement Shares.

 

v.                                      Broker/Dealer Relationships. Neither the Company nor any Subsidiary (i) is required to register as a “broker” or “dealer” in accordance with the provisions of the Exchange Act or (ii) directly or indirectly through one or more intermediaries, controls or is a “person associated with a member” or “associated person of a member” (within the meaning set forth in the FINRA Manual).

 

w.                                    No Reliance. The Company has not relied upon FBR or legal counsel for FBR for any legal, tax or accounting advice in connection with the offering and sale of the Placement Shares.

 

x.                                      Taxes. The Company and the Subsidiaries have filed all federal, state, local and foreign tax returns which have been required to be filed and paid all taxes shown thereon through the date hereof, to the extent that such taxes have become due and are not being contested in good faith, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. Except as otherwise disclosed in or contemplated by the Registration Statement or the Prospectus, no tax deficiency has been determined adversely to the Company or any Subsidiary which has had, or would have, individually or in the aggregate, a Material Adverse Effect. The Company has no knowledge of any federal, state or other governmental tax deficiency, penalty or assessment which has been asserted or threatened against it which would have a Material Adverse Effect.

 

y.                                      Title to Real and Personal Property. The Company and the Subsidiaries have good and valid title in fee simple to all items of real property and good and valid title to all personal property described in the Registration Statement or Prospectus as being owned by them that are material to the businesses of the Company or such Subsidiary, in each case free and clear of all liens, encumbrances and claims, except those that (i) do not materially interfere with the use made of such property by the Company and the Subsidiaries or (ii) would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Any real property described in the Registration Statement or Prospectus as being leased by the Company and the Subsidiaries is held by them under valid, existing and enforceable leases, except those that (A) do not materially interfere with the use made or proposed to be made of such property by the Company or the Subsidiaries or (B) would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

z.                                       Intellectual Property. The Company and the Subsidiaries own or possess

 

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adequate enforceable rights to use all patents, patent applications, trademarks (both registered and unregistered), service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) (collectively, the “Intellectual Property”), necessary for the conduct of their respective businesses as conducted as of the date hereof, except to the extent that the failure to own or possess adequate rights to use such Intellectual Property would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; the Company and the Subsidiaries have not received any written notice of any claim of infringement or conflict with asserted Intellectual Property rights of others, which infringement or conflict, if the subject of an unfavorable decision, would reasonably be expected to result in a Material Adverse Effect; there are no pending, or to the Company’s knowledge, threatened judicial proceedings or interference proceedings against the Company or its Subsidiaries challenging the Company’s or any of its Subsidiary’s rights in or to the Intellectual Property or the validity of the scope of any of the Company’s or any Subsidiary’s patents, patent applications or proprietary information, except for such right or claim that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; to the Company’s knowledge, no other entity or individual has any right or claim in any of the Company’s or any of its Subsidiary’s patents, patent applications or any patent to be issued therefrom by virtue of any contract, license or other agreement entered into between such entity or individual and the Company or any Subsidiary or by any non-contractual obligation, other than by written licenses granted by the Company or any Subsidiary, except for such right or claim that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; the Company and the Subsidiaries have not received any written notice of any claim challenging the rights of the Company or its Subsidiaries in or to any Intellectual Property owned, licensed or optioned by the Company or any Subsidiary which claim, if the subject of an unfavorable decision would reasonably be expected to result in a Material Adverse Effect.

 

aa.                               Environmental Laws. The Company and the Subsidiaries (i) are in compliance with any and all applicable federal, state, local and foreign laws, rules, regulations, decisions and orders relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “Environmental Laws”); (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses as described in the Registration Statement and the Prospectus; and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except, in the case of any of clauses (i), (ii) or (iii) above, for any such failure to comply or failure to receive required permits, licenses, other approvals or liability as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

bb.                               Disclosure Controls. The Company maintains a system of internal accounting controls designed to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is

 

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compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company is not aware of any material weaknesses in its internal control over financial reporting (other than as set forth in the Registration Statement or the Prospectus). Since the date of the latest audited financial statements of the Company included in the Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting (other than as set forth in the Registration Statement or the Prospectus). The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) that comply with the requirements of the Exchange Act. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of a date within 90 days prior to the filing date of the Form 10-K for the fiscal year most recently ended (such date, the “Evaluation Date”). The Company presented in its Form 10-K for the fiscal year most recently ended the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the most recent Evaluation Date, which stated that such disclosure controls and procedures were effective.

 

cc.                                 Sarbanes-Oxley Act. There is and has been no failure on the part of the Company or, to the knowledge of the Company, any of the Company’s directors or officers, in their capacities as such, to comply in all material respects with any applicable provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder. Each of the principal executive officer and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company as applicable) has made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to all reports, schedules, forms, statements and other documents required to be filed by it or furnished by it to the Commission during the past 12 months. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Exchange Act Rules 13a-15 and 15d-15.

 

dd.                               Finder’s Fees. Neither the Company nor any Subsidiary has incurred any liability for any finder’s fees, brokerage commissions or similar payments in connection with the transactions herein contemplated, except as may otherwise exist with respect to FBR pursuant to this Agreement.

 

ee.                                 Labor Disputes. No labor disturbance by or dispute with employees of the Company or any Subsidiary exists or, to the knowledge of the Company, is threatened which would reasonably be expected to result in a Material Adverse Effect.

 

ff.                                   Investment Company Act. Neither the Company nor any Subsidiary is or, after giving effect to the offering and sale of the Placement Shares, will be required to register as an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

 

gg.                                 Operations. The operations of the Company and the Subsidiaries are and have been conducted at all times in compliance with applicable financial record keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions to which the Company or the

 

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Subsidiaries are subject, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency having jurisdiction over the Company (collectively, the “Money Laundering Laws”), except where the failure to be in such compliance would not reasonably be expected to result in a Material Adverse Effect; and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

hh.                               Off-Balance Sheet Arrangements. There are no transactions, arrangements and other relationships between and/or among the Company, and/or, to the knowledge of the Company, any of its affiliates and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity (each, an “Off Balance Sheet Transaction”) that could reasonably be expected to affect materially the Company’s liquidity or the availability of or requirements for its capital resources, including those Off Balance Sheet Transactions described in the Commission’s Statement about Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Release Nos. 33-8056; 34-45321; FR-61), required to be described in the Registration Statement or the Prospectus which have not been described as required.

 

ii.                                       Underwriter Agreements. The Company is not a party to any agreement (other than this Agreement) with an agent or underwriter for any “at the market” or continuous equity transaction.

 

jj.                                     ERISA. To the knowledge of the Company, (i) each material employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that is maintained, administered or contributed to by the Company or any of its affiliates for employees or former employees of the Company and the Subsidiaries has been maintained in material compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended (the “Code”); (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred which would result in a material liability to the Company with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption; and (iii) for each such plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) equals or exceeds the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions, other than, in the case of (i), (ii) and (iii) above, as would not reasonably be expected to have a Material Adverse Effect.

 

kk.                               Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) (a “Forward-Looking Statement”) contained in the Registration Statement and the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

 

ll.                                       Margin Rules. Neither the issuance, sale and delivery of the Placement

 

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Shares nor the application of the proceeds thereof by the Company as described in the Registration Statement and the Prospectus will violate Regulation T, U or X of the Board of Governors of the Federal Reserve System.

 

mm.                       Insurance. The Company and the Subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as the Company and the Subsidiaries reasonably believe are adequate for the conduct of their business.

 

nn.                               No Improper Practices. (i) Neither the Company nor, to the Company’s knowledge, the Subsidiaries, nor to the Company’s knowledge, any of their respective executive officers has, in the past five years, made any unlawful contributions to any candidate for any political office (or failed fully to disclose any contribution in violation of law) or made any contribution or other payment to any official of, or candidate for, any federal, state, municipal, or foreign office or other person charged with similar public or quasi-public duty in violation of any law or of the character required to be disclosed in the Prospectus; (ii) no relationship, direct or indirect, exists between or among the Company or, to the Company’s knowledge, the Subsidiaries or any affiliate of any of them, on the one hand, and the directors, officers and stockholders of the Company or, to the Company’s knowledge, the Subsidiaries, on the other hand, that is required by the Securities Act to be described in the Registration Statement and the Prospectus that is not so described; (iii) no relationship, direct or indirect, exists between or among the Company or the Subsidiaries or any affiliate of them, on the one hand, and the directors, officers, stockholders or directors of the Company or, to the Company’s knowledge, the Subsidiaries, on the other hand, that is required by the rules of FINRA to be described in the Registration Statement and the Prospectus that is not so described; (iv) there are no material outstanding loans or advances or material guarantees of indebtedness by the Company or, to the Company’s knowledge, the Subsidiaries to or for the benefit of any of their respective officers or directors or any of the members of the families of any of them; and (v) the Company has not offered, or caused any placement agent to offer, Common Stock to any person with the intent to influence unlawfully (A) a customer or supplier of the Company or the Subsidiaries to alter the customer’s or supplier’s level or type of business with the Company or the Subsidiaries or (B) a trade journalist or publication to write or publish favorable information about the Company or the Subsidiaries or any of their respective products or services, and, (vi) neither the Company nor the Subsidiaries nor, to the Company’s knowledge, any employee or agent of the Company or the Subsidiaries has made any payment of funds of the Company or the Subsidiaries or received or retained any funds in violation of any law, rule or regulation (including, without limitation, the Foreign Corrupt Practices Act of 1977), which payment, receipt or retention of funds is of a character required to be disclosed in the Registration Statement or the Prospectus.

 

oo.                               Status Under the Securities Act. The Company was not and is not an ineligible issuer as defined in Rule 405 under the Securities Act at the times specified in Rules 164 and 433 under the Securities Act in connection with the offering of the Placement Shares.

 

pp.                               No Misstatement or Omission in an Issuer Free Writing Prospectus. Each Issuer Free Writing Prospectus, as of its issue date and as of each Applicable Time (as defined in Section 25 below), did not, does not and will not, through the completion of the Placement or Placements for which such Issuer Free Writing Prospectus is issued, include any

 

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information that conflicted, conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, including any Incorporated Document that has not been superseded or modified. The foregoing sentence does not apply to statements in or omissions from any Issuer Free Writing Prospectus based upon and in conformity with written information furnished to the Company by FBR specifically for use therein.

 

qq.                               No Conflicts. Neither the execution of this Agreement by the Company, nor the issuance, offering or sale of the Placement Shares, nor the consummation by the Company of any of the transactions contemplated herein, nor the compliance by the Company with the terms and provisions hereof will conflict with, or will result in a breach of, any of the terms and provisions of, or has constituted or will constitute a default under, or has resulted in or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any contract or other agreement to which the Company may be bound or to which any of the property or assets of the Company is subject, except (i) such conflicts, breaches or defaults as may have been waived and (ii) such conflicts, breaches and defaults that would not have a Material Adverse Effect; nor will such action result (x) in any violation of the provisions of the organizational or governing documents of the Company, or (y) in any material violation of the provisions of any statute or any order, rule or regulation applicable to the Company or of any court or of any federal, state or other regulatory authority or other government body having jurisdiction over the Company, except where such violation would not reasonably be expected to have a Material Adverse Effect.

 

rr.                                     OFAC.

 

(i)                                     Neither the Company nor any Subsidiary (collectively, the “Entity”) nor, to the Company’s knowledge, any director, officer, employee, agent, affiliate or representative of the Entity, is a government, individual, or entity (in this paragraph (rr), “Person”) that is, or is owned or controlled by a Person that is:

 

(a)                                 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

 

(b)                                 located, organized or resident in a country or territory that is the subject of Sanctions.

 

(ii)                            The Entity will not, directly or indirectly, knowingly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:

 

(a)                                 to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or

 

(b)                                 in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).

 

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(iii)                         The Entity represents and covenants that, except as detailed in the Registration Statement and the Prospectus, for the past 5 years, it has not knowingly engaged in and is not now knowingly engaged in any dealing or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.

 

ss.                                   Stock Transfer Taxes. On each Settlement Date, all material stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Placement Shares to be sold hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with by the Company in all material respects.

 

Any certificate signed by an officer of the Company and delivered to FBR or to counsel for FBR pursuant to or in connection with this Agreement shall be deemed to be a representation and warranty by the Company, as applicable, to FBR as to the matters set forth therein.

 

7.                                      Covenants of the Company.  The Company covenants and agrees with FBR 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 FBR under the Securities Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act) (the “Prospectus Delivery Period”) (i) the Company will notify FBR promptly of the time when any subsequent amendment to the Registration Statement, other than documents incorporated by reference or amendments not related to any Placement, 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 related to the Placement or for additional information related to the Placement, (ii) the Company will prepare and file with the Commission, promptly upon FBR’s request, any amendments or supplements to the Registration Statement or Prospectus that, upon the advice of the Company’s legal counsel, may be necessary or advisable in connection with the distribution of the Placement Shares by FBR (provided, however, that the failure of FBR to make such request shall not relieve the Company of any obligation or liability hereunder, or affect FBR’s right to rely on the representations and warranties made by the Company in this Agreement and provided, further, that the only remedy FBR shall have with respect to the failure to make such filing shall be to cease making sales under this Agreement until such amendment or supplement is filed); (iii) the Company will not file any amendment or supplement to the Registration Statement or Prospectus relating to the Placement Shares or a security convertible into the Placement Shares (other than an Incorporated Document) unless a copy thereof has been submitted to FBR within a reasonable period of time before the filing and FBR has not reasonably objected thereto (provided, however, that (A) the failure of FBR to make such objection shall not relieve the Company of any obligation or liability hereunder, or affect FBR’s right to rely on the representations and warranties made by the Company in this Agreement and (B) the Company has no obligation to provide FBR any advance copy of such filing or to provide FBR an opportunity to object to such filing if the filing does not name FBR or does not relate to the transaction herein provided; and provided, further, that the only remedy FBR shall have with respect to the failure by the

 

17

 

Company to obtain such consent shall be to cease making sales under this Agreement) and the Company will furnish to FBR 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; and (iv) the Company will cause each amendment or supplement to the Prospectus to be filed with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the Securities Act or, in the case of any document to be incorporated therein by reference, to be filed with the Commission as required pursuant to the Exchange Act, within the time period prescribed (the determination to file or not file any amendment or supplement with the Commission under this Section 7(a), based on the Company’s reasonable opinion or reasonable objections, shall be made exclusively by the Company).

 

b.                                      Notice of Commission Stop Orders. The Company will advise FBR, 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 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. The Company will advise FBR promptly after it receives any request by the Commission for any amendments to the Registration Statement or any amendment or supplements to the Prospectus or any Issuer Free Writing Prospectus or for additional information related to the offering of the Placement Shares or for additional information related to the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus.

 

c.                                       Delivery of Prospectus; Subsequent Changes. During the Prospectus Delivery Period, 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 the Company has omitted any information from the Registration Statement pursuant to Rule 430A under the Securities Act, it will use its commercially reasonable efforts to comply with the provisions of and make all requisite filings with the Commission pursuant to said Rule 430A and to notify FBR promptly of all such filings. If during the Prospectus Delivery Period any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such Prospectus Delivery Period it is necessary to amend or supplement the Registration Statement or Prospectus to comply with the Securities Act, the Company will promptly notify FBR 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 the filing of any amendment or supplement, if in the judgment of the Company, doing so is in the best interest of the Company.

 

d.                                      Listing of Placement Shares. During the Prospectus Delivery Period, the

 

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Company will use its commercially reasonable efforts to cause the Placement Shares to be listed on the Exchange and to qualify the Placement Shares for sale under the securities laws of such jurisdictions in the United States as FBR 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, file a general consent to service of process, or subject itself to taxation in any jurisdiction if it is not otherwise so subject.

 

e.                                       Delivery of Registration Statement and Prospectus.  The Company will furnish to FBR and its counsel (at the reasonable 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 the Prospectus Delivery Period (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 FBR may from time to time reasonably request and, at FBR’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 FBR 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.                                       Use of Proceeds. The Company will use the Net Proceeds as described in the Prospectus in the section entitled “Use of Proceeds.”

 

h.                                      Notice of Other Sales. Without the prior written consent of FBR, the Company will not, directly or indirectly, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any Common Stock (other than the Placement Shares offered pursuant to this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any rights to purchase or acquire, Common Stock during the period beginning on the date on which any Placement Notice is delivered to FBR hereunder and ending on the third (3rd) Trading Day immediately following the final Settlement Date with respect to Placement Shares sold pursuant to such Placement Notice (or, if the Placement Notice has been terminated or suspended prior to the sale of all Placement Shares covered by a Placement Notice, the date of such suspension or termination); and will not directly or indirectly in any other “at the market” or continuous equity transaction offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any Common Stock (other than the Placement Shares offered pursuant to this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any rights to purchase or acquire, Common Stock prior to the termination of this Agreement; provided, however, that such restrictions will not apply in connection with the Company’s issuance or sale of (i) Common Stock, options to purchase Common Stock or Common Stock issuable upon the exercise of options or settlement of other equity awards, pursuant to any stock option, or benefits plan, stock ownership plan or dividend reinvestment plan (but not Common Stock subject to a waiver to exceed plan limits in its dividend reinvestment plan) of the Company

 

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whether now in effect or hereafter implemented; (ii) Common Stock issuable upon conversion of securities or the exercise of warrants, options or other rights in effect or outstanding, and disclosed in filings by the Company available on EDGAR or otherwise in writing to FBR, (iii) Common Stock, or securities convertible into or exercisable for Common Stock, offered and sold in a privately negotiated transaction to vendors, customers, strategic partners or potential strategic partners or other investors conducted in a manner so as not to be integrated with the offering of Common Stock hereby, (iv) Common Stock in connection with any acquisition, strategic investment, commercial transaction or other similar transaction (including any joint venture, strategic alliance or partnership), (v) Common Stock issuable as a matching contribution under the Company’s 401(k) plan or (vi) Common Stock issuable as payment in satisfaction of accrued dividends payable upon the Company’s Series C Convertible Preferred Stock.

 

i.                                          Change of Circumstances. The Company will, at any time during the pendency of a Placement Notice advise FBR 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 required to be provided to FBR pursuant to this Agreement.

 

j.                                         Due Diligence Cooperation. During the term of this Agreement, the Company will cooperate with any reasonable due diligence review conducted by FBR or its representatives 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 FBR may reasonably request.

 

k.                                      Required Filings Relating to Placement of Placement Shares. The Company agrees that on such dates as the Securities Act shall require, 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 date a filing under Rule 424(b) is made, a “Filing Date”), which prospectus supplement will set forth, within the relevant period, the amount of Placement Shares sold through FBR, the Net Proceeds to the Company and the compensation payable by the Company to FBR 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.

 

l.                                          Representation Dates; Certificate. Each time during the term of this Agreement that the Company:

 

(i)                                     amends or supplements (other than by means of a prospectus supplement relating solely to an offering of securities other than the Placement Shares) the Registration Statement or the Prospectus relating to the Placement Shares by means of a post-effective amendment, sticker, or supplement but not by means of incorporation of documents by reference into the Registration Statement or the Prospectus relating to the Placement Shares;

 

(ii)                                  files an annual report on Form 10-K under the Exchange Act (including any Form 10-K/A containing amended audited financial information or a material amendment to the previously filed Form 10-K);

 

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(iii)          files its quarterly reports on Form 10-Q under the Exchange Act; or

 

(iv)          files a current report on Form 8-K containing amended financial information (other than information “furnished” pursuant to Items 2.02 or 7.01 of Form 8-K or to provide disclosure pursuant to Item 8.01 of Form 8-K relating to the reclassification of certain properties as discontinued operations in accordance with Statement of Financial Accounting Standards No. 144) 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 FBR (but in the case of clause (iv) above only if FBR reasonably determines that the information contained in such Form 8-K is material) with a certificate, in the form attached hereto as Exhibit 7(1). The requirement to provide a certificate under this Section 7(1) shall be automatically 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 on which the Company files its annual report on Form 10-K. Notwithstanding the foregoing, (i) upon the delivery of the first Placement Notice hereunder and (ii) if the Company subsequently decides to sell Placement Shares following a Representation Date when the Company relied on such waiver and did not provide FBR with a certificate under this Section 7(1), then before FBR sells any Placement Shares, the Company shall provide FBR with a certificate, in the form attached hereto as Exhibit 7(1), dated the date of the Placement Notice.

 

m.           Legal Opinion. On or prior to the date of the first Placement Notice given hereunder the Company shall cause to be furnished to FBR a written opinion and a negative assurance letter of Goodwin Procter LLP or other counsel reasonably satisfactory to FBR (“Company Counsel”), each in form and substance reasonably satisfactory to FBR. Thereafter, within five (5) 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(l) for which no waiver is applicable, and not more than once per calendar quarter, the Company shall cause to be furnished to FBR a negative assurance letter of Company Counsel in form and substance reasonably satisfactory to FBR; provided that, in lieu of such negative assurance for subsequent periodic filings under the Exchange Act, Company Counsel may furnish FBR with a letter (a “Reliance Letter”) to the effect that FBR may rely on the negative assurance letter previously delivered under this Section 7(m) to the same extent as if it were dated the date of such letter (except that statements in such prior letter shall be deemed to relate to the Registration Statement and the Prospectus as amended or supplemented as of the date of the Reliance Letter).

 

n.             Comfort Letter. On or prior to the date of the first Placement Notice given hereunder and within five (5) Trading Days after each subsequent Representation Date, other than pursuant to Section 7(l)(iii), the Company shall cause its independent accountants to furnish FBR letters (the “Comfort Letters”), dated the date the Comfort Letter is delivered, which shall meet the requirements set forth in this Section 7(n). The Comfort Letter from the Company’s independent accountants shall be in a form and substance reasonably satisfactory to FBR, (i)

 

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confirming that they are an independent 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 underwriters 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.

 

o.             Market Activities. The Company will not, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes or would 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 Placement Shares or (ii) sell, bid for, or purchase Placement Shares in violation of Regulation M, or pay anyone any compensation for soliciting purchases of the Placement Shares other than FBR.

 

p.             Investment Company Act. The Company will conduct its affairs in such a manner so as to reasonably ensure that neither it nor the 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.

 

q.             No Offer to Sell. Other than an Issuer Free Writing Prospectus approved in advance by the Company and FBR in its capacity as agent hereunder pursuant to Section 23, neither of FBR nor the Company (including its agents and representatives, other than FBR in its capacity as such) will make, use, prepare, authorize, approve or refer to any written communication (as defined in Rule 405), required to be filed with the Commission, that constitutes an offer to sell or solicitation of an offer to buy Placement Shares hereunder.

 

r.              Sarbanes-Oxley Act. The Company will maintain and keep accurate books and records reflecting its assets and maintain internal accounting controls in a manner designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and including those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the Company’s consolidated financial statements in accordance with GAAP, (iii) that receipts and expenditures of the Company are being made only in accordance with management’s and the Company’s directors’ authorization, and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements. The Company will maintain disclosure controls and procedures that comply with the requirements of the Exchange Act.

 

8.             Representations and Covenants of FBR. FBR represents and warrants that it is duly registered as a broker-dealer under FINRA, the Exchange Act and the applicable statutes and regulations of each state in which the Placement Shares will be offered and sold, except such states in which FBR is exempt from registration or such registration is not otherwise required. FBR shall continue, for the term of this Agreement, to be duly registered as a broker-dealer

 

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under FINRA, the Exchange Act and the applicable statutes and regulations of each state in which the Placement Shares will be offered and sold, except such states in which it is exempt from registration or such registration is not otherwise required, during the term of this Agreement.  FBR shall comply with all applicable law and regulations in connection with the transactions contemplated by this Agreement, including the issuance and sale through FBR of the Placement Shares.

 

9.             Payment of Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, filing, including any fees required by the Commission, and printing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment and supplement thereto and each Issuer Free Writing Prospectus, in such number as FBR shall deem reasonably necessary, (ii) the printing and delivery to FBR of this Agreement and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Placement Shares, (iii) the preparation, issuance and delivery of the certificates, if any, for the Placement Shares to FBR, including any stock or other transfer taxes and any capital duties, stamp duties or other duties or taxes payable upon the sale, issuance or delivery of the Placement Shares to FBR, (iv) the fees and disbursements of the counsel, accountants and other advisors to the Company, (v) the reasonable and documented out-of-pocket fees and disbursements of counsel to FBR up to $20,000; (vi) the fees and expenses of the transfer agent and registrar for the Common Stock, (vii) the filing fees incident to any review by FINRA of the terms of the sale of the Placement Shares, and (viii) the fees and expenses incurred in connection with the listing of the Placement Shares on the Exchange.

 

10.          Conditions to FBR’s Obligations. The obligations of FBR 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 (other than those representations and warranties made as of a specified date or time), to the due performance in all material respects by the Company of its obligations hereunder, to the completion by FBR of a due diligence review satisfactory to it in its reasonable judgment, and to the continuing reasonable satisfaction (or waiver by FBR in its sole discretion) of the following additional conditions:

 

a.             Registration Statement Effective. The Registration Statement shall remain effective and shall be available for the sale of all Placement Shares contemplated to be issued by any Placement Notice.

 

b.             No Material Notices. None of the following events shall have occurred and be continuing: (i) receipt by the Company 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 receipt by the Company of notification of 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 receipt by the Company of notification of the initiation of, or a threat to initiate, any proceeding for such

 

23

 

purpose; or (iv) the occurrence of any event that makes any material statement made in the Registration Statement or the Prospectus or any material Incorporated Document untrue in any material respect or that requires the making of any changes in the Registration Statement, the Prospectus or any material Incorporated Document 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 or any material Incorporated Document, 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. FBR 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 FBR’s reasonable opinion is material, or omits to state a fact that in FBR’s reasonable 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 Effect, or any development that would cause a Material Adverse Effect, or a downgrading in or withdrawal of the rating assigned to any of the Company’s securities (other than asset backed securities) by any “nationally recognized statistical rating organization,” as such term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act (a “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 FBR (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.             Legal Opinion of Company Counsel. FBR shall have received the opinion and negative assurance letter of Company Counsel required to be delivered pursuant to Section 7(m) on or before the date on which such delivery of such opinion and negative assurance letter are required pursuant to Section 7(m).

 

f.             Legal Opinion of FBR Counsel. FBR shall have received a written opinion and a negative assurance letter of Duane Morris LLP or other counsel reasonably satisfactory to FBR (“FBR Counsel”) on or before the date on which the delivery of the Company Counsel legal opinion is required pursuant to Section 7(m), with respect to such matters as FBR may reasonably require, and the Company shall have furnished to such counsel such documents as FBR Counsel may reasonably request for enabling them to pass upon such matters.

 

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

 

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h.             Representation Certificate. FBR shall have received the certificate required to be delivered pursuant to Section 7(1) on or before the date on which delivery of such certificate is required pursuant to Section 7(1).

 

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

 

j.              No Suspension. Trading in the Common Stock shall not have been suspended on the Exchange and the Common Stock shall not have been delisted from the Exchange.

 

k.             Other Materials. On each date on which the Company is required to deliver a certificate pursuant to Section 7(1), the Company shall have furnished to FBR such appropriate further information, certificates and documents as FBR may reasonably request and which are usually and customarily furnished by an issuer of securities in connection with a securities offering of the type contemplated hereby. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof.

 

l.              Securities Act Filings Made. All filings with the Commission required by Rule 424 under the Securities Act 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 approved for listing on the Exchange, subject only to notice of issuance, or the Company shall have filed an application for listing of the Placement Shares on the Exchange at, or prior to, the issuance of any Placement Notice.

 

n.             No Termination Event. There shall not have occurred any event that would permit FBR to terminate this Agreement pursuant to Section 13(a).

 

11.          Indemnification and Contribution.

 

(a)           Company Indemnification. The Company agrees to indemnify and hold harmless FBR, its partners, members, directors, officers, employees and agents and each person, if any, who controls FBR within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act as follows:

 

(i)            against any and all loss, liability, claim, damage and expense whatsoever, as incurred, joint or several, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact included in any related Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

25

 

(ii)           against any and all loss, liability, claim, damage and expense whatsoever, as incurred, joint or several, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 11(d) below) any such settlement is effected with the written consent of the Company, which consent shall not unreasonably be delayed or withheld; and

 

(iii)          against any and all expense whatsoever, as incurred (including the reasonable and documented out-of-pocket fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above,

 

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made solely in reliance upon and in conformity with written information furnished to the Company by FBR expressly for use in the Registration Statement (or any amendment thereto), or in any related Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto).

 

(b)           Indemnification by FBR. FBR agrees to indemnify and hold harmless the Company and its directors and officers, 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 against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 11(a) of this Agreement, 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 in any related Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with information relating to FBR and furnished to the Company in writing by FBR expressly for use therein.

 

(c)           Procedure. Any party that proposes to assert the right to be indemnified under this Section 11 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 11, 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 11 and (ii) any liability that it may have to any indemnified party under the foregoing provisions of this Section 11 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

 

26

 

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 of interest 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 and documented out-of-pocket 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 and documented out-of-pocket 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 reasonable and documented out-of-pocket 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 in reasonable detail. 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 11 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent (1) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (2) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

(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 11 is applicable in accordance with its terms but for any reason is held to be unavailable from the Company or FBR, the Company and FBR 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 FBR, such as persons who control the Company within the meaning of the Securities Act or the Exchange 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 FBR may be subject in such proportion as shall be appropriate to reflect the

 

27

 

relative benefits received by the Company on the one hand and FBR on the other hand. The relative benefits received by the Company on the one hand and FBR 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 FBR (before deducting expenses) 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 FBR, on the other hand, 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 FBR, 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 FBR agree that it would not be just and equitable if contributions pursuant to this Section 11(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 11(d) shall be deemed to include, for the purpose of this Section 11(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 11(c) hereof. Notwithstanding the foregoing provisions of this Section 11(d), FBR 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 11(d), any person who controls a party to this Agreement within the meaning of the Securities Act or the Exchange Act, and any officers, directors, partners, employees or agents of FBR, will have the same rights to contribution as that party, and each officer who signed the Registration Statement and director of the Company 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 11(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 11(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 11(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 11(c) hereof.

 

12.          Representations and Agreements to Survive Delivery. The indemnity and contribution agreements contained in Section 11 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 FBR, any

 

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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.

 

13.          Termination.

 

a.             FBR may terminate this Agreement, by notice to the Company, as hereinafter specified at any time (1) if there has been, since the time of execution of this Agreement or since the date as of which information is given in the Prospectus, any Material Adverse Effect, or any development that would have a Material Adverse Effect that, in the sole judgment of FBR, is material and adverse and makes it impractical or inadvisable to market the Placement Shares or to enforce contracts for the sale of the Placement Shares, (2) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of FBR, impracticable or inadvisable to market the Placement Shares or to enforce contracts for the sale of the Placement Shares, (3) if trading in the Common Stock has been suspended or limited by the Commission or the Exchange, or if trading generally on the Exchange has been suspended or limited, or minimum prices for trading have been fixed on the Exchange, (4) if any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market shall have occurred and be continuing, (5) if a major disruption of securities settlements or clearance services in the United States shall have occurred and be continuing, or (6) if a banking moratorium has been declared by either U.S. Federal or New York authorities. Any such termination shall be without liability of any party to any other party except that the provisions of Section 9 (Payment of Expenses), Section 11 (Indemnification and Contribution), Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding such termination. If FBR elects to terminate this Agreement as provided in this Section 13(a), FBR shall provide the required notice as specified in Section 14 (Notices).

 

b.             The Company shall have the right, by giving five (5) 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 9 (Payment of Expenses), Section 11 (Indemnification and Contribution), Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding such termination.

 

c.             FBR shall have the right, by giving five (5) 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 9 (Payment of Expenses), Section 11 (Indemnification and Contribution), Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding such termination.

 

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d.             Unless earlier terminated pursuant to this Section 13, this Agreement shall automatically terminate upon the issuance and sale of all of the Placement Shares through FBR on the terms and subject to the conditions set forth herein except that the provisions of Section 9 (Payment of Expenses), Section 11 (Indemnification and Contribution), Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) 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 13(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 9 (Payment of Expenses), Section 11 (Indemnification and Contribution), Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) shall remain in full force and effect. Upon termination of this Agreement, the Company shall not have any liability to FBR for any discount, commission or other compensation with respect to any Placement Shares not otherwise sold by FBR under this Agreement.

 

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 FBR 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.

 

14.          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, and if sent to FBR, shall be delivered to:

 

FBR Capital Markets & Co.

1300 North 17th Street

Suite 1400

Arlington, Virginia 22209

Attention:          Legal Department
 Telephone:        (703) 312-9500

Email:                atmdesk@fbr.com

 

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with a copy to:

 

Duane Morris LLP

One Riverfront Plaza
 1037 Raymond Boulevard, Suite 1800
 Newark, New Jersey  07102-5429

Attention:          James T. Seery
 Telephone:        (973) 424-2088
 Email:                jtseery@duanemorris.com

 

and if to the Company, shall be delivered to:

 

Plug Power Inc.

968 Albany Shaker Road

Latham, New York 12110
 Attention:          Gerard L. Conway, Jr.
 Telephone:        (518) 738-0970

Email:                gconway@plugpower.com

 

with a copy to:

 

Goodwin Procter LLP

100 Northern Avenue

Boston, Massachusetts 02210

Attention:          Robert P. Whalen, Jr.
 Telephone:        (617) 570-1394

Email:                rwhalen@goodwinlaw.com

 

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, by email, or by verifiable facsimile transmission on or before 4:30 p.m., New York City time, on a Business Day 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 Exchange and commercial banks in the City of New York are open for business.

 

15.          Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and FBR and their respective successors and the affiliates, controlling persons, officers and directors referred to in Section 11 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 the Company nor FBR may assign its rights or

 

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obligations under this Agreement without the prior written consent of the other party.

 

16.          Adjustments for Stock Splits. The parties acknowledge and agree that all share-related numbers contained in this Agreement shall be adjusted to take into account any share consolidation, stock split, stock dividend, corporate domestication or similar event effected with respect to the Placement Shares.

 

17.            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 FBR. 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.

 

18.          GOVERNING LAW AND TIME; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. THE COMPANY AND FBR EACH HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

19.          CONSENT TO JURISDICTION. 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

 

32

 

PROCESS IN ANY MANNER PERMITTED BY LAW.

 

20.          Use of Information. FBR may not use any information gained in connection with this Agreement and the transactions contemplated by this Agreement, including due diligence, to advise any party with respect to transactions not expressly approved by the Company.

 

21.          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 or email of a .pdf attachment.

 

22.          Effect of Headings.  The section, Schedule and Exhibit headings herein are for convenience only and shall not affect the construction hereof.

 

23.          Permitted Free Writing Prospectuses. The Company represents, warrants and agrees that, unless it obtains the prior consent of FBR, and FBR represents, warrants and agrees that, unless it obtains the prior consent of the Company, it has not made and will not make any offer relating to the Placement Shares that would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405, required to be filed with the Commission. Any such free writing prospectus consented to by FBR or by the Company, as the case may be, is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company represents and warrants that it has treated and agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and has complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely filing with the Commission where required, legending and record keeping. For the purposes of clarity, the parties hereto agree that all free writing prospectuses, if any, listed in Exhibit 23 hereto are Permitted Free Writing Prospectuses.

 

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

 

a.             FBR is acting solely as agent in connection with the public offering of the Placement Shares and in connection with each transaction contemplated by this Agreement and the process leading to such transactions, and no fiduciary or advisory relationship between the Company or any of its respective affiliates, stockholders (or other equity holders), creditors or employees or any other party, on the one hand, and FBR, on the other hand, has been or will be created in respect of any of the transactions contemplated by this Agreement, irrespective of whether or not FBR has advised or is advising the Company on other matters, and FBR has no obligation to the Company with respect to the transactions contemplated by this Agreement except the obligations expressly set forth in this Agreement;

 

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

 

c.             FBR has not provided any legal, accounting, regulatory or tax advice with respect to the transactions contemplated by this Agreement and it has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate;

 

d.             it is aware that FBR and its affiliates are engaged in a broad range of

 

33

 

transactions which may involve interests that differ from those of the Company and FBR has no obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship or otherwise; and

 

e.             it waives, to the fullest extent permitted by law, any claims it may have against FBR for breach of fiduciary duty or alleged breach of fiduciary duty in connection with the sale of Placement Shares under this Agreement and agrees that FBR shall not have any liability (whether direct or indirect, in contract, tort or otherwise) to it in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on its behalf or in right of it or the Company, employees or creditors of Company, other than in respect of FBR’s obligations under this Agreement and to keep information provided by the Company to FBR and its counsel confidential to the extent not otherwise publicly-available.

 

25.          Definitions.  As used in this Agreement, the following terms have the respective meanings set forth below:

 

“Applicable Time” means (i) each Representation Date and (ii) the time of each sale of any Placement Shares pursuant to this Agreement.

 

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433, relating to the Placement Shares that (1) is required to be filed with the Commission by the Company, (2) is a “road show” that is a “written communication” within the meaning of Rule 433(d)(8)(i) whether or not required to be filed with the Commission, or (3) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Placement Shares or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g) under the Securities Act.

 

“Rule 172,” “Rule 405,” “Rule 415,” “Rule 424,” “Rule 424(b),” “Rule 430B,” and “Rule 433” refer to such rules under the Securities Act.

 

All references in this Agreement to financial statements and schedules and other information that is “contained,” “included” or “stated” in the Registration Statement or the Prospectus (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information that is incorporated by reference in the Registration Statement or the Prospectus, as the case may be.

 

All references in this Agreement to the Registration Statement, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to EDGAR; all references in this Agreement to any Issuer Free Writing Prospectus (other than any Issuer Free Writing Prospectuses that, pursuant to Rule 433, are not required to be filed with the Commission) shall be deemed to include the copy thereof filed with the Commission pursuant to EDGAR; and all references in this Agreement to “supplements” to the Prospectus shall include, without limitation, any supplements, “wrappers” or similar materials prepared in connection with any offering, sale or private placement of any Placement Shares by FBR outside of the United States.

 

[Remainder of the page intentionally left blank]

 

34

 

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

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
PLUG POWER, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Andrew Marsh
    
	
 
    	
 
    	
Name: Andrew Marsh
    
	
 
    	
 
    	
Title: Chief Executive Officer
    

 

	
 
    	
ACCEPTED as of the date first-above written:
    
	
 
    	
 
    
	
 
    	
FBR CAPITAL MARKETS & CO.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Patrice McNicoll
    
	
 
    	
 
    	
Name:   Patrice McNicoll
    
	
 
    	
 
    	
Title:   Co-Head of Capital Markets
    

 

35

 

SCHEDULE 1

 

 

	
FORM OF PLACEMENT 
    	
NOTICE
    

 

 

	
From:
    	
Plug
    	
 Power Inc.
    
	
 
    	
 
    	
 
    
	
To:
    	
FBR Capital Markets & Co.
    	
 
    
	
 
    	
 
    	
 
    
	
Attention:
    	
[·]
    	
 
    
	
 
    	
 
    	
 
    
	
Subject:
    	
At Market Issuance—Placement Notice
    	
 
    
	
 
    	
 
    	
 
    
	
Gentlemen:
    	
 
    	
 
    

 

Pursuant to the terms and subject to the conditions contained in the At Market Issuance Sales Agreement between Plug Power Inc., a Delaware corporation (the “Company”), and FBR Capital Markets & Co. (“FBR”), dated April 3, 2017, the Company hereby requests that FBR sell up to [    ] of the Company’s Common Stock, par value $0.01 per share, at a minimum market price of $            per share, during the time period beginning [month, day, time] and ending [month, day, time].

 

36

 

SCHEDULE 2

 

 

Compensation

 

 

The Company shall pay to FBR in cash, upon each sale of Placement Shares pursuant to this Agreement, an amount equal to 3.0% of the gross proceeds from each sale of Placement Shares.

 

37

 

SCHEDULE 3

 

 

Notice Parties

 

 

	
The Company
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Andrew J. Marsh
    	
 
    	
Andy_Marsh@plugpower.com
    
	
 
    	
 
    	
 
    
	
Paul B. Middleton
    	
 
    	
Paul_Middleton@plugpower.com
    
	
 
    	
 
    	
 
    
	
Gerard L. Conway, Jr.
    	
 
    	
gconway@plugpower.com
    
	
 
    	
 
    	
 
    
	
John A. Cococcia
    	
 
    	
jcococcia@plugpower.com
    
	
 
    	
 
    	
 
    
	
Martin D. Hull
    	
 
    	
mhull@plugpower.com
    

 

	
FBR
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Matthew Feinberg
    	
 
    	
mfeinberg@fbr.com
    
	
 
    	
 
    	
 
    
	
Ryan Loforte
    	
 
    	
rloforte@fbr.com
    
	
 
    	
 
    	
 
    
	
Patrice McNicoll
    	
 
    	
pmcnicoll@fbr.com
    
	
 
    	
 
    	
 
    
	
Keith Pompliano
    	
 
    	
kpompliano@fbr.com
    
	
 
    	
 
    	
 
    
	
with a copy to atmdesk@fbr.com
    	
 
    	
 
    

 

38

 

SCHEDULE 6(g)

 

 

Subsidiaries

 

 

	
Company
    	
 
    	
Jurisdiction
    
	
 
    	
 
    	
 
    
	
None. 
    	
 
    	
 
    

 

39

 

EXHIBIT 7(1)

 

Form of Representation Date Certificate

 

                               , 20          

 

This Representation Date Certificate (this “Certificate”) is executed and delivered in connection with Section 7(1) of the At Market Issuance Sales Agreement (the “Agreement”), dated April 3, 2017, and entered into between Plug Power Inc. (the “Company”) and FBR Capital Markets & Co. All capitalized terms used but not defined herein shall have the meanings given to such terms in the Agreement.

 

The Company hereby certifies as follows:

 

1.              As of the date of this Certificate (i) the Registration Statement does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading and (ii) neither the Registration Statement nor the Prospectus contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (iii) no event has occurred as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein not untrue or misleading for this paragraph 1 to be true.

 

2.              Each of the representations and warranties of the Company contained in the Agreement were, when originally made, and are, as of the date of this Certificate, true and correct in all material respects.

 

3.              Except as waived by FBR in writing, each of the covenants required to be performed by the Company in the Agreement on or prior to the date of the Agreement, this Representation Date, and each such other date prior to the date hereof as set forth in the Agreement, has been duly, timely and fully performed in all material respects and each condition required to be complied with by the Company on or prior to the date of the Agreement, this Representation Date, and each such other date prior to the date hereof as set forth in the Agreement has been duly, timely and fully complied with in all material respects.

 

4.              Subsequent to the date of the most recent financial statements in the Prospectus, and except as described in the Prospectus, including Incorporated Documents, there has been no Material Adverse Effect.

 

5.              No stop order suspending the effectiveness of the Registration Statement or of any part thereof has been issued, and no proceedings for that purpose have been instituted or are pending or threatened by any securities or other governmental authority (including, without limitation, the Commission).

 

6.              No order suspending the effectiveness of the Registration Statement or the qualification or registration of the Placement Shares under the securities or Blue Sky laws of any

 

40

 

jurisdiction are in effect and no proceeding for such purpose is pending before, or threatened, to the Company’s knowledge or in writing by, any securities or other governmental authority (including, without limitation, the Commission).

 

The undersigned has executed this Representation Date Certificate as of the date first written above.

 

	
 
    	
PLUG POWER INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

EXHIBIT 23

 

Permitted Issuer Free Writing Prospectuses

 

None.Exhibit 4.3

 

	
DATED
    	
2016
    
	
 
    

 

WARRANT INSTRUMENT

	
 
    

 

 

	
5 New Street   Square | London EC4A 3TW
   Tel +44 (0)20 7300 7000
   Fax +44 (0)20 7300 7100
    	

    
	
DX  41   London
    	
 
    
	
www.taylorwessing.com
    	
 
    

 

 

	
THIS   WARRANT INSTRUMENT is made on
    	
2016
    

 

BY

 

VERONA PHARMA PLC, a public limited liability company incorporated and registered in England & Wales under company number 05375156, whose registered office is at One, Central Square, Cardiff CF10 1FS (the “Company”).

 

AGREED TERMS

 

This warrant instrument (this “Warrant Instrument”) has been entered into by the Company by way of deed poll relating to the Warrants to subscribe for the Shares (as such terms are defined herein), subject to the Company’s articles of association.

 

This Warrant Instrument and the exhibits and appendices set out the terms and conditions of the Warrants.

 

Subject to the terms herein, no modification to this Warrant Instrument may be effected except by deed poll executed by the Company.

 

This Warrant instrument shall be governed by and construed in accordance with English law.

 

This Warrant has been duly executed by the Company and delivered as a deed on the date shown at the beginning.

 

	
EXECUTED as a DEED by
    	
)
    
	
VERONA   PHARMA PLC
    	
)
    
	
acting by a   director
    	
)
    
	
in the presence   of:
    	
 
    
	
 
    	
Director
    

 

	
 
    	
 
    
	
Witness signature:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Witness name:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Witness address:
    	
 
    

 

 

Terms and Conditions of the Warrants

 

1.              Terms and Conditions of the Warrants

 

1.1       Background and Reasons for Issuing the Warrants

 

At a general meeting of shareholders of Verona Pharma plc (the “Company”) held on [•] 2016, the Board of Directors of the Company were authorised to issue certain warrants (the “Warrants”) providing for the subscription of new ordinary shares of £0.001 each in the capital of the Company (the “Shares”) in accordance with the Companies Act 2006 (the “Companies Act”) and the Company’s articles of association and on the terms and conditions set out herein (the “Terms and Conditions”).

 

The issuance of the Warrants is made pursuant to these Terms and Conditions.

 

In respect of the Reg D Offering (defined below), these Terms and Conditions will be appended to a securities purchase agreement dated June 17, 2016 (the “Securities Purchase Agreement”) between the Company and certain investors (the “US Investors”) in an offering exempt from registration pursuant to Regulation D (the “Reg D Offering”) under the U.S. Securities Act of 1933, as amended (the “Securities Act”) under which the US Investors have, subject to certain terms and conditions, undertaken to subscribe for securities of the Company (the “Units”), with each Unit consisting of (i) one Share; and (ii) one Warrant to purchase two-fifths (0.4) of a Share, at a purchase price of £0.02873 per Unit (the “US Transaction”).

 

Concurrently with the Reg D Offering there will be an offshore offering (together with the Reg D Offering, the “Offerings”) to certain investors pursuant to Regulation S (“Regulation S”) under the Securities Act (the “Offshore Investors” and, together with the US Investors, the “Investors”) under which the Offshore Investors have, subject to certain terms and conditions, undertaken to subscribe for Units, with each Unit consisting of (i) one Share; and (ii) one Warrant to purchase two-fifths (0.4) of a Share, at a purchase price of £0.02873 per Unit (the “Offshore Transaction”, together with the US Transaction, the “Transaction”).

 

1.2       Number of Warrants

 

The Company shall issue Warrants to the Investors entitling the holders thereof (the “Warrantholders”) to subscribe for in aggregate a maximum of 622,318,538 Shares (or corresponding number of ADSs, based on the exchange ratio applicable to the exchange of Shares for ADSs (the “ADS Exchange Ratio”)) in accordance with Section 2, subject to adjustment as described in these Terms and Conditions.

 

1.3       Subscription of Warrants

 

In accordance with the terms of the Offerings, the Warrants have been subscribed for by and shall be issued to the Investors at the completion of the Transaction.

 

The Warrants will be issued in certificated form in the form set out in Appendix C (each such certificate, a “Warrant Certificate”).  The Company shall maintain a register of the holders of Warrants, the Warrant Certificates they hold, and the number of Warrant Shares (defined below) for which their Warrants are exercisable.

 

The Warrants will not be listed by the Company on a regulated market or other trading platform.

 

1.4       Transfer of Warrants

 

The Warrants may not be transferred or pledged other than:

 

1

 

(a)                                 to the Warrantholder, an Affiliate (as such term is defined in the Registration Rights Agreement) of a Warrantholder, or to any corporation, partnership, limited liability company or other entity all of the beneficial ownership interests of which are held by the Warrantholder in a transaction not involving a disposition for value or to any investment fund or other entity controlled or managed by the Warrantholder or under common control with the Warrantholder, (or, if the Warrantholder is an investment company registered under the U.S. Investment Company Act of 1940, as amended (a “Mutual Fund”), pursuant to a merger or reorganization with or into another Mutual Fund that shares the same investment adviser registered pursuant to the requirements of the Investment Advisers Act of 1940, as amended), or to any partner, member or shareholder or former partner, member or shareholder of the Warrantholder, or

 

(b)                                 to a third party which would be holding, as the result of the transfer, Warrants representing the right to acquire at least 10,000,000 Shares, or if less, all of the Warrants held by the transferor (pledgor); or

 

(c)                                  pursuant to an effective registration statement under the Securities Act, or pursuant to Rule 144 under the Securities Act or any other exemption from registration under the Securities Act; and

 

provided that in each case:

 

i.                                          such transfer of Warrants is made in compliance with these Terms and Conditions, applicable securities laws, and all requirements of regulatory authorities, and in connection therewith the Company may require that the transferring Warrantholder deliver to the Company an opinion of counsel in a form reasonably satisfactory to the Company to the effect that registration under the Securities Act or qualification under the securities laws of any state is not required in connection with any such transfer; provided, however, that the Company shall not require such legal opinion for transfers made by Offshore Investors to persons outside of the U.S. in compliance with Regulation S (“Offshore Transfers”);

 

ii.                                       the holder of the Warrant to be transferred or pledged must, prior to transfer or pledge of the Warrant, deliver to the Company: (a) the original Warrant Certificate (or an indemnity in a form satisfactory to the Company (acting reasonably) in the event that the Warrant Certificate is lost or destroyed); (b) a duly executed Warrant Assignment in the form of Exhibit (A); and (c) an Accredited Investor Certification certifying the “accredited investor” status under the Securities Act of the transferee or pledgee in the form set out in Exhibit (B-1) or an Offshore Investor Certification in the form set out in Exhibit (B-2); and

 

iii.                                    each Warrant Certificate transferred as above provided, other than with respect to Offshore Transfers, shall bear an appropriate restrictive legend as set forth in Section 2.15.

 

2.              Terms and Conditions of Share Subscription

 

2.1       Right to Subscribe for Warrant Shares

 

Each Warrant Certificate entitles its holder to subscribe for a number of new Shares set forth in the Warrant Certificate or, following the U.S. Offering and at the election of the Warrantholder, a number of ADSs representing an equivalent number of Shares based on the ADS Exchange Ratio corresponding to the ratio in the Company’s ADS facility with the depository bank (as applicable, the “Warrant Shares”).  References herein to the Warrant Shares shall mean the Shares or, if applicable, the ADSs (representing an equivalent

2

 

number of Shares, based on the ADS Exchange Ratio determined from time to time, which shall be adjusted as necessary in connection with any subdivision or combination of the capital stock of the Company), mutatis mudantis.  The form of Exercise Notice will specify whether the Company will be required to deliver Shares on exercise of the Warrant, or ADSs representing an equivalent number of Shares.

 

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

 

No fractional shares or scrip representing fractional shares shall be issued upon the exercise of any Warrant. As to any fraction of a share which the Warrantholder would otherwise be entitled to purchase upon such exercise (determined on an aggregate basis with all other Warrants then being exercised by the Warrantholder), the Company shall round down to the next whole share.

 

2.2       Subscription Price

 

The subscription price for each Warrant Share is £0.034476 (which price is expressed on a per-Share basis), subject to adjustment as described in these Terms and Conditions (the “Warrant Exercise Price”). The Warrant Exercise Price shall be booked in its entirety to the share capital of the Company.

 

2.3       Share Subscription, Payment and Registration of Shares

 

Unless otherwise specifically provided under these Terms and Conditions, the Warrants shall be exercisable for the Warrant Shares as set forth in this Section 2.3 during the subscription period that commences on the earlier of (the “Commencement Date”) (i) the closing date of the U.S. Offering (defined below), and (ii) the first anniversary of the closing date of the Offerings, and ends on the fifth anniversary of the Commencement Date (the “Share Subscription Period”), provided that in the event that the Company announces the execution of a definitive agreement providing for an Acquisition (as defined below) prior to the beginning of the Share Subscription Period pursuant to the preceding clauses (i) or (ii), then the Share Subscription Period shall instead begin immediately following such announcement ( and in such case, the Warrant shall remain exercisable until the sixth anniversary of the closing of the Offerings) and the Company shall provide prompt notice to the Warrantholders of the commencement of such Share Subscription Period.  Any Warrants remaining unexercised after the end of the Share Subscription Period shall be automatically exercised pursuant to the cashless exercise procedures described in Section 2.4 hereof, without any action being taken by the Warrantholders, provided that the applicable Warrantholder is a holder of one or more Shares at such time (as described herein).

 

“Acquisition” means any of the following: (i) any sale, lease, license, transfer, conveyance or other disposition of all or substantially all of the assets of the Company; (ii) any reorganization, consolidation, merger, demerger or sale of shares of the Company (including, without limitation, a public tender offer for the shares in the Company) where the holders of the Company’s outstanding shares as of immediately before the transaction (or series of related transactions) beneficially own less than a majority by voting powers of the outstanding shares of the surviving or successor entity as of immediately after the transaction; (iii) a scheme of arrangement under Part 26 of the Companies Act of 2006 pursuant to which all of the securities or shares in the Company become vested in a third party; (iv) a takeover offer within the meaning of Part 28 of the Companies Act 2006; or (v) the acquisition by any “person” (together with his, her or its Affiliates) or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) acquires, directly or indirectly, the beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the 

 

3

 

Exchange Act) of outstanding shares of capital stock and/or other equity securities of the Company, in a single transaction or series of related transactions (including, without limitation, one or more tender offers or exchange offers), representing at least 50% of the voting power of or economic interests in the then outstanding shares of capital stock of the Company.

 

The Warrants may be exercised in whole or in part, at any time or from time to time on any day during the Share Subscription Period, by surrender of the Warrant Certificate and the exercise notice in the form set out in Exhibit (C) (the “Exercise Notice”), duly completed and executed by the Warrantholder, to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Warrantholder at the address of the Warrantholder appearing on the books of the Company) specifying whether the Warrants will be exercised by way of:

 

(a)                                 cash payment, with the Warrantholder making payment to the Company in cash of the Warrant Exercise Price for the Warrant Shares (the “Exercise Amount”) by wire transfer of immediately available funds to the account of the Company in an amount equal to the Exercise Amount on a delivery versus payment basis (except where the Warrants are exercised for ADSs); or

 

(b)                                 the cashless exercise procedure specified in section 2.4 below,

 

together with, in each case to the extent necessary under the Securities Act, delivery to the Company of either (i) an Accredited Investor Certification certifying the “accredited investor” status under the Securities Act of the recipient of the Warrant Shares to be received upon exercise of the Warrants for cash pursuant to the preceding clause (a), in the form set out in Exhibit (B-1), or (ii) an Offshore Investor Certification in the form set out in Exhibit (B-2), as applicable, in each case with such exercise to be effective upon receipt by the Company of such notice, such Exercise Amount and such Accredited Investor Certification (the “Effective Exercise”).

 

In the event a Warrantholder delivers an Accredited Investor Certification in connection with exercise of Warrants, unless there is then an effective registration statement covering the issuance or resale of the Warrant Shares to be issued upon exercise, the Warrant Shares shall bear the legend set forth in Section 2.15.  For the avoidance of doubt, in the event a Warrantholder delivers an Offshore Investor Certification, the Warrant Shares shall not bear a legend.  If there is an effective registration statement covering the Warrant Shares to be issued upon exercise, then the Warrant Shares shall be issued free of any restrictive legends and shall be delivered to the Warrantholder via CREST or DTC, as applicable (with such Shares being eligible for trading on the Alternative Investment Market (“AIM”), a market operated by the London Stock Exchange plc) and with the ADSs being eligible for trading on the Nasdaq Global Market or the Nasdaq Capital Market (“Nasdaq”) (in each case, as applicable).

 

If the Company has reasonable grounds to object to any attempted exercise, it must give written notice of such objection within two (2) Business Days of receipt of the related exercise notice.

 

The Company shall issue Warrant Shares on the basis of the Warrants validly exercised in accordance with this Section 2.3 to the exercising Warrantholder.  Warrant Shares issued on the basis of Warrants validly exercised in accordance with this Section 2.3 shall be: (i) written up in the Company’s register of members; and (ii) admitted to trading as set forth in Section 3.1.

 

Delivery of the Shares or ADSs representing the Warrant Shares issuable upon exercise shall be made within three (3) Business Days after the Effective Exercise (“T+3 Settlement”).

 

4

 

If the Company shall have completed a U.S. Offering prior to Effective Exercise and sold American depositary shares representing Shares (“ADSs”) in the U.S. Offering and the Warrantholder(s) deposit Warrant Shares (initially consisting of Shares) with the depositary for the ADSs, the Company shall use its best efforts to cooperate with any reasonable request made of the Company by or on behalf of the depositary for such ADSs in connection with any such deposit and any sale of the ADSs under an effective registration statement covering such ADSs or pursuant to an exemption from registration available under the U.S. securities laws; provided, any ADSs (either certificates or book entry notations) shall be issued with restrictive legends under the Securities Act if, at the time of such deposit of the Shares, the ADSs have not then been registered for resale under that certain Registration Rights Agreement between the Company and the parties listed on the signature pages thereto dated on or about the date of completion of the Offerings (the “Registration Rights Agreement”).

 

For the purposes of these Terms and Conditions “U.S. Offering” means the closing of the first sale of ordinary shares of the Company or ADSs to the public in the United States in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act and in connection with which such shares or ADSs are listed on the Nasdaq.

 

2.4       Cashless Exercise

 

The Warrantholder at its sole discretion may, if it is a shareholder of the Company, determine by specifying in the Exercise Notice to exercise, in whole or in part, at such time by means of a “cashless exercise” in which the Warrantholder shall be entitled to receive a number of Warrant Shares by way of a non pre-emptive bonus issue of fully paid up Warrant Shares to the relevant Warrantholder made out of either distributable or non-distributable reserves of the Company (including by way of a capitalisation of (i) the Company’s share premium account in accordance with section 610(3) of the Companies Act 2006 (or other non-distributable reserve from time to time); or (ii) the Company’s distributable reserves from time to time (as defined in section 830(2) of the Companies Act)), of equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

	
 
    	
(A) =
    	
the last Closing Price immediately preceding   the time of delivery of the Exercise Notice giving rise to the applicable “cashless   exercise”, as set forth in the applicable Exercise Notice;
    
	
 
    	
 
    	
 
    
	
 
    	
(B) =
    	
the Exercise Price of this Warrant, as   adjusted hereunder; and
    
	
 
    	
 
    	
 
    
	
 
    	
(X) =
    	
the number of Warrant Shares for which the   Warrantholder has elected to exercise this Warrant that would be issuable   upon exercise of this Warrant in accordance with the terms of this Warrant if   such exercise were by means of a cash exercise rather than a cashless   exercise.
    

 

For purposes of this Section 2.4, the “last Closing Price” means the last Closing Price (as defined in Section 2.10) as calculated over an entire trading day such that, in the event that this Warrant is exercised at a time that AIM or Nasdaq is open, the prior trading day’s volume weighted average price shall be used in this calculation. For the avoidance of doubt, if the Warrant is being exercised for Shares, then the last Closing Price shall be determined with reference to AIM and if the Warrant is being exercised for ADSs, then the last Closing Price shall be determined with reference to Nasdaq.

 

Notwithstanding anything contained herein to the contrary, the issuance of Warrant Shares upon the cashless exercise of a Warrant shall not be deemed to cause an adjustment pursuant to Sections 2.6 through 2.10 hereof.

 

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The provisions above permitting “cashless exercise” are intended, in part, to ensure that the exchange of this Warrant for Warrant Shares pursuant to such provisions will be characterized  as and constitute  a valid reorganization in the form of a recapitalization under  section 368(a)(1)(E) of the U.S. Internal Revenue Code of 1986, as amended.

 

2.5       Shareholder Rights

 

The Warrant Shares subscribed for on the basis of the Warrants will entitle the holders thereof to any possible dividend and to other shareholder rights upon their proper registration in the Company’s register of members.

 

2.6       Issuance of Warrant Shares or Rights Entitling to Shares

 

Should the Company, prior to the end of the Share Subscription Period, resolve on any issue of new shares, stock options or other special rights entitling to shares to all shareholders (other than an issue of shares that is made in order to effect a subdivision or combination of shares within the meaning of Section 2.7), the holders of Warrants shall have the same or equal rights as the shareholders to participate in such issue. This equality shall be achieved in the manner resolved by the Board of Directors of the Company by (i) changing the Warrant Exercise Price, (ii) changing the number of Warrant Shares which the Warrants entitle to subscribe for, or by (iii) using a combination of the aforementioned items (i) and (ii), provided that adjustment shall only be made pursuant to this Section 2.6 to the extent that adjustment is not provided for with respect to such transaction under Sections 2.7 through 2.13.

 

2.7       Adjustment for Stock Splits and Combinations

 

If the Company, prior to the end of the Share Subscription Period shall effect a subdivision of its ordinary shares, the Warrant Exercise Price then in effect immediately before that subdivision shall be proportionately decreased.  If the Company, prior to the end of the Share Subscription Period shall combine its ordinary shares, the Warrant Exercise Price then in effect immediately before the combination shall be proportionately increased.  For the avoidance of doubt, if the Company, prior to the end of the Share Subscription Period shall make any adjustment to the ADS Exchange Ratio, the number of ADSs receivable upon exercise of a Warrant, and the exercise price payable per ADS, shall be correspondingly adjusted.  Any adjustment under this Section 2.7 shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

2.8       Adjustment for Certain Dividends and Distributions

 

If the Company, prior to the end of the Share Subscription Period, shall make or issue, or fix a record date for the determination of holders of its ordinary shares entitled to receive, a dividend or other distribution to the shareholders from the fund for invested unrestricted equity payable in ordinary shares in the Company, then and in each such event the Warrant Exercise Price then in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Warrant Exercise Price then in effect by a fraction:

 

(a)                                 the numerator of which shall be the total number of ordinary shares outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(b)                                 the denominator of which shall be the total number of ordinary shares outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of ordinary shares issuable in payment of such dividend or distribution;

 

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provided, however, that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Warrant Exercise Price shall be recomputed accordingly as of the close of business on such date and thereafter the Warrant Exercise Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions, if any.

 

2.9       Adjustment in Number of Warrant Shares Issuable Upon Exercise of Warrants

 

When any adjustment is required to be made in the Warrant Exercise Price pursuant to Section 2.7 or 2.8, the number of Warrant Shares issuable upon the exercise of a Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of Warrant Shares issuable upon the exercise of the Warrant immediately prior to such adjustment, multiplied by the Warrant Exercise Price in effect immediately prior to such adjustment, by (ii) the Warrant Exercise Price in effect immediately after such adjustment.

 

2.10                        Adjustments for Other Dividends and Distributions

 

If the Company, prior to the end of the Share Subscription Period, shall: (i) pay or declare a dividend payable to all shareholders other than in ordinary shares (e.g. in cash or assets other than ordinary shares in the Company); or (ii) distribute assets to shareholders from the fund for invested unrestricted equity (other than ordinary shares), the share premium reserve or legal reserve or its share capital, then and in each such event the Warrant Exercise Price then in effect immediately before such event shall be decreased as of such event by multiplying the Warrant Exercise Price then in effect by a fraction:

 

(a)                                 the numerator of which shall be equal to (i) the Closing Price on the day immediately prior to the date when such event was first published (or if there is no such price, the fair market value of one ordinary share of the Company as of such date as determined in good faith by the Board of Directors of the Company) minus (ii) the amount per outstanding share of such dividend or distribution; and

 

(b)                                 the denominator of which shall be the Closing Price on the day immediately prior to the date when such event was first published (or if there is no such price, the fair market value of one ordinary share of the Company as of such date as determined in good faith by the Board of Directors of the Company).

 

In the event that the application of the above fraction would result in an increase in the Warrant Exercise Price, then no adjustment shall be made hereunder. If the Company distributes assets other than cash, the amount per outstanding share of the distribution shall be calculated by reference to the fair market value of the assets distributed as determined in good faith by the Board of Directors of the Company.

 

“Closing Price” for purposes of this Section 2.10 means: (i) prior to the closing of the U.S. Offering, the volume weighted average closing price of the ordinary shares of the Company on AIM  during the ten trading day period preceding the measurement date, or (ii) after the closing of the U.S. Offering, the most recently reported closing price of the ordinary shares or ADSs, as applicable, on the Nasdaq.

 

2.11                        Adjustment for Reorganization

 

(a)                                 If, prior to the end of the Share Subscription Period, there shall occur any reorganization, recapitalization, reclassification, consolidation, merger or demerger involving the Company in which the Company’s ordinary shares are converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 2.7, 2.8, 2.10 or 2.12) (collectively, a “Reorganization”), then, following such Reorganization, subject to Section 2.11(b), the Warrantholders shall receive upon exercise of the Warrants the kind and amount of securities, cash or other

 

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property, if any, which the Warrantholders would have been entitled to receive pursuant to such Reorganization if such exercise had taken place immediately prior to such Reorganization. Appropriate adjustment (as determined in good faith by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Warrantholder, to the end that the provisions set forth in these Terms and Conditions (including provisions with respect to changes in and other adjustments of the Warrant Exercise Price and the number of Warrant Shares issuable upon exercise of the Warrants) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter deliverable upon the exercise of the applicable Warrants.

 

(b)                                 The Warrantholders shall not be entitled to demand the redemption of the Warrants in relation to a merger or a division in accordance with Chapter 27 of the Companies Act, provided, however, that the Warrantholders shall be entitled to demand such redemption in the event that as a result of such merger or division the Warrants will be exercisable for anything other than shares or securities that are listed on a regulated market (within the meaning of the Markets in Financial Instruments Directive (2004/39(EC))) or a United States national securities exchange.

 

2.12                        Treatment of Warrants in an Acquisition

 

(a)                                 In the event of an Acquisition prior to the end of the Share Subscription Period (other than, for the purposes of this provision, an Acquisition consummated by way of an unsolicited third-party offer), the Company shall use its best efforts to ensure that lawful and adequate provision shall be made whereby each Warrantholder shall thereafter continue to have the right to subscribe for upon the Terms and Conditions and in lieu of the Warrant Shares issuable upon exercise of the Warrants held by such Warrantholder, such number of shares, where the value of each new warrant to purchase one share in the surviving or acquiring entity (“Acquirer”) is determined in accordance with the Black-Scholes Option Pricing formula set forth in Appendix (A) hereto, that is equivalent to the aggregate value of the Warrants held by such Warrantholder, where the value of each Warrant to purchase one Share in the Company is determined in accordance with the Black-Scholes Option Pricing formula set forth Appendix (B) hereto. Furthermore, the new warrants to purchase shares in the Acquirer referred to herein shall have the same expiration date as the Warrants, and shall have a strike price, KAcq, that is calculated in accordance with Appendix (A) hereto.  For the avoidance of doubt, if the Acquirer surviving or acquiring entity, as the case may be, is a member of a consolidated group for financial reporting purposes, the “Acquirer” shall be deemed to be the parent of such consolidated group for purposes of this Section 2.12 and Appendix (A) hereto.

 

(b)                                 Moreover, appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Exercise Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock (or ADSs) thereafter deliverable upon the exercise thereof. The Company shall not effect any such Acquisition unless prior to or simultaneously with the consummation thereof the successor corporation resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume by written instrument, reasonably deemed by the Board of Directors of the Company and the Warrantholder to be satisfactory in form and substance, the obligation to deliver to the holder of the Warrants, at the last address of such holder appearing on the books of the Company, such shares of stock, as, in accordance with the foregoing provisions, such holder may be entitled to purchase, and the other obligations under these Warrants. The provisions of this Section 2.12 shall similarly apply to successive Acquisitions.

 

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(c)                                  If the Company, in spite of using its best efforts, is unable to cause these Warrants to continue in full force and effect until the expiration of the Share Subscription Period in connection with any Acquisition, then the Company shall pay the Warrantholders an amount per Warrant to purchase one Share in the Company that is calculated in accordance with the Black-Scholes Option Pricing formula set forth in Appendix (B) hereto (the “Black-Scholes Value”). Such payment shall be made in cash in the event that the Acquisition results in the shareholders of the Company receiving cash from the Acquirer at the closing of the transaction, and shall be made in shares of the Company (with the value of each share in the Company determined according to SCorp in Appendix (B) hereto) in the event that the Acquisition results in the shareholders of the Company receiving shares in the Acquirer or other entity at the closing of the transaction. In the event that the shareholders of the Company receive both cash and shares at the closing of the transaction, such payment to the Warrantholders shall also be made in both cash and shares in the same proportion as the consideration received by the shareholders.  Following any payment required pursuant to this Section 2.12(c), the Warrant shall terminate, without payment of any additional consideration therefor.

 

(d)                                 Notwithstanding the foregoing, in the event that as a result of the Acquisition the Warrants will be exercisable for anything other than shares or securities that are listed on a regulated market (within the meaning of the Markets in Financial Instruments Directive (2004/39(EC))) or a United States national securities exchange, the Warrantholder shall be entitled to demand to receive a cash payment in an amount equal to the Black-Scholes Value per Warrant (calculated in accordance with Appendix B attached hereto) contemporaneously with or promptly after the consummation of such Acquisition.  Following any such demand, the Warrant shall terminate, without payment of any consideration other than the Black-Scholes Value therefor, effective upon the payment of such amount.

 

2.13                        Rights of Warrantholders in Certain Situations

 

(a)                                 If, prior to the end of the Share Subscription Period, the Company is placed into liquidation, the Warrantholders shall have the right to exercise the Warrants pursuant to these Terms and Conditions during a fixed period of time to be determined by the Board of Directors of the Company of which the Company shall give the Warrantholders written notice, provided that such period for exercise of the Warrants may not expire earlier than ten (10) Business Days following the date on which the Company sends the Warrantholders notice of such fixed period determined by the Board of Directors and five (5) Business Days prior to completion of the liquidation of the Company; provided further than any exercise by the Warrantholders of the Warrants may be conditioned upon the completion of the liquidation of the Company. Notwithstanding any other provisions in these Terms and Conditions, should the Company be struck off from Companies House prior to the exercise of the Warrants, the Warrantholders shall have no right to exercise the Warrants.

 

(b)                                 If, prior to the end of the Share Subscription Period, the Company makes a resolution to acquire its own shares through a tender offer to all the shareholders or to acquire other special rights entitling to shares issued in one or more transactions that were related to the offering of the Warrants (the “Related Offerings”) through a tender offer to all holders of such rights, the Company shall make an equal offer to the Warrantholders in respect of the Warrants. If the Company acquires its own shares in any other manner, or if the Company acquires stock options or special rights entitling to shares other than those issued in the Related Offerings, no measures will need to be taken in relation to the Warrants.

 

(c)                                  If, prior to the end of the Share Subscription Period, a tender offer regarding all shares, stock options and other special rights issued by the Company is made by a

 

9

 

party other than the Company, including pursuant to a scheme of arrangement under Part 26 of the Companies Act 2006 pursuant to which all of the securities or shares in the Company become vested in a third party, or should a shareholder have the obligation to redeem the shares from the Company’s other shareholders, or to redeem the stock options or other special rights issued by the Company, or should a shareholder have under the Companies Act the right and obligation to redeem the shares from the Company’s other shareholders, then the Warrantholders may transfer all of their Warrants to such offeror or redeemer, as the case may be. If any such tender offer results in the third party acquiring more than 50% of the voting stock of the Company, then that event shall be deemed an “Acquisition” as set forth above.

 

Should a shareholder under the Companies Act have and exercise the right to redeem the shares from the other shareholders of the Company, the Warrantholders shall upon request by such shareholder have a corresponding obligation to transfer all of their Warrants for redemption, in which case the Acquirer shall pay the Warrantholders the Black-Scholes Value per Warrant, and the Warrant shall terminate, without payment of any consideration other than the Black-Scholes Value therefor, effective upon satisfying such payment obligation.

 

The Board of Directors may at its discretion in any of the situations mentioned in this Section 2.13(c), also give the Warrantholders an opportunity (which for the avoidance of doubt shall not foreclose the Warrantholders from exercising the Warrants for the securities or other property for which they would otherwise have been exercisable) to exercise the Warrants or to convert the Warrants into equity issued by the offeror or redeemer, as the case may be, on such terms and within such reasonable time period prior to the completion of the tender offer or redemption, as resolved by the Board of Directors.

 

2.14                        Notice of Adjustment

 

Not less than ten (10) Business Days prior to the record date or effective date, as the case may be, of any action which requires or might require an adjustment or readjustment of the Warrant Exercise Price or the number, amount or type of securities or other assets issuable upon exercise of the Warrants, the Company shall give notice to the Warrantholders of such event, describing such event in reasonable detail and specifying the record date or effective date, as the case may be, and, if determinable, the required adjustment and computation thereof. If the required adjustment is not determinable as the time of such notice, the Company shall give notice to the Warrantholders of such adjustment and computation as soon as reasonably practicable after such adjustment becomes determinable.

 

2.15                        Legend

 

Neither the Warrants nor the Warrant Shares issuable upon exercise of the Warrants have been or will be registered under the Securities Act or under any state securities laws of the United States, except as provided under the Registration Rights Agreement executed in connection with the Offerings. Except as otherwise permitted by Section 1.4, each Warrant Certificate and each certificate representing the Warrant Shares shall bear the following legends or such variations thereof as the Company may prescribe from time to time:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT IN COMPLIANCE WITH THE SECURITIES ACT, (B) RULE 903 or 904 PURSUANT TO THE SECURITIES ACT, OR (C) RULE 144 UNDER THE SECURITIES ACT (UPON FURNISHING TO THE

 

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COMPANY SUCH REPRESENTATION LETTERS AS THE COMPANY MAY REQUIRE), OR (II) UNLESS AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, SHALL BE PROVIDED TO THE COMPANY, PROVIDING THAT SUCH SALE, TRANSFER OR ASSIGNMENT DOES NOT REQUIRE REGISTATION UNDER THE SECURITIES ACT.

 

Notwithstanding the foregoing, no Warrant Certificate issued to Offshore Investors pursuant to the Offshore Transaction nor any Warrant Shares issued to such Offshore Investors or their respective transferees pursuant to the cashless exercise procedures set forth in Section 2.4 hereof or pursuant to an exercise of the Warrant in connection with which a duly completed and executed Offshore Investor Certification is delivered shall bear such legend.

 

2.16                        Exercise Limitation

 

Notwithstanding any provisions herein to the contrary, from and after the time that the Company has ceased to qualify as a “foreign private issuer” (as that term is defined in the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”)), the Warrantholder shall not be entitled to exercise Warrants for a number of Shares in excess of that number of Shares which, upon giving effect to such exercise, would cause the aggregate number of Shares deemed beneficially owned by the Warrantholder to exceed 9.99% of the outstanding Shares following such exercise. For purposes of the foregoing proviso, the aggregate number of Shares beneficially owned by the Warrantholder shall include the number of Shares issuable upon exercise of this Warrant with respect to which determination of such proviso is being made, but shall exclude the Shares which would be issuable upon (i) exercise of the remaining, unexercised Warrants beneficially owned by the Warrantholder and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by the Warrantholder subject to a limitation on conversion or exercise analogous to the limitation contained herein.  Except as set forth in the preceding sentence, for purposes of this Section 2.16, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. Notwithstanding the foregoing, the Warrantholder may waive the foregoing limitation, or increase or decrease the foregoing limitation to any other percentage, by written notice to the Company; provided that a waiver by the Warrantholder of the foregoing limitation or a request to increase such limitation requires not less than 61 days prior written notice (with such waiver of the foregoing limitation or request to increase such limitation taking effect only upon the expiration of such 61 day notice period and applying only to the Warrantholder and not to any other holder of Warrants). For purposes of this Section 2.16, in determining the number of outstanding Shares, the Warrantholder may rely on the number of outstanding Shares as reflected in (x) the Company’s most recent periodic report filed with the SEC on the date thereof, (y) a more recent public announcement by the Company or (z) any other notice by the Company or its transfer agent setting forth the number of Shares outstanding. Upon the written request of the Warrantholder, the Company shall use commercially reasonable efforts to within confirm in writing or by electronic mail to the Warrantholder the number of Shares then outstanding within three (3) Business Days after written request by such Warrantholder. In any case, the number of outstanding Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Warrantholder since the date as of which such number of outstanding Shares was reported.

 

3.              Forfeiture Event

 

Pursuant to section 5(k) of the Securities Purchase Agreement, to the extent that the U.S. Offering is consummated within one year from completion of the Transaction and any Warrantholder does not fully subscribe for Shares or ADSs in the U.S. Offering (including the value of any Shares or ADSs acquired in any concurrent private offering made on substantially the same terms as the U.S. Offering) having an aggregate purchase price not less than the aggregate purchase price of the securities such Warrantholder purchased in the Transaction (or such lesser amount as may be 

 

11

 

allocated to the Warrantholder in the U.S. Offering by the lead underwriter in such offering), such Warrantholder will forfeit any Warrants issued to that Warrantholder in the Transaction. By way of example, if a Warrantholder purchases USD$5 million of securities in the Transaction, that Warrantholder will forfeit any Warrants purchased in the Transaction unless such Warrantholder purchases at least USD$5 million in the U.S Offering (including any concurrent private placement). Notwithstanding the foregoing, (i) if the Warrantholder’s allocation is cut back by the lead underwriter in the U.S Offering (or concurrent private placement), then the required level of participation to retain the Warrants shall be only that amount that is allocated to the Warrantholder in the U.S Offering (or concurrent private placement); and (ii) if any Warrantholder is barred from purchasing securities in the U.S. Offering, pursuant to its internal or other tax related structure or other applicable law or rule, and has notified the Company of such fact prior to the pricing of the U.S. Offering, such Warrantholder shall not forfeit any Warrants issued to that Warrantholder in the Transaction.  The provisions of this Section 3 shall be binding on any transferee of the Warrants.

 

4.              Other Terms

 

4.1                               Stock Exchange Listing and Government Approvals

 

The Company will, at its own expense, use its reasonable best efforts to: (a) maintain the AIM listing of its ordinary shares on the London Stock Exchange and as soon as reasonably practicable following the consummation of the U.S. Offering effect the AIM listing of the Warrant Shares; (b) obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities which may from time to time be required of the Company in order to satisfy its obligations under these Terms and Conditions; (c) take all action which may be necessary for the admission of the Warrant Shares issuable upon exercise of the Warrants for trading on the London Stock Exchange on or before the earliest of: (i) the U.S. Offering; (ii) the listing by the Company of other ordinary shares on the London Stock Exchange or its successors, however, provided that the admission of the Warrant Shares would not require additional documentation (including, but not limited to, the publication of a prospectus under the Financial Services and Markets Act 2000) by the Company; and (iii) the date six (6) months from the issue of Warrant Shares; and (d) following the U.S. Offering and to the extent that the Company causes ADSs to be issued in the U.S. Offering, maintain the listing of the ADSs on Nasdaq or another United States national securities exchange.

 

4.2                               Governing Law and Jurisdiction

 

These Terms and Conditions shall be governed by and construed in accordance with English law and each of the parties to this agreement hereby submits to the non-exclusive jurisdiction of the English courts.

 

4.3                               Notices

 

All notices related to the Warrants by the Company shall be sent by express courier or e-mail to the addresses provided to the Company by the respective Warrantholders. The notices related to the Warrants to the Company may be sent by express courier or e-mail to:

 

Verona Pharma plc

address: 3 More London Riverside, London SE1 2RE, United Kingdom

e-mail: jan-anders.karlsson@veronapharma.com and claire.poll@veronapharma.com

attention: Jan-Anders Karlsson and Claire Poll

 

A notice made in accordance with the above shall be deemed to have been received by its recipient on (i) the fourth (4th) Business Day after the day of sending if sent by express courier, or (ii) on the day of transmission if sent by e-mail, provided that a confirmation of successful transmission has been obtained from the recipient.

 

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4.4                               Other Matters

 

By subscribing for the Warrants, the Warrantholders undertake to adhere to these Terms and Conditions

 

In discharging any obligations hereunder, the parties acknowledge and agree that time shall be of the essence.

 

The Warrantholders shall be solely responsible for any taxes, duties and other such payments possibly incurred by the holders of Warrants in relation to receiving the Warrants and the subscription of any Warrant Shares under these Terms and Conditions.

 

The Board of Directors of the Company shall resolve upon all other matters related to the Warrants and to amend the technical procedures relating to the Warrants (including, but not limited to, additional procedures related to the subscription of Warrant Shares), provided, in each case, that such actions, resolutions or amendments are not prejudicial to the Warrantholders.

 

THE CASHLESS EXERCISE PROVISIONS (AS SET OUT IN THE TERMS AND CONDITIONS) WILL ONLY BE AVAILABLE IF AT THE TIME OF EXERCISE OF THE WARRANTS THE WARRANTHOLDER IS ALSO A SHAREHOLDER OF ONE OR MORE ORDINARY SHARES (WHICH MAY INCLUDE BEING A SHAREHOLDER OF RECORD, OR A BENEFICIAL OWNER OF SHARES, INCLUDING SHARES IN STREET NAME, AS WELL AS HOLDING ADS’S IN ANY SUCH FORMS) IN THE COMPANY.

 

13

 

Exhibit A

 

Form of Warrant Assignment

 

To: Verona Pharma plc

 

Reference is made to the terms and conditions dated [·] 2016 and concerning the issuance of Warrants by Verona Pharma plc (the “Terms and Conditions”). The capitalised terms used herein shall have the same meanings as in the Terms and Conditions.

 

[NOTE: IF THE FORM CONCERNS TRANSFER, THE FOLLOWING SHALL BE INCLUDED]

 

FOR VALUE RECEIVED                              (the “Assignor”) hereby notifies that it has undertaken to sell, assign and transfer all of the rights of the Assignor under the Warrants to the Assignee(s) as set forth below:

 

	
Name(s) of Assignee(s)
    	
 
    	
Assignee(s) Contact
   Information
    	
 
    	
Number of Warrants
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

All notices to be given by the Company to the Assignor as Warrantholder shall be sent to the Assignee(s) at the above listed address(es).

 

[NOTE: IF THE FORM CONCERNS PLEDGE, THE FOLLOWING SHALL BE INCLUDED]

 

(the “Pledgor”) hereby notifies that it has undertaken to irrevocably and unconditionally pledge [with first priority all of the rights of, title to and other interests in] the Warrants to the Pledgee(s) as set forth below:

 

	
Name(s) of Pledgee(s)
    	
 
    	
Number of Warrants Pledged
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

NOTE: IF WARRANTS ARE REGISTERED INTO A BOOK-ENTRY SECURITIES SYSTEM, THE PLEDGOR AND PLEDGEE ARE RESPONSIBLE FOR EFFECTING THE REGISTRATION OF ANY PLEDGE TO THE BOOK-ENTRY ACCOUNT OF THE PLEDGOR

 

[NOTE: THE BELOW SHALL BE INCLUDED IN ALL FORMS]

 

Place and date:

Name of the [Assignor / Pledgor]:

 

	
By:
    	
By:
    
	
Title:
    	
Title:
    

 

The above [assignment / pledge] is acknowledged and accepted.

 

Place and date:

 

VERONA PHARMA PLC

 

By:

Title:

 

14

 

Exhibit B-1

 

Form of Accredited Investor Certification

 

Reference is made to the terms and conditions dated [·] 2016 concerning the issuance of Warrants by Verona Pharma plc (the “Terms and Conditions”). The capitalised terms used herein shall have the same meanings as in the Terms and Conditions.

 

The undersigned represents and warrants to Verona Pharma plc (the “Company”) in connection with the transfer of Warrants exercisable for Warrant Shares, to the undersigned, or in connection with the exercise of Warrants for Warrant Shares to be subscribed for by the undersigned, that the undersigned fits within each category marked below, and that for any category marked, it has truthfully set forth any description required as provided for below. The undersigned agrees to furnish any additional information that the Company deems necessary in order to verify the answers set forth below.

 

(PLEASE MARK EACH CATEGORY APPLICABLE TO YOU)

 

o                                    The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.

 

o                                    Explanation. In calculating net worth, you may include equity in personal property, real estate, cash, short-term investments, stock and securities. Please follow these guidelines in calculating the value of your principal residence: (i) you may not include equity in your principal residence as an asset; (ii) you may exclude indebtedness that is secured by your primary residence, up to the estimated fair market value of the primary residence on the date hereof from the calculation of liabilities (unless the amount of such indebtedness outstanding on the date hereof exceeds the amount outstanding 60 days before the date hereof, other than as a result of the acquisition of the primary residence, in which case the excess should be included in the calculation of liabilities); and (iii) you should include indebtedness that is secured by your principal residence in excess of the fair market value of the primary residence on the date hereof in the calculation of liabilities.

 

o                                    The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case, including foreign income, tax exempt income and full amount of capital gains and losses, but excluding any income of other family members and any unrealized capital appreciation), and has a reasonable expectation of reaching the same income level in the current year.

 

o                                    The undersigned is a director or executive officer of the Company.

 

o                                    The undersigned is either: (a) a bank as defined in Section 3(a)(2) of the U.S. Securities Act of 1933, as amended (the “Securities Act”); (b) a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; (c) a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; (d) an insurance company as defined in Section 2(13) of the Securities Act; (e) an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of the Securities Act; (f) a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; (g) a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such a plan has total assets in excess of $5,000,000; or (h) an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”), if the

 

15

 

investment decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are “accredited investors,” as defined in Rule (501)(a) promulgated under the Securities Act.

 

	
 
    
	
 
    

 

(describe entity)

 

o                                    The undersigned is a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.

 

	
 
    
	
 
    

 

(describe entity)

 

o                                    The undersigned is an organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, a corporation, a business trust, or a partnership, not formed for the specific purpose of acquiring the Warrant Shares, with total assets in excess of $5,000,000.

 

	
 
    
	
 
    

 

(describe entity)

 

o                                    The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Warrant Shares, whose investments are directed by a “sophisticated person” as described in Rule 506(b) (2)(ii) promulgated under the Securities Act.

 

o                                    The undersigned is an entity, all the equity owners of which are “accredited investors” within one or more of the above categories. If relying upon this category alone, each equity owner must complete a separate copy of this Certificate.

 

	
 
    
	
 
    

 

(describe entity)

 

THE UNDERSIGNED UNDERSTANDS THAT THE COMPANY WILL RELY ON THE FOREGOING REPRESENTATIONS TO, AMONG OTHER THINGS, MAINTAIN THE EXEMPTION FOR THE ISSUANCE OF WARRANT SHARES AND WARRANTS FROM THE REQUIREMENT TO REGISTER SUCH WARRANT SHARES AND WARRANTS UNDER THE SECURITIES ACT.

 

The answers to the foregoing questions are correctly stated to the best of my knowledge, information and belief.

 

	
Dated:
    	
 
    	
 
    

 

16

 

	
Name of Investor:
    	
 
    	
 
    
	
 
    	
 
    
	
Signature of Authorized Signatory of Investor:
    	
 
    	
 
    
	
 
    	
 
    
	
Name of Authorized Investor:
    	
 
    	
 
    
	
 
    	
 
    
	
Title of Authorized Investor:
    	
 
    	
 
    
						

 

17

 

Exhibit B-2

 

Form of Offshore Investor Certification

 

Reference is made to the terms and conditions dated [·] 2016 concerning the issuance of Warrants by Verona Pharma plc (the “Terms and Conditions”). The capitalised terms used herein shall have the same meanings as in the Terms and Conditions.

 

The undersigned represents and warrants to Verona Pharma plc (the “Company”) in connection with the transfer of Warrants exercisable for Warrant Shares to the undersigned, or in connection with the exercise of Warrants for Warrant Shares to be subscribed for by the undersigned, that the undersigned holder (i) is not located within the United States, (ii) is not a U.S. Person, and (iii) is not holding or exercising the Warrants for the account or benefit of a U.S. Person or a person in the United States.  The undersigned acknowledges and agrees that the Warrant Shares will not be delivered to an account within the United States, and certificates representing Warrant Shares will not be delivered to an address within the United States.

 

“United States” and “U.S. Person” are as defined in Rule 902 of Regulation S under the U.S. Securities Act of 1933, as amended.

 

THE UNDERSIGNED UNDERSTANDS THAT THE COMPANY WILL RELY ON THE FOREGOING REPRESENTATIONS TO, AMONG OTHER THINGS, MAINTAIN THE EXEMPTION FOR THE TRANSFER OF THE WARRANTS OR THE ISSUANCE OF WARRANT SHARES FROM THE REQUIREMENT TO REGISTER SUCH TRANSFER OR EXERCISE UNDER THE SECURITIES ACT.

 

In connection therewith, the undersigned agrees to furnish any additional information that the Company deems necessary in order to verify the applicability of the exemption.

 

The answers to the foregoing questions are correctly stated to the best of my knowledge, information and belief.

 

	
Dated:
    	
 
    	
 
    
	
 
    	
 
    
	
Name of Investor:
    	
 
    	
 
    
	
 
    	
 
    
	
Signature of Authorized Signatory of Investor:
    	
 
    	
 
    
	
 
    	
 
    
	
Name of Authorized Investor:
    	
 
    	
 
    
	
 
    	
 
    
	
Title of Authorized Investor:
    	
 
    	
 
    
							

 

18

 

Exhibit C

 

Form of Exercise Notice

 

To: Verona Pharma plc

 

Reference is made to the terms and conditions dated [·], 2016, concerning the issuance of Warrants by Verona Pharma plc (the “Terms and Conditions”).  The capitalized terms used herein shall have the same meanings as in the Terms and Conditions.

 

The undersigned hereby irrevocably elects to exercise the warrant issued to it by the Company, dated [·], 20   Warrant Certificate No. [·] (the “Warrant Certificate”), and purchase thereunder (and surrenders herewith the Warrant Certificate) as follows:

 

(1)          ̈           Warrant Shares to be issued as Ordinary Shares pursuant to the Terms and Conditions;

 

 ̈           Warrant Shares to be issued as ADSs pursuant to the Terms and Conditions.

 

(2)         Method of Exercise (Please initial the applicable blank):

 

           The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

 

           The undersigned, being a shareholder in the Company as well as a Warrantholder, elects to exercise the attached Warrant pursuant to the cashless exercise provisions described in Section 2.4 of the Warrant.

 

(3)         Exercise Amount payable:                                                                                                                        GBP                                        

 

(4)         Please issue a certificate or certificates representing the securities specified in Item (1) above in the name of the undersigned or in such other name as is specified below:

 

	
 
    	
 
    	
 
    
	
 
    	
(Name)
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
(Address)
    	
 
    

 

(5)         If a cash exercise, the Exercise Amount shall be paid to the following bank account of Verona Pharma plc:

 

(6)

 

	
 
    	
IBAN:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
BIC:
    	
 
    

 

(7)         If this exercise is in connection with an Acquisition and is being conditioned on completion of the Acquisition, check the following box: o.

 

19

 

The Warrantholder represents and warrants that this Exercise Notice has been duly signed and constitutes a valid and binding act by the undersigned to exercise the said Warrants.

 

	
Place and date:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name of the Warrantholder:
    	
 
    	
 
    

 

	
 
    	
 
    
	
By:
    

 

Title:

 

The above exercise is acknowledged and accepted.

 

Place and date:

 

VERONA PHARMA PLC

 

	
 
    	
 
    
	
By:
    	
 
    
	
Title:
    	
 
    

 

20

 

APPENDIX A

 

Black-Scholes Option Pricing formula to be used when calculating the value of each new warrant to purchase one share in the Acquirer shall be:

 

 

CAcq = value of each warrant to purchase one share in the Acquirer

 

SAcq = price of Acquirer’s stock as determined by reference to the average of the closing prices on the securities exchange or Nasdaq over the 20-day period ending three trading days prior to the closing of the Acquisition described in Section 2.12 if the Acquirer’s stock is then traded on such exchange or system, or the average of the closing bid or sale prices (whichever is applicable) in the over-the-counter market over the 20-day period ending three trading days prior to the closing of the Acquisition if the Acquirer’s stock is then actively traded in the over-the-counter market, or the then most recently completed financing if the Acquirer’s stock is not then traded on a securities exchange or system or in the over-the-counter market.

 

TAcq = expiration date of new warrants to purchase shares in the Acquirer = TCorp

 

tAcq = date of issue of new warrants to purchase shares in the Acquirer

 

TAcq-tAcq = time until warrant expiration, expressed in years

 

 = volatility = annualized standard deviation of daily log-returns (using a 262-day annualization factor) of the Acquirer’s stock price on the securities exchange or Nasdaq over a 20-day trading period, determined by the Warrantholders, that is within the 100-day trading period ending on the trading day immediately after the public announcement of the Acquisition described in Section 2.12 if the Acquirer’s stock is then traded on such exchange or system, or the annualized standard deviation of daily-log returns (using a 262-day annualization factor) of the closing bid or sale prices (whichever is applicable) in the over-the-counter market over a 20-day trading period, determined by the Warrant Holder, that is within the 100-day trading period ending on the trading day immediately after the public announcement of the Corporate Reorganization if the Acquirer’s stock is then actively traded in the over-the-counter market, or 0.5 (or 50%) if the Acquirer’s stock is not then traded on a securities exchange or system or in the over-the-counter market. In no event will the volatility variable be more than 0.5 (or 50%).

 

N = cumulative normal distribution function

 

 

ln = natural logarithm

 

 = dividend rate of the Acquirer for the most recent 12-month period at the time of closing of the Acquisition.

 

KAcq = strike price of new warrants to purchase shares in the Acquirer = KCorp * (SAcq / SCorp)

 

r = annual yield, as reported by Bloomberg at time tAcq, of the United States Treasury security measuring the nearest time TAcq

 

 

21

 

APPENDIX B

 

Black-Scholes Option Pricing formula to be used when calculating the value of each Warrant to purchase one Share in the Company shall be:

 

 

CCorp = value of each Warrant to purchase one share in the Company

 

SCorp = price of Company stock as determined by reference to the average of the closing prices on Nasdaq over the 20-day period ending three trading days prior to the closing of the Corporate Reorganization described in Section 5(d) if the Company’s stock is then traded on Nasdaq, or the average of the closing bid or sale prices (whichever is applicable) in the over-the-counter market over the 20-day period ending three trading days prior to the closing of the Acquisition if the Company’s stock is then actively traded in the over-the-counter market, or on the AIM market, if the Company’s stock is not then traded on a securities exchange or system or in the over-the-counter market, or the most recently completed financing if the Company’s stock is not then traded on AIM.

 

TCorp = expiration date of Warrants to purchase shares in the Company

 

tCorp = date of public announcement of transaction

 

TCorp-tCorp = time until Warrant expiration, expressed in years

 

 = volatility = the annualized standard deviation of daily log-returns (using a 262-day annualization factor) of the Company’s stock price on the securities exchange or Nasdaq Global Market over a 20-day trading period, determined by the Warrant Holders, that is within the 100-day trading period ending on the trading day immediately after the public announcement of the Corporate Reorganization described in Section 5(d) if the Company’s stock is then traded on such exchange or system, or the annualized standard deviation of daily-log returns (using a 262-day annualization factor) of the closing bid or sale prices (whichever is applicable) in the over-the-counter market over a 20-day trading period, determined by the Warrant Holder, that is within the 100-day trading period ending on the trading day immediately after the public announcement of the Corporate Reorganization if the Company’s stock is then actively traded in the over-the-counter market, or 0.5 (or 50%) if the Company’s stock is not then traded on a securities exchange or system or in the over-the-counter market. In no event will the volatility variable be more than 0.5 (or 50%).

 

N = cumulative normal distribution function

 

 

ln = natural logarithm

 

 = dividend rate of the Company for the most recent 12-month period at the time of closing of the Acquisition.

 

KCorp = strike price of Warrant

 

r = annual yield, as reported by Bloomberg at time tCorp, of the United States Treasury security measuring the nearest time TCorp

 

 

 

APPENDIX C

 

Form of Warrant Certificate

 

Certificate no: [·]

 

Verona Pharma Plc

(Incorporated under the Companies Acts 2006

with registered number 05375156)

 

WARRANT to subscribe for ordinary shares of £0.001 each in the capital of Verona Pharma Plc (the “Shares”) pursuant to an instrument executed by Verona Pharma Plc on [·] June 2016 (the “Warrant Instrument”).

 

	
Certificate no:
    	
[·]
    
	
 
    	
 
    
	
Date of issue:
    	
[·]
    
	
 
    	
 
    
	
Number of   Warrants:
    	
[·]
    

 

THIS IS TO CERTIFY that [·] of [·]

 

is the holder of the number of Warrants set out above, which are subject to the articles of association of the Company and otherwise on the terms and conditions contained in the Warrant Instrument.

 

[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT IN COMPLIANCE WITH THE SECURITIES ACT, (B) RULE 903 or 904 PURSUANT TO THE SECURITIES ACT, OR (C) RULE 144 UNDER THE SECURITIES ACT (UPON FURNISHING TO THE COMPANY SUCH REPRESENTATION LETTERS AS THE COMPANY MAY REQUIRE), OR (II) UNLESS AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, SHALL BE PROVIDED TO THE COMPANY, PROVIDING THAT SUCH SALE, TRANSFER OR ASSIGNMENT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. ](1)

 

This certificate has been executed as a deed and entered into and delivered on the date of issue.

 

	
EXECUTED as a DEED by
    	
)
    
	
VERONA   PHARMA PLC
    	
)
    
	
acting by a   director
    	
)
    
	
in the presence   of:
    	
 
    
	
 
    	
Director
    

 

	
 
    	
 
    
	
Witness signature:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Witness name:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Witness address:
    	
 
    

 

(1)  Legend only required as set forth in Section 2.15 of the Terms and Conditions.

 

 

Schedule A

 

In accordance with Instruction 2 to Item 601 of Regulation S-K, below is a schedule setting forth the material details in which the form of warrant differs from the warrants issued to each warrantholder listed below.

 

	
Investor
    	
 
    	
Amount
    	
 
    
	
Orbimed Private   Investments VI, LP
    	
 
    	
93,396,936
    	
 
    
	
Growth Equity   Opportunities Fund IV, LLC
    	
 
    	
88,481,308
    	
 
    
	
Novo A/S
    	
 
    	
88,481,308
    	
 
    
	
Abingworth   Bioventures VI, LP
    	
 
    	
70,211,068
    	
 
    
	
Tekla Life   Science Investors
    	
 
    	
18,581,075
    	
 
    
	
Tekla World   Healthcare Fund
    	
 
    	
25,659,579
    	
 
    
	
BioDiscovery 4   FPCI
    	
 
    	
44,240,654
    	
 
    
	
Aisling Capital   IV, LP
    	
 
    	
29,493,769
    	
 
    
	
Arix Bioscience   Holdings Ltd
    	
 
    	
25,807,048
    	
 
    
	
HSBC Global   Custody Nominee (UK) Ltd A/C 944287
    	
 
    	
21,280,890
    	
 
    
	
BBHISL Nominees   Ltd. A/c 121624
    	
 
    	
11,138,182
    	
 
    
	
The Bailey 1995   Family Trust
    	
 
    	
4,424,065
    	
 
    
	
Nortrust   Nominees Limited a/c PCL22
    	
 
    	
3,440,939
    	
 
    
	
Rensburg Client   Nominees Limited A/C CLT
    	
 
    	
2,255,482
    	
 
    
	
Dr. David   Ebsworth
    	
 
    	
245,781
    	
 
    
	
N+1 Singer   Capital Markets Limited
    	
 
    	
1,783,512
    	
 
    
	
Vivo Ventures   Fund VII, L.P.
    	
 
    	
73,123,825
    	
 
    
	
Vivo Ventures   VII Affiliates Fund, L.P.
    	
 
    	
1,593,724
    	
 
    
	
Vivo Ventures   Fund VI, L.P.
    	
 
    	
18,543,537
    	
 
    
	
Vivo Ventures VI   Affiliates Fund, L.P.
    	
 
    	
135,850

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