Document:

EXHIBIT 4.5            

 

THE REGISTERED HOLDER OF THIS PURCHASE OPTION, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION, EXCEPT AS HEREIN PROVIDED, AND THE REGISTERED HOLDER OF THIS PURCHASE OPTION AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE OPTION FOR A PERIOD OF ONE YEAR FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) SUNRISE SECURITIES CORP., RODMAN & RENSHAW, LLC, OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING (DEFINED HEREIN), OR (II) ANY SUCCESSOR, MANAGER, OFFICER, PARTNER, MEMBER OR EMPLOYEE OF SUNRISE SECURITIES CORP., RODMAN & RENSHAW, LLC OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.

 

UNIT PURCHASE OPTION

 

FOR THE PURCHASE OF

300,000 UNITS

OF

SMG INDIUM RESOURCES LTD.

 

1.           Purchase Option.

 

THIS CERTIFIES THAT, in consideration of $100.00 duly paid by or on behalf of SUNRISE SECURITIES CORP., RODMAN & RENSHAW, LLC or their designees (each, a “Holder”), as registered owner of this Purchase Option (“Purchase Option”), to SMG Indium Resources Ltd. (the “Company”), Holder is entitled, at any time or from time to time after ________, 2011 (“Effective Date”), and at or before 5:00 p.m., New York City local time, ___________, 2015 (“Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to THREE HUNDRED THOUSAND (300,000) units (“Units”) of the Company, each Unit consisting of one share of common stock of the Company, par value $.001 per share (“Common Stock”), and one warrant (“Warrant”) expiring four years from the Effective Date of the registration statement (“Registration Statement”) pursuant to which Units are offered for sale to the public (the “Offering”).  Each Warrant is on the same terms and conditions as the warrants included in the Units being registered for sale to the public by
way of the Registration Statement (“Public Warrants”), except that the exercise price of each Warrant is $____ per share (such exercise price, as it may be adjusted hereunder, the “Underwriter’s Warrant Price”).  If the Expiration Date is a day on which banking institutions are authorized by law to close in New York City, then this Purchase Option may be exercised on the next succeeding day which is not such a day in accordance with the terms herein.  During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate the Purchase Option.  This Purchase Option is initially exercisable at $__ per Unit so purchased; provided, however, that upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Option, including the exercise
price per Unit and the number of Units (and shares of Common Stock and Warrants) to be received upon such exercise, shall be adjusted as therein specified.  The term “Exercise Price” shall mean the initial exercise price per Unit or the adjusted exercise price per Unit, depending on the context.

 

  

  

  

 

2.           Exercise.

 

2.1         Exercise Form.  In order to exercise this Purchase Option, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Option and payment of the Exercise Price for the Units being purchased payable in cash or by certified check or official bank check.  If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., New York City local time, on the Expiration Date, this Purchase Option shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.

 

2.2         Legend.  Each certificate for the securities purchased under this Purchase Option shall bear a legend as follows unless such securities have been registered under the Securities Act of 1933, as amended (the “Securities Act”):

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”) OR APPLICABLE STATE LAW.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW.”

 

  

-2-

  

 

2.3         Cashless Exercise.

 

2.3.1           Determination of Amount.  In lieu of the payment of the Exercise Price multiplied by the number of Units for which this Purchase Option is exercisable in the manner required by Section 2.1, the Holder shall have the right (but not the obligation) to convert any exercisable but unexercised portion of this Purchase Option into Units (“Conversion Right”) as follows: upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment by the Holder of any of the Exercise Price in cash) that number of Units (or
that number of shares of Common Stock and Warrants comprising that number of Units) equal to the quotient obtained by dividing (x) the “Value” (as defined below) of the portion of the Purchase Option being converted by (y) the Current Market Value (as defined below) of the portion of the Purchase Unit Option being converted.  The “Value” of the portion of the Purchase Option being converted shall equal the remainder derived from subtracting (a) the product of (i) the Exercise Price multiplied by (ii) the number of Units underlying the portion of this Purchase Option being converted from (b) the product of (i) the Current Market Value of a Unit multiplied by (ii) the number of Units underlying the portion of the Purchase Option being converted.  As used herein, the term “Current Market Value” per Unit at any date means:
(i) if the Units are listed on a national securities exchange (including, without limitation, the NYSE Euronext and the NASDAQ Stock Market) or quoted on the Over the Counter Bulletin Board (or any successor electronic inter-dealer quotation system), the average closing price of a Unit for the thirty (30) trading days immediately preceding the date of determination of the Current Market Price in the principal trading market for the Units as reported by the exchange or the quotation system, as the case may be; (ii) if the Units are not listed on a national securities exchange or quoted on Over the Counter Bulletin Board (or any successor electronic inter-dealer quotation system), but are traded in the residual over-the-counter market, the closing bid price for a Unit on the last trading day preceding the date in question for which such quotations are reported by the Pink Sheets, LLC or similar publisher of such quotations; and (iii) if the fair market value of the Units cannot be
determined pursuant to clause (i) or (ii) above, such price as the Board of Directors of the Company shall determine, in good faith.

 

2.3.2           Mechanics of Cashless Exercise.  The cashless exercise right described in this Section 2.3 (“Cashless Exercise Right”) may be exercised by the Holder on any business day on or after the Commencement Date and not later than the Expiration Date by delivering the Purchase Option with the duly executed exercise form attached hereto with the cashless exercise section completed to the Company, exercising the Cashless Exercise Right and specifying the total number of Units the Holder will purchase pursuant to such Cashless Exercise
Right.

 

2.4         Net Cash Settlements.  In no event will the Company be required to net cash settle the exercise of the Purchase Option or the Warrants underlying the Purchase Option, regardless of whether any or all of the Registrable Securities have been registered by the Company pursuant to an effective registration statement.

 

3.           Transfer.

 

3.1         General Restrictions.  The registered Holder of this Purchase Option, by its acceptance hereof, agrees that it will not sell, transfer, assign, pledge or hypothecate, or enter into any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of, this Purchase Option for a period of one year following the Effective Date to anyone other than (i) a Holder or an underwriter or a selected dealer in connection with the Offering, or (ii) any successor, officer, manager, partner, member or employee of a Holder or of any such underwriter or selected
dealer.  On and after the first anniversary of the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws.  In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Option and payment of all transfer taxes, if any, payable in connection therewith.  The Company shall within five business days transfer this Purchase Option on the books of the Company and shall execute and deliver a new Purchase Option or Purchase Options of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Units purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.

 

  

-3-

  

 

3.2         Restrictions Imposed by the Act.  The securities evidenced by this Purchase Option shall not be transferred unless and until (i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption from registration under the Securities Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Mintz Levin Cohn Ferris Glovsky & Popeo, P.C. shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a registration
statement or a post-effective amendment to the Registration Statement relating to such securities has been filed by the Company and declared effective by the Securities and Exchange Commission (the “Commission”) and compliance with applicable state securities law has been established.

 

4.           New Purchase Options to be Issued.

 

4.1         Partial Exercise or Transfer.  Subject to the restrictions in Section 3 hereof, this Purchase Option may be exercised or assigned in whole or in part.  In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Option for cancellation, together with the duly executed exercise or assignment form and, except in the case of an exercise of this Purchase Option contemplated by Section 2.3 hereof, funds sufficient to pay any Exercise Price and/or transfer tax, the Company shall cause to be delivered to the Holder without charge a new Purchase Option of like tenor to this
Purchase Option in the name of the Holder evidencing the right of the Holder to purchase the number of Units purchasable hereunder as to which this Purchase Option has not been exercised or assigned.  In addition, the Company shall cause to be delivered to any Permitted Transferee without charge a new Purchase Option of like tenor to this Purchase Option in the name of such transferee evidencing the right of such transferee to purchase the number of Units purchasable hereunder as to which this Purchase Option has been transferred to such transferee.

 

4.2         Lost Certificate.  Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Option and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Option of like tenor and date.  Any such new Purchase Option executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.

 

  

-4-

  

 

5.           Registration Rights.

 

5.1         Demand Registration.

5.1.1           Grant of Right.  The Company, upon written demand (“Initial Demand Notice”) of the Holder(s) of at least 50.1% of the Purchase Options and/or the underlying Units and/or the underlying securities (“Majority Holders”), agrees to use its reasonable best efforts to register (the “Demand Registration”) under the Securities Act on two occasions, all of the Purchase Options requested by the Majority Holders
in the Initial Demand Notice and all of the securities underlying such Purchase Options, including the Units, Common Stock, the Warrants and the Common Stock underlying the Warrants that are not capable of being sold pursuant to Rule 144 or other exemption from registration without a volume limitation (collectively, the “Registrable Securities”). On such occasion, the Company will file a registration statement for use in an offering of the Registrable Securities from time-to-time or a post-effective amendment to the Registration Statement covering all of the Registrable Securities that will permit an offering of the Registrable Securities from time-to-time and use its reasonable best efforts to have such registration statement or post-effective amendment filed and declared effective as soon as possible thereafter.  The demand for registration may be
made at any time during a period of five years beginning on the Effective Date.  The Initial Demand Notice shall specify the intended method(s) of distribution of the Registrable Securities.  The Company will notify all holders of the Purchase Options and/or Registrable Securities of the demand within ten days from the date of the receipt of any such Initial Demand Notice.  Each holder of Registrable Securities who wishes to include all or a portion of such holder’s Registrable Securities in the Demand Registration (each such holder including shares of Registrable Securities in such registration, a “Demanding Holder”) shall so notify the Company within five (5) days after the receipt by the holder of the notice from the Company and complete a selling shareholder questionnaire.  Upon any such request, the Demanding Holders shall be entitled to have their Registrable
Securities included in the Demand Registration, subject to Section 5.1.4.  The Company will then use its reasonable best efforts (a) to prepare and file within sixty (60) days a new registration statement or a post-effective amendment to the Registration Statement covering the resale of the Registrable Securities which the Demanding Holders have requested to be registered and (b) to cause such registration statement to be declared effective as soon as possible thereafter.

 

5.1.2           Effective Registration.  A registration will not count as a Demand Registration until the registration statement filed with the Commission with respect to such Demand Registration has been declared effective and the Company has complied with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such registration statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the Commission or any other governmental agency or court, the registration
statement with respect to such Demand Registration will be deemed not to have been declared effective unless and until such stop order or injunction is removed, rescinded or otherwise terminated.

 

5.1.3           Underwritten Offering.  If the Majority Holders so elect and such holders so advise the Company as part of the Initial Demand Notice, the offering of all or any portion of the Registrable Securities pursuant to such Demand Registration shall be in the form of one underwritten offering.  All Demanding Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Majority Holders.

 

  

-5-

  

5.1.4           Reduction of Offering.  If the managing underwriter or underwriters for a Demand Registration that is to be an underwritten offering advises the Company and the Demanding Holders in writing that the dollar amount or number of shares of Registrable Securities which the Demanding Holders desire to sell pursuant to the underwritten offering, taken together with all other shares of Common Stock or other securities which the Company desires to sell and the shares of Common Stock, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights held by other
stockholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “Maximum Number of Shares”), then the Company shall include in such registration: (i) first, the Registrable Securities as to which Demand Registration has been requested by the Demanding Holders that want to participate in such underwritten offering (pro rata in accordance with the number of shares that each such Person has requested be included in such registration, regardless of the number of shares held by each such Person (such proportion is referred to herein as “Pro Rata”)) that can be sold
without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock as to which “piggy-back” registration has been requested by the holders thereof, Pro Rata, that can be sold without exceeding the Maximum Number of Shares; and (iv) fourth, to the extent that the Maximum Number of Shares have not been reached under the foregoing clauses (i), (ii), and (iii), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons and that can be sold without exceeding the Maximum
Number of Shares.

 

5.1.5           Withdrawal.  If a majority-in-interest of the Demanding Holders disapprove of the terms of any underwriting or are not entitled to include all of their Registrable Securities in any offering, such majority-in-interest of the Demanding Holders may elect to withdraw from such offering by giving written notice to the Company and the underwriter or underwriters of their request to withdraw prior to the initial filing of the registration statement filed with the Commission with respect to such Demand Registration.  If the majority-in-interest of the Demanding Holders withdraws from a proposed
offering relating to a Demand Registration prior to such initial filing, then such registration shall not count as a Demand Registration provided for in Section 5.1, provided that the majority-in-interest of the Demanding Holders electing to so withdraw from the offering pays all reasonable costs and expenses incurred by the Company in connection with such withdrawn Demand Registration.

 

5.1.6           Terms.  The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to one Demand Registration and all Piggy Back Registrations (as defined below), but the Holders shall pay any and all underwriting commissions.  The Company agrees to use its reasonable best efforts to qualify or register the Registrable Securities in such states as are reasonably requested by the Majority Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a state in which such registration would cause (i) the
Company to be obligated to qualify to do business in such state, or would subject the Company to taxation as a foreign corporation doing business in such jurisdiction or (ii) the principal stockholders of the Company to be obligated to escrow their shares of capital stock of the Company.  The Company shall use its reasonable best efforts to cause any registration statement or post-effective amendment filed pursuant to the demand rights granted under Section 5.1.1 to remain effective until the expiration of the Warrants in accordance with the terms and conditions of that certain Warrant Agreement, dated as of _______, 2011, between the Company and Continental Stock Transfer & Trust Company (the “Warrant Agreement”) or until such earlier time as the shares issuable underlying the Warrants may be sold pursuant to an exemption from such registration.

 

  

-6-

  

 

5.1.7           Permitted Delays.  The Company shall be entitled to postpone the filing of any registration statement under this Section 5.1, if (a) at any time prior to the filing of such registration statement the Company’s Board of Directors determines, in its good faith business judgment, that such registration and offering would materially and adversely affect any financing, acquisition, corporate reorganization, or other material transaction involving the Company, and (b) the Company delivers to the Demanding Holders written notice thereof within five (5) business days of the date of receipt by the Company
of a request for Demand Registration; provided that all such periods of postponement may not exceed 45 days during any 365 day period.

 

5.2         “Piggy-Back” Registration.

 

5.2.1           Piggy-Back Rights.  If at any time during the seven (7) year period commencing on the Effective Date the Company proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for stockholders of the Company for their account (or by the Company and by stockholders of the Company including, without limitation, pursuant to Section 5.1), other than a registration statement (i) filed in connection with any
employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that is convertible into equity securities of the Company, (iv) on Form S-4 filed in connection with an acquisition transaction or (v) for a dividend reinvestment plan, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of shares of Registrable Securities as such holders may request in writing within five (5)
days following receipt of such notice (a “Piggy-Back Registration”).  The Company shall cause such Registrable Securities to be included in such registration and shall use reasonable best efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof.  All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an underwriter or underwriters shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such Piggy-Back Registration.

 

  

-7-

  

5.2.2        Reduction of Offering.  If the managing underwriter or underwriters for a Piggy-Back Registration that is to be an underwritten offering advises the Company and the holders of Registrable Securities in writing that the dollar amount or number of shares of Common Stock which the Company desires to sell, taken together with shares of Common Stock, if any, as to which registration has been demanded pursuant to written contractual arrangements with persons other than the holders of Registrable Securities hereunder, the Registrable Securities as to which registration has been requested under this Section 5.2, and the shares
of Common Stock, if any, as to which registration has been requested pursuant to the written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Shares, then the Company shall include in any such registration:

 

(a)           If the registration is undertaken for the Company’s account: (A) first, the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; and (B) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Stock or other securities, if any, comprised of Registrable Securities, as to which registration has been requested pursuant to the applicable written contractual piggy-back registration rights of such security holders or for the account of other persons that the Company is obligated to register pursuant to written
contractual piggy-back registration rights with such persons, Pro Rata, that can be sold without exceeding the Maximum Number of Shares; and

 

(b)           If the registration is a “demand” registration undertaken at the demand of persons other than the holders of Registrable Securities, (A) first, the shares of Common Stock or other securities for the account of the demanding persons that can be sold without exceeding the Maximum Number of Shares; (B) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; and (C) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A) and
(B), collectively the shares of Common Stock or other securities comprised of Registrable Securities, as to which registration has been requested pursuant to the terms hereof, and/or the shares of Common Stock or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons, Pro Rata, that can be sold without exceeding the Maximum Number of Shares.

 

5.2.3        Withdrawal.  Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the registration statement.  The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a registration statement at any time prior to the effectiveness of the registration statement.  Notwithstanding any such withdrawal, the Company
shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 5.2.4.

 

5.2.4        Maintenance of Priority. Until such time as the Company has registered the Registrable Securities, so long as there are Registrable Securities hereunder, the Company shall not grant to any person piggy-back rights superior to the rights of the Holders of Registrable Securities hereunder.

 

  

-8-

  

 

5.3         General Terms.

 

5.3.1           Indemnification.  The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any of their respective heirs, successors, permitted assigns and transfers, and agents and representatives, against all loss, claim, damage, expense or liability (including all reasonable
attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against litigation, commenced or threatened, or any claim whatsoever whether arising out of any action between the underwriter and the Company or between the underwriter and any third party or otherwise) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the underwriters contained in Section 8 of the Underwriting Agreement between the Company and the Representatives, on their own behalf and on behalf of other underwriters named therein, dated the Effective Date.  The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 8 of the Underwriting Agreement pursuant to which the underwriters have agreed to indemnify the Company.

 

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

 

  

-9-

  

5.3.3           Documents Delivered to Holders.  The Company shall furnish the Holders participating in an underwritten offering, a signed counterpart, addressed to the participating Holders, of (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “comfort” letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a
letter dated the date of the closing under the underwriting agreement) signed by the independent public accountants who have issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities.  The Company shall also deliver promptly to the Holders participating in the offering, the correspondence and memoranda described below and copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the
registration statement and permit the Holders, to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”).  Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times and as often as the Holders, shall reasonably request.  The Company shall not be required to disclose any confidential information or other records to the Holders, or to any other person, until and unless such persons shall have entered into reasonable confidentiality agreements (in form and substance reasonably satisfactory to the
Company), with the Company with respect thereto.

 

5.3.4           Rule 144 Sale.  Notwithstanding anything contained in this Section 5 to the contrary, the Company shall have no obligation pursuant to Sections 5.1 or 5.2 for the registration of Registrable Securities held by any Holder (i) where such Holder would then be entitled to sell under Rule 144 within any three month period (or such other period prescribed under Rule 144 as may be provided by amendment thereof) all of the Registrable Securities held by such Holder, and (ii) where the number of Registrable Securities held by such Holder is within the volume limitations of Rule 144.

 

5.3.5           Underwriting Agreement. If an underwritten offering is requested pursuant to Section 5.1, the Company shall enter into an underwriting agreement with the managing underwriter(s), if any, selected by any Holders, which managing underwriter shall be reasonably acceptable to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each participating Holder and such managing underwriter(s), and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing
underwriter. The participating Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and shall agree to such covenants and indemnification and contribution obligations of selling securityholders as are customarily contained in agreements of that type used by the managing underwriter. Further, such Holders shall execute appropriate custody agreements and otherwise cooperate fully in the preparation of the registration statement and other documents relating to any offering in which they include Registrable Securities pursuant to this Section 5. Each Holder shall also furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be reasonably required to effect the registration of the Registrable Securities.

 

5.3.6           Supplemental Prospectus.  Each Holder agrees, that upon receipt of any notice from the Company of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, such Holder will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such
Holder’s receipt of the copies of a supplemental or amended prospectus, and, if so desired by the Company, such Holder shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of such destruction) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

 

  

-10-

  

 

6.           Adjustments.

 

6.1         Adjustments to Exercise Price and Number of Securities.  The Exercise Price and the number of Units underlying the Purchase Option shall be subject to adjustment from time to time as hereinafter set forth:

 

6.1.1           Stock Dividends - Split-Ups.  If after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock or by a split-up of shares of Common Stock or other similar event, then, on the effective date thereof, the number of shares of Common Stock underlying each of the Units purchasable hereunder shall be increased in proportion to such increase in outstanding shares.  In such case, the number of shares of Common Stock, and the exercise price applicable thereto, underlying the
Warrants underlying each of the Units purchasable hereunder shall be adjusted in accordance with the terms of the Warrants.  For example, if the Company declares a two-for-one stock dividend and at the time of such dividend this Purchase Option is for the purchase of one Unit at $12.00 per whole Unit (each Warrant underlying the Units is exercisable for $9.00 per share), upon effectiveness of the dividend, this Purchase Option will be adjusted to allow for the purchase of one Unit at $12.00 per Unit, each Unit entitling the holder to receive two shares of Common Stock and two Warrants (each Warrant exercisable for $4.50 per share).

 

6.1.2           Extraordinary Dividends.  If the Company, at any time while this Purchase Option is outstanding and unexpired, shall pay a dividend or make a distribution in cash, securities or other assets to the holders of Common Stock (or other shares of the Company’s capital stock receivable upon exercise of the Purchase Option), other than (i) as described in Sections 6.1.1, 6.1.3 or 6.1. 4, (ii) regular quarterly or other periodic dividends, (iii) in connection with the conversion rights of the holders of Common Stock upon consummation of the Company’s initial Business Combination or (iv) in
connection with the Company’s liquidation and the distribution of its assets upon its failure to consummate a Business Combination (any such non-excluded event being referred to herein as an “Extraordinary Dividend”), then the Exercise Price shall be decreased, effective immediately after the effective date of such Extraordinary Dividend, by the amount of cash and/or the fair market value (as determined by the Company’s Board of Directors, in good faith) of any securities or other assets paid on each share of Common Stock in respect of such Extraordinary Dividend.

 

6.1.3           Aggregation of Shares.  If after the date hereof, and subject to the provisions of Section 6.3, the number of outstanding shares of Common Stock is decreased by a consolidation, combination or reclassification of shares of Common Stock or other similar event, then, on the effective date thereof, the number of shares of Common Stock underlying each of the Units purchasable hereunder shall be decreased in proportion to such decrease in outstanding shares.  In such case, the number of shares of Common Stock, and the exercise price applicable thereto, underlying the Warrants underlying each of
the Units purchasable hereunder shall be adjusted in accordance with the terms of the Warrants.

 

  

-11-

  

 

6.1.4           Replacement of Securities upon Reorganization, etc.  In case of any reclassification or reorganization of the outstanding shares of Common Stock other than a change covered by Section 6.1.1 or 6.1.3 hereof or that solely affects the par value of such shares of Common Stock, or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance
to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Option shall have the right thereafter (until the expiration of the right of exercise of this Purchase Option) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of shares of Common Stock of the Company obtainable upon exercise of this Purchase Option and the underlying Warrants immediately prior to such event; and if any reclassification also results in a change in shares of Common Stock covered by Section 6.1.1 or 6.1.3, then such adjustment shall be made pursuant to Sections
6.1.1, 6.1.3 and this Section 6.1.4.  The provisions of this Section 6.1.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.

 

6.1.5           Changes in Form of Purchase Option.  This form of Purchase Option need not be changed because of any change pursuant to this Section, and Purchase Options issued after such change may state the same Exercise Price and the same number of Units as are stated in the Purchase Options initially issued pursuant to this Agreement.  The acceptance by any Holder of the issuance of new Purchase Options reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.

 

6.1.6           Adjustments of Warrants.  To the extent the price of the Warrants is lowered pursuant to Section 3.1 of the Warrant Agreement, the price of the Warrants underlying the Purchase Option shall be reduced on identical terms (except that the Warrant Price (as defined in the Warrant Agreement) for the Warrants shall always remain 110% of the Warrant Price for the Public Warrants), subject to any limitations and conditions that may be imposed by FINRA pursuant to Rule 2710 of the National Association of Securities Dealers, Inc. (the “NASD Conduct
Rules”) and any such reduction must remain in effect for at least twenty (20) business days.  To the extent that the duration of the Warrants is extended pursuant to Section 3.2 of the Warrant Agreement, the duration of the Warrants underlying the Purchase Option shall be extended on identical terms, subject to any limitations that may be imposed by FINRA pursuant to the NASD Conduct Rules.

 

  

-12-

  

 

6.2         Substitute Purchase Option.  In case of any consolidation of the Company with, or merger of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger which does not result in any reclassification or change of the outstanding Common Stock), the corporation formed by such consolidation or merger shall execute and deliver to the Holder a supplemental Purchase Option providing that the holder of each Purchase Option then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Option) to receive, upon exercise of such
Purchase Option, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or merger, by a holder of the number of shares of Common Stock of the Company for which such Purchase Option might have been exercised immediately prior to such consolidation, merger, sale or transfer.  Such supplemental Purchase Option shall provide for adjustments which shall be identical to the adjustments provided in Section 6.  The above provision of this Section shall similarly apply to successive consolidations or mergers.

 

6.3         Elimination of Fractional Interests.  The Company shall not be required to issue certificates representing fractions of shares of Common Stock or Warrants upon the exercise of the Purchase Option, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down to the nearest whole number of Warrants, shares of Common Stock or other securities, properties or rights.

 

7.           Reservation and Listing.

 

The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuance upon exercise of the Purchase Options or the Warrants underlying the Purchase Option, such number of shares of Common Stock or other securities, properties or rights as shall be issuable upon the exercise thereof.  The Company covenants and agrees that, upon exercise of the Purchase Options and payment of the Exercise Price therefor, all shares of Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder.  The Company further covenants and agrees that upon exercise of the Warrants underlying the Purchase Options and payment of the
respective Warrant exercise price therefor, all shares of Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder.  As long as the Purchase Options shall be outstanding, the Company shall use its best efforts to cause all (i) Units and shares of Common Stock issuable upon exercise of the Purchase Options, (ii) Warrants issuable upon exercise of the Purchase Options and (iii) shares of Common Stock issuable upon exercise of the Warrants included in the Units issuable upon exercise of the Purchase Option to be listed (subject to official notice of issuance) on all securities exchanges (or, if applicable on the Nasdaq Global Market, Nasdaq Capital Market, FINRA OTC Bulletin Board or any successor trading market) on which the Units, the Common Stock or the Public Warrants may then be listed and/or quoted.

 

  

-13-

  

 

8.           Certain Notice Requirements.

 

8.1         Holder’s Right to Receive Notice.  Nothing herein shall be construed as conferring upon the Holders the right to vote or consent as a stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company.  If, however, at any time prior to the expiration of the Purchase Options and their exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen days prior to the date fixed as a record date or the date of closing the transfer books
for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale.  Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be.  Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other stockholders of the Company at the same time and in the same manner that such notice is given to the stockholders.

 

8.2         Events Requiring Notice.  The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, or (ii) the Company shall offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business or a merger of the Company wherein the separate existence of the Company shall cease shall be proposed.

 

8.3         Notice of Change in Exercise Price.  The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“Price Notice”).  The Price Notice shall describe the event causing the change and the method of calculating the change in Exercise Price and shall be certified as being true and accurate by the Company’s President and Chief Financial Officer.

 

8.4         Transmittal of Notices.  All notices, requests, consents and other communications under this Purchase Option shall be in writing and shall be deemed to have been duly made when hand delivered, mailed by express mail or private courier service, or sent by facsimile transmission, with confirmation of receipt: (i) If to the registered Holder of the Purchase Option, to the address and/or fax number of such Holder as shown on the books of the Company, or (ii) if to the Company, to the following address or fax number or to such other address or and fax number as the Company may designate by notice to the Holders:

 

SMG Indium Resources Ltd.

41 University Drive, Suite 400

Newton, Pennsylvania 18940

Attn:  Ailon Z. Grushkin

 

Sunrise Securities Corp.

641 Lexington Avenue, 25th Floor

New York, NY 10022

Attn:  Nathan Low

 

  

-14-

  

 

and

 

Rodman & Renshaw, LLC

1251 Avenue of the Americas, 20th Floor

New York, New York 10020

Attn:  Ramnarain Jaigobind

 

9.           Miscellaneous.

 

9.1         Amendments.  The Company may from time to time supplement or amend this Purchase Option without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company may deem necessary or desirable and that the Company, in the exercise of reasonable judgment, determines that it shall not adversely affect the interest of the Holders.  All other modifications or amendments shall require
the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.

 

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

 

9.3         Entire Agreement.  This Purchase Option (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Option) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

 

9.4         Binding Effect.  This Purchase Option shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Option or any provisions herein contained.

 

9.5         Governing Law; Submission to Jurisdiction.  This Purchase Option shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws.  The Company agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Option shall be brought and enforced in the courts of the State of New York located in New York County or of the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.  The
Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.  Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8 hereof.  Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.  The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor.

 

  

-15-

  

 

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

 

9.7         Execution in Counterparts.  This Purchase Option may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto.

 

9.8         Underlying Warrants.  At any time after exercise by a Holder of this Purchase Option, a Holder may exchange its Warrants (with an initial exercise price of $____) for Public Warrants (with an initial exercise price of $___) upon payment to the Company of the difference between the exercise price of its Warrant and the exercise price of the Public Warrants.  Any such Public Warrants and the Common Stock underlying such Public Warrants shall constitute Registrable Securities.

 

[Remainder of Page Intentionally Left Blank]

 

  

-16-

  

IN WITNESS WHEREOF, the Company has caused this Purchase Option to be signed by its duly authorized officer as of the ___ day of _________, 2011.

 

	  	
SMG INDIUM RESOURCES LTD.

	  	  
	  	
By:

	
  

	  	
Name:

	  	
Title:

  

-17-

  

  

Form to be used to exercise Purchase Option

 

SMG Indium Resources Ltd.

41 University Drive, Suite 400

Newton, Pennsylvania 18940

Attn: Chief Executive Officer

Date:_________________, 201__

The undersigned hereby elects irrevocably to exercise all or a portion of the within Purchase Option and to purchase ____ Units of SMG Indium Resources Ltd. and hereby makes payment of $____________ (at the rate of $_________ per Unit) in payment of the Exercise Price pursuant thereto.  Please issue the Common Stock and Warrants as to which this Purchase Option is exercised in accordance with the instructions given below.

 

or

 

The undersigned hereby elects irrevocably to convert its right to purchase _________ Units purchasable under the within Purchase Option by surrender of the unexercised portion of the attached Purchase Option (with a “Value” of $_______ based on a “Market Price” of $_______).  Please issue the securities comprising the Units as to which this Purchase Option is exercised in accordance with the instructions given below.

 

NOTICE: The signature to this exercise notice must correspond with the name as written upon the face of the Purchase Option in every particular, without alteration or any change whatever.

 

_______________________________________

Signature(s) Guaranteed:

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).

 

INSTRUCTIONS FOR REGISTRATION OF SECURITIES

_______________________________________

Name

_______________________________________

                (Print in Block Letters)

_______________________________________

_______________________________________

Address

 

  

-18-

  

 

Form to be used to assign Purchase Option

 

ASSIGNMENT

 

(To be executed by the registered Holder to effect a transfer of the within Purchase Option):

 

FOR VALUE RECEIVED,___________________________________________ does hereby sell, assign and transfer unto______________________________________ the right to purchase __________ Units of SMG Indium Resources Ltd.  (the “Company”) evidenced by the within Purchase Option and does hereby authorize the Company to transfer such right on the books of the Company.

 

Dated:___________________, 201_

_________________________________

Signature

NOTICE: The signature to this assignment must correspond with the name as written upon the face of the Purchase Option in every particular, without alteration or any change whatever.

 

_________________________________

Signature(s) Guaranteed:

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).

 

  

-19-EXHIBIT 10.1

AMENDED AND RESTATED

MANAGEMENT SERVICES AGREEMENT

This Amended and Restated Management Services Agreement (this “Agreement”), by and between SMG Indium Resources Ltd., a Delaware corporation (the “Company”) and Specialty Metals Group Advisors LLC, a Delaware limited liability company (the “Manager”), entered into as of ______, 2011 and effective immediately upon the effectiveness of the initial public offering of the Company (the “IPO”).

AGREEMENT

In consideration of the mutual promises, covenants and conditions hereinafter set forth, the parties hereto mutually agree as follows:

	
  

	
1.

	
Retention of Manager.

	 	
a.

	
Duties of Manager. The Company hereby retains Manager to actively assist in the management of the Company’s operations.  Manager accepts such appointment and agrees to discharge faithfully and diligently the duties set forth herein and implement the policies established by the Company’s board of directors (the “Board of Directors”), including, but not limited to, the following:

	
  

	
i.

	
Use commercially reasonable efforts to negotiate, arrange, and execute for and on the Company’s behalf, through industry-standard tenders, the purchase and stockpile of indium with a minimum purity of 99.99% over a prudent period of time.  The Manager, on the Company’s behalf, may enter into long-term and or short-term supply contracts with indium suppliers;

	
  

	
ii.

	
Provide to the Board of Directors delivery and payment particulars with respect to each purchase and sale of indium;

	
  

	
iii.

	
Use commercially reasonable efforts to negotiate and arrange for the transportation and storage of the Company’s indium stockpile at third-party facilities located in the United States, Canada and or the United Kingdom, in accordance with standard industry terms.  The Manager is not required to retain a custodian on our behalf;

	
  

	
iv.

	
Use commercially reasonable efforts to negotiate and arrange for indemnities or insurance on the Company’s indium stockpile, in accordance with standard industry practices by either the third-party storage facility’s insurance policy, a separately purchased insurance policy or both;

	
  

	
v.

	
Conduct limited inspections of the indium delivered to the Company regarding the minimum 99.99% purity requirements, based on the following:

   

  

  

  

 

	
  

	
1.

	
if indium is purchased from a supplier known to be a regular indium industry supplier, the Manager will not be responsible for conducting any chemical assays or other tests designed to verify that such indium meets the minimum 99.99% purity requirements as established by Regular Industry Practice.  For the purposes of this Agreement, Regular Industry Practice means purchasing, storing or selling the metal indium containing a minimum 99.99% purity level, delivered in the form of Ingots, which are individually wrapped in transparent polyethylene bags having a minimum thickness of 0.004 inches;

	
  

	
2.

	
if indium is purchased from a third-party supplier that is not known to be a regular indium industry supplier, the Manager, at its discretion, may hire, at the Company’s expense, an independent lab to perform random assay tests using glow-discharge mass spectrometry (“GDMS”) to verify the purity of the indium;

	
  

	
vi.

	
At the Manager’s discretion, negotiate and arrange for the lending and/or sale of indium from the Company’s stockpile to: (1) generate cash to satisfy the Company’s operating expenses (2) facilitate the Manager’s ability to negotiate long-term and or short-term supply contracts with potential indium suppliers to acquire an indium stockpile (3) take advantage of periodic shortages in the indium market based on market conditions that the Manager deems favorable to the Company;

	
  

	
vii.

	
Arrange, negotiate and execute any additional documents regarding the acquisition, storage, insuring and disposition of indium on the Company’s behalf, including, but not limited to, corporate, title, environmental, financial documents and other material agreements regarding the acquisition, storage, insuring and disposition of indium on the Company’s behalf;

	
  

	
viii.

	
On a daily basis, or where pricing information for indium is not available on a daily basis, no less frequently than a bi-weekly basis, prepare a report with the assistance of the Company’s chief financial officer (the “Report”) to be made available to the Company and the Board of Directors regarding the net market value (the “NMV”) of each share of the Company’s common stock for publication on the Company’s website.  Such report shall also include the last spot price of indium as reported by Metal Bulletin, or other reliable, independent source, and the quantity of indium held in inventory.  If needed, in the event the spot price of indium fluctuates by more than 5%, the Manager shall cause the Company to publish the revised NMV within one business day.  NMV shall be determined by multiplying the number of kilograms
of indium held by or for the Company by the last spot price for indium published by Metal Bulletin posted on Bloomberg L.P. for the month, plus cash and any other Company assets, less any and all of the Company’s outstanding payables, indebtedness and any other liabilities, divided by the total number of outstanding common shares.

  

  

  

  

  

	
  

	
ix.

	
In the event the Manager, on the Company’s behalf, contracts to purchase or sell a material quantity of indium, the Manager shall work with the Company to prepare a Current Report on Form 8-K to disclose such information.

	
  

	
x.

	
Publish, on the Company’s behalf, on the Company’s website, the quantity of indium held in inventory, the average price paid per kilogram of indium and the Company’s NMV within 2 business days of any change in inventory held by the Company.

	
  

	
xi.

	
Prepare, or cause to be prepared, any and all regulatory filing materials, reports to the Company’s stockholders, and other reports to the Board of Directors as may be reasonably requested from time to time; and

	
  

	
xii.

	
Furnish office facilities, service and supplies and generally oversee with the Management’s staff and independent contractors, management of the Company’s business and affairs.

	
  

	
b.

	
Duties of Company.

	
  

	
i.

	
The Company shall pay all fees and expenses in accordance with the operation of the Company and services performed by the Manager pursuant to this Agreement, except where expressly assumed by the Manager.

	
  

	
ii.

	
In the event the Manager elects to purchase indium on the Company’s behalf, pursuant to long-term or short-term contracts with an indium supplier, the Company shall have funds reserved to satisfy such purchase price and shall pay such purchase price.

	
  

	
iii.

	
In the event the Manager elects to lend or sell indium on the Company’s behalf, pursuant to long-term or short-term contracts with an indium customer, the Company shall have the required amount of indium reserved to satisfy the delivery commitments pursuant to such contracts.

	
  

	
2.

	
Fees and Expenses.

	
  

	
a.

	
Management Fee.  In consideration for providing the services hereunder, the Manager shall receive from the Company, and the Company shall pay to the Manager, regardless of its ability to successfully purchase and stockpile the metal indium, a fee equal to 1/6th of 1% per month of the NMV (2% per annum).  For purposes of this Section 2, the Management Fee shall be determined by (x) multiplying the number of kilograms of indium held by the Company by the last spot price for indium published by Metal Bulletin posted on Bloomberg L.P. for the month, plus cash and any other Company assts, less any and all of the Company’s outstanding payables, indebtness and any other liabilities, (y) multiplied by 1/6th of 1%.  Such Management Fee shall be determined on the last day of each month and payable on or before the 10th day following the end of such month.

   

  

  

  

 

	
  

	
b.

	
Expenses.  The Company shall be responsible for the payment of any and all fees and expenses incurred by the Manager in connection with the services performed by the Manager on behalf of the Company.  Except as otherwise agreed to by the Manager, the Company will expressly assume the following expenses:

	
  

	
i.

	
brokerage and trading commissions;

	
  

	
ii.

	
all fees associated with the performance of assay testing by independent laboratories;

	
  

	
iii.

	
warehouse or storage facilities costs, transportation costs, storage and transportation insurance fees, commission fees, security services costs, and other charges arising upon the holding, purchase, lending or sale of indium or other Company assets;

	
  

	
iv.

	
office facility fees (including office rental, services and supplies);

	
  

	
v.

	
directors and officers liability and key man insurance policies;

	
  

	
vi.

	
legal and audit fees, including SEC related fees;

	
  

	
vii.

	
corporate finance offering costs;

	
  

	
viii.

	
fees payable for listings, the maintenance of listings and filings or other requirements of stock exchanges on which any of the Company’s securities are listed or quoted;

	
  

	
ix.

	
cost associated with printing and mailing financial reports and materials for Stockholders’ meetings, valuations, reporting to Stockholders, securities regulatory filings and any other purposes required by law;

	
  

	
x.

	
fees payable to any registrar and transfer agent of the common stock or other securities;

	
  

	
xi.

	
all taxes (including income, capital and sales taxes); and

	
  

	
xii.

	
all other fees and expenses related to running and operating the Company, unless specifically excluded herein.

	
  

	
2.

	
Term.  Unless earlier terminated pursuant to Section 3 below, this Agreement shall remain in effect for a term of five (5) years, or _____, 2016. This Agreement may be renewed on terms mutually acceptable to each party upon 90 days written notice prior to the expiration of such term.

	
  

	
3.

	
Termination.

	
  

	
a.

	
By Both Parties.  This Agreement may be terminated by mutual consent of the parties upon 90 days written notice.

   

  

  

  

 

	
  

	
b.

	
By the Company For Cause.  The Company may terminate this Agreement for Cause by action of the Board of Directors upon written notice to the Manager at any time.  “Cause” shall mean:

	
  

	
i.

	
If any member of the Manager (x) has been convicted of, or entered into a plea of guilty or nolo contendere for a felony or other serious crime or crime involving moral turpitude, or any knowing violation of any federal or state banking, securities or tax law or regulation (y) is determined by a court of law to have committed a willful act of embezzlement, fraud or dishonesty (with respect to the Company or any of its affiliates or any of their customers or suppliers) which may adversely affect the Company’s financial, market, reputation and other interests in any material manner; or

	
  

	
ii.

	
Manager’s repeated material non-compliance or breach of this Agreement, in connection with Manager’s duties hereunder, after written notice thereof from the Board of Directors, and such material non-compliance has not been cured within 90 days after Manger’s receipt of notice thereof from the Board of Directors.

Notwithstanding the foregoing, the Manager shall not be terminated for Cause pursuant to this Section 3(b) without (i) reasonable notice to Manager setting forth the reasons for the Company’s intention to terminate for Cause, and (ii) an opportunity for Manager, together with counsel, if any, to be heard before the Board of Directors.

	
  

	
c.

	
By Manager.

	
  

	
i.

	
Manager may terminate this Agreement by written notice to the Board of Directors if (x) either Ailon Z. Grushkin, Richard Biele or Alan Benjamin is terminated as a director or executive officer position held with the Company, without the prior written consent of such respective individual, other than for Cause and (y) the Board of Directors has not, within 30 days of such removal, given notice of termination of this Agreement pursuant to Section 3(b).

	
  

	
ii.

	
Manager may terminate this Agreement upon 30 days written notice to the Board of Directors if there is a Change in Control of the Company.  For purposes of this Agreement, Change in Control shall mean (i) the acquisition of 50% or more of the then outstanding voting stock of the Company in a single transaction or series of transactions, (ii) members of the incumbent Board of Directors cease to constitute a majority of the Board of Directors without the approval of the remaining members of the Board of Directors or (iii) reorganization, merger or consolidation where all or substantially all holders of the outstanding voting stock of the Company do not, after such reorganization, merger or consolidation, own more than 50% of the then outstanding voting stock of the resulting entity.

 

  

  

  

 

	
  

	
d.

	
Liquidation, Dissolution or Bankruptcy of the Company.  This Agreement shall terminate upon the completion of the dissolution, liquidation, winding-up, bankruptcy, sale of substantially all of the assets, sale of the business or insolvency proceeding commenced by, or on behalf of, the Company.

	
  

	
4.

	
Effects of Termination.

	
  

	
a.

	
Company Termination (other than for Cause); Manager Termination.  If (A) Manager is terminated by the Company (other than for Cause) or (B) Manager terminates the Agreement pursuant to Section 3(c) then the Manager shall receive that portion of the Management Fee payable to the effective date of termination plus an additional amount equal to:

	
  

	
i.

	
one year’s Management Fee calculated based upon (y) an average of the Company’s monthly NMV over the previous twelve (12) month period prior to termination (z) multiplied by twelve (12); or

	
  

	
ii.

	
in the event that this Agreement is terminated prior to twelve (12) months of service, the Manager shall be entitled to an additional Management Fee calculated based upon (y) an average of the Company’s monthly NMV over the previous months of service (z) multiplied by the number of months of service.

	
  

	
b.

	
Company Termination for Cause.  If Manager is terminated by the Company for Cause pursuant to Section 3(b), no further payments of the Management Fee shall be paid after the effectiveness of termination under Section 3(b) is given by the Board of Directors to the Manager.

	
  

	
5.

	
Non-Competition; Confidentiality; Disclosure of Information.

	
  

	
a.

	
Non–Competition and Non-Solicitation.  Without the prior written consent of the Board of Directors, Manager shall not, and they shall cause their, affiliates to not, directly or indirectly, so long as the Manager is retained hereunder and until the one-year anniversary of any termination of this Agreement:

	
  

	
i.

	
interfere with, disrupt or attempt to disrupt any then existing relationship, contractual or otherwise, between the Company or its subsidiaries and any of their customers, suppliers, clients, executives, employees, vendors, licensees or business relations or other persons with whom the Company or its subsidiaries deal or in any way disparage the Company to any of the foregoing; or

 

  

  

  

 

	
  

	
ii.

	
solicit for employment, attempt to employ or assist any other entity in employing or soliciting for employment any employee or executive who at the termination date was employed by the Company or its subsidiaries.

	
  

	
b.

	
Intellectual Property Rights.  Manager hereby acknowledges that any material produced by or upon the instructions of Manger during the term that benefits the Company shall be “works for hire” to the extent applicable and belong to the Company to the extent such materials are in the nature of inventions or other items of intellectual property.  Manager agrees to take any and all steps reasonably requested by the Company to ensure that title thereto shall be fully vested in the Company and agrees to make no claim to personal ownership thereof.

	
  

	
c.

	
Confidentiality.  During the term of Manager’s retention hereunder and thereafter, and except as required by any court, supervisory authority or administrative agency or as may, in the opinion of Manger’s counsel, be otherwise required by applicable law, Manager shall not, without the consent of the Board of Directors or a person authorized thereby, disclose to any person, other than a then-current employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by them of the obligations hereunder, any confidential or proprietary information of the Company, including any vendor from which the Company purchases, or potentially purchases, indium from, and customers, or potential customers, in which the Company may sell indium to, obtained by
them during the term of this Agreement, unless such information has become a matter of public knowledge at the time of such disclosure.

	
  

	
6.

	
Indemnification.

	
  

	
a.

	
The Company agrees to indemnify Manager and hold Manager harmless against any and all losses, claims, damages, liabilities and costs (and all actions in respect thereof and any legal or other expenses in giving testimony or furnishing documents in response to a subpoena or otherwise), including, without limitation, the costs of investigating, preparing or defending any such action or claim, whether or not in connection with litigation in which Manager is a party, as and when incurred, directly or indirectly caused by, relating to, based upon or arising out of any work performed by Manager in connection with this Agreement to the full extent permitted by the New York Business Corporation Law and by the Certificate of Incorporation and By-Laws of the Company, as may be amended from time to time.

  

  

  

 

	
  

	
b.

	
The indemnification provision of this Section 7 shall be in addition to any obligations which the Company may otherwise have to Manager.

	
  

	
c.

	
The Company agrees to indemnify Manager and hold Manager harmless against any and all loss of opportunity whereby the value of any of the Company’s assets or value of any particular indium, monetary or currency investment could have been increased, or any decline in value of any of the Company’s assets unless such decline is the result of the Manager’s gross negligence, willful misconduct or willful failure to comply with express directions given by resolution of the Board of Directors or the Company’s stockholders.

	
  

	
d.

	
If any action, proceeding or investigation is commenced as to which Manager proposes to demand such indemnification, Manager shall notify the Company with reasonable promptness.  Manager shall have the right to retain counsel of Management’s own choice to represent Manager, and the Company shall pay all reasonable fees and expenses of such counsel; and such counsel shall, to the fullest extent consistent with such counsel’s professional responsibilities, cooperate with the Company and any counsel designated by the Company.  The Company shall be liable for any settlement of any claim against Manager made with the Company’s written consent, which consent shall not be unreasonably withheld or delayed, to the fullest extent permitted by the New York Business Corporation Law and the Certificate of Incorporation and By-Laws of the Corporation, as may be
amended from time to time.  No such settlement of any claim shall be made by Manager without the written consent of the Company, which consent shall not be unreasonably withheld or delayed.

	
  

	
7.

	
Notices.  Notices delivered pursuant to this Agreement shall be in writing, and shall be deemed to have been duly given when (a) delivered by hand; (b) sent by facsimile (with receipt confirmed), provided that a copy is promptly thereafter mailed by first-class prepaid certified mail, return receipt requested; (c) received by the addressee, if sent with delivery receipt requested by Express Mail, Federal Express, other express delivery service or first-class prepaid certified mail, in each case to the appropriate addresses and facsimile numbers set forth below, or to such other address(es) or facsimile number(s) as a party may designate as to itself by notice to the other party.

If to the Company:

SMG Indium Resources Ltd.

176 LaGuardia Ave.

Staten Island, New York 10314

Attention: Ailon Z. Grushkin

Facsimile: (215) 933-6953

   

  

  

  

 

If to the Manger:

Specialty Metals Group Advisors LLC

176 LaGuardia Ave.

Staten Island, New York 10314

Attention: Ailon Z. Grushkin

Facsimile: (718) 477-4344

In each case, with a copy to:

Ellenoff, Grossman & Schole LLP

150 East 42nd Street

New York, NY 10017

Attention: Barry Grossman

Facsimile:  (212) 370-7889

	
  

	
8.

	
Governing Law.  This Agreement shall be governed by the laws of the State of New York.

	
  

	
9.

	
Waiver of Jury Trial.  EACH PARTY TO THIS AGREEMENT UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY RELATED DOCUMENTS, ANY DEALINGS BETWEEN OR AMONG THEM RELAING TO THE SUBJECT MATTER OF THIS AGREEMENT.

	
  

	
10.

	
Assignability.  The Company nor the Manager may not assign this Agreement without the prior written consent of the respective party.  Except as provided in Section 1 of this Agreement, in the event that the Manger elects to delegate any of its duties or obligations under this Agreement to any third-party or independent contractor, the Manager shall do so at the Manager’s own expense.

	
  

	
11.

	
Enforcement, Separability.  It is the desire and intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, in case any provision of this Agreement shall be declared invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.  To the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of any jurisdiction where this Agreement may be subject to review and interpretation, the terms of such restriction, for the purpose only of the operation of such restriction in such jurisdiction, shall
be the maximum restriction allowed by the laws of such jurisdiction and such restriction shall be deemed to have been revised accordingly herein.

     

  

  

  

 

	
  

	
12.

	
Titles and Subtitles.  The titles of the paragraphs and subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

	
  

	
13.

	
Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.  This Agreement and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a electronically confirmed facsimile transmission, shall be treated in all manners and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.

	
  

	
14.

	
No Strict Construction.  The parties hereto have participated jointly in the negotiating and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, an no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

	
  

	
15.

	
Miscellaneous.  This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes any other agreements entered into between the Manager and the Company prior to the date of this Agreement relating thereto.  This Agreement may not be altered, modified, amended or terminated except by a written instrument signed by each of the parties hereto.  No term or provision hereof shall be deemed waived and no breach consented to or excused, unless such waiver, consent of excuse shall be in writing and signed by the party claimed to have waived, consented or excused.  A consent, waiver or excuse of any breach shall not constitute a consent to, waiver of, or excuse of any other or subsequent breach whether or not of the same kind of the original
breach.

 

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

	  	
SMG INDIUM RESOURCES LTD.

	  	  
	  	
By:

	  
	  	
  Name: Ailon Z. Grushkin

	  	
  Title:  President

	  	  
	  	
SPECIALTY METALS GROUP

	  	
ADVISORS LLC

	  	  
	  	
By:

	  
	  	
  Name:  Ailon Z. Grushkin

	  	
  Title:  Manager

	
Acknowledged and Agreed:

	  
	
   

	  
	
Richard Biele

	  
	
  

	  
	
Alan Benjamin

	  
	
RCM Indium, LLC

	  
	
By:

	  	  
	
Name: William Martin

	
Title: Manager

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}]]