Document:

ex10-30.htm

    EXHIBIT
10.30

    

    STOCK PURCHASE
AGREEMENT

     

    THIS
STOCK PURCHASE AGREEMENT (this “Agreement”)
is dated as of October___, 2009, and is entered into by and among ____; ____;
____; ____ and ____; (each individually, an “Investor”
and collectively, the "Investors")
and NeoMagic Corporation, a Delaware corporation (the “Company”),
with the Company and each of the Investors hereinafter being referred to
collectively as the “Parties”
and individually as a “Party.”).

     

    RECITALS

     

    WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Act”),
the Company desires to issue and sell to each Investor, and each Investor
desires to purchase from the Company, common stock and warrants to be issued by
the Company as more fully described below in this Agreement, including the
exhibits hereto;

     

    WHEREAS,
the Company and each  Investor are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 505 of Regulation D (“Regulation
D”) as promulgated by the U.S. Securities and Exchange Commission (the
“SEC”)
under the  Act;

     

    WHEREAS,
concurrently herewith, as part of this offering,  certain other
Investors ____________; _______________ ; and ____________ collectively,
the  "Other Investors")
are purchasing from the Company Twenty Million (20,000,000) Shares of the
Company’s common stock, par value $0.001 (the “Common
Stock”), for an aggregate consideration of Six Hundred Thousand Dollars
(U.S. $600,000), and , in connection with such purchase,
are  receiving an aggregate of Twenty Million (20,000,000) Class A
Warrants and Twenty Million (20,000,000) Class B Warrants;

    

    WHEREAS,
the aggregate consideration payable by the Investors shall be  based
on a purchase price of Three Cents ($.03) (the “Purchase
Price”) for one share of Common Stock, plus one Class A (Employee)
Warrant and one Class B (Employee)Warrant, as defined below, such Common Stock
and Warrants, being collectively referred to hereinafter as the "Securities";
and

     

    WHEREAS,
the Parties hereto desire that, upon the terms and subject to the conditions
contained herein, including payment by  the Investors, in accordance
with Exhibit 1, of an aggregate consideration of One Hundred and Fifty Two
Thousand Four Hundred and Fourteen Dollars and  Forty Four Cents
($152,414.44) to purchase an aggregate of Five Million Eighty Thousand Four
Hundred and Eighty (5,080,480) shares of the Company's Common Stock, issuable at
the Purchase Price  at the Closing, and, in connection with such
purchase, the Investors shall receive the following :

     

    
      
        
        

      

      
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    (a) An aggregate of Two Million Five
Hundred and Forty Thousand TwoHundred and  Forty(2,540,240) Class A
(Employee) Warrants (the"ClassA
(Employee) Warrants"),
to be granted pursuant to the form of the Class A Employee Warrant Agreement
attached as Exhibit 2; and

    

               (b)
An aggregate of Two Million Five Hundred and Forty Thousand TwoHundred and
Forty(2,540,240) Class B (Employee) Warrants (the"ClassB
(Employee) Warrants"),
to be granted pursuant to the form of the Class B Employee Warrant Agreement
attached as Exhibit 3;

    

    WHEREAS,
contemporaneously with the execution and delivery of this Agreement and the
Class A (Employee) Warrant Agreements and Class B (Employee) Warrant Agreements
referenced above, the Parties may be executing and delivering other
contemporaneous agreements executed by the Parties, which together with this
Agreement  and such Warrant Agreements shall be collectively referred
to as the “Transaction
Documents”);

     

    NOW,
THEREFORE, in consideration of the mutual agreements hereinafter set forth, and
such other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereto do hereby covenant, agree, represent
and warrant as follows:

     

    ARTICLE
1

    PURCHASE
AND SALE OF SECURITIES

     

    1.1  
Incorporation of
Recitals.  The recitals to this Agreement set forth above are hereby
incorporated by reference into this Agreement. 

    

    1.2 Purchase of
Securities.  Subject to the satisfaction (or waiver) of the terms
and conditions of this Agreement, each Investor agrees to purchase at the
Closing and the Company agrees to sell and issue to such Investor at the Closing
the Securities set forth opposite its name in Exhibit 1
hereto. 

    

    1.3 Closing Date. 
The closing (the “Closing”)
of the purchase and sale of the Common Stock and the Warrants shall take place
at 11:00 a.m., Pacific Time on October __, 2009, subject to any required
notification of satisfaction of the conditions to the Closing set forth herein,
or on such later date as is mutually agreed to by the Company and the Investors
(the “Closing
Date”).  The Closing shall occur on the Closing Date at the offices
of the Company at 780 Montague Expressway, Suite 504, San Jose, California (or
such other place as is mutually agreed to by the Company and the
Investors).

     

    1.4 Closing Deliveries. 
(a) At the Closing, the Company shall deliver or cause to be delivered to
each Investor the following (the “Company
Deliverables”):

     

    
      
        
        

      

      
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    (i)
irrevocable instructions addressed to the Company’s transfer agent instructing
it to issue a certificate or to make an appropriate book entry evidencing the
Shares, registered in the name of such Investor;

     

    (ii) the Class A and Class B (Employee)
Warrant Agreements, duly executed by the Company, granting the number
of  Class A and Class B (Employee)Warrants to be delivered to the
Investor in accordance with Exhibit 1 hereto ;   

     

    (b) 
At the Closing, each Investor shall deliver or cause to be delivered to the
Company the consideration set forth below on the Investor's signature page,
pursuant to the Company's  standard authorization to withhold
form.

    

    

    ARTICLE
2

     

    REPRESENTATIONS
AND WARRANTIES

    OF THE INVESTORS

    

    Except
for the representation and warranty set forth in Section 2.1 (b) below made
solely by Young and Zaidi , each of the  Investors represents and
warrants to the Company that, as of the date hereof and as of the
Closing:

     

    2.1 Status of
Investor.

    

    (a)   Investor has such
knowledge and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of an investment in the
Securities.

     

    (b)   Young and Zaidi are
executive officers of the Company and, as such, each is an “accredited investor”
as defined in Rule 501(a) under the Act.  Each Investor is not a
registered broker-dealer under Section 15 of the Securities Exchange Act of
1934, as amended (the "1934
Act").   

    

    (c) 
Investor is acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or with the intent of
distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor’s right at all times  to sell or
otherwise dispose of all or any part of such Securities in compliance with the
six(6) month or greater holding period set forth in Rule 144 promulgated under
the Act and in compliance with other applicable federal and state securities
laws.  Subject to the immediately preceding sentence, nothing contained
herein shall be deemed a representation or warranty by such Investor to hold the
Securities for any period of time.  Such Investor does not have any
agreement or understanding, directly or indirectly, with any person to
distribute any of the Securities.

     

    
      
        
        

      

      
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    (d) 
Investor has not directly or indirectly, nor has any person acting on behalf of
or pursuant to any understanding with such Investor, engaged in any transactions
in the securities of the Company (including, without limitation, any short sales
as defined in Rule 200 promulgated under Regulation SHO under the 1934 Act
and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps and similar arrangements (including on
a total return basis), and sales and other transactions through non-US broker
dealers or foreign regulated brokers (“Short
Sales”) involving the Company’s securities) since the the 30th day prior
to the date of this Agreement.  Such Investor covenants that neither it nor
any person acting on its behalf or pursuant to any understanding with it will
engage in any transactions in the securities of the Company (including Short
Sales) prior to the time that the transactions contemplated by this Agreement
are publicly disclosed.

     

    2.2 Access to
Information.  Investor has been, and remains an employee of the
Company; is intimately familiar with the business and operations of the Company;
and has been furnished with such materials and has been given such access to
information relating to the Company as he or she has requested. Each Investor
has also been afforded the full opportunity to ask questions regarding the
Company and the Securities, all to the extent that the Investor has found
necessary to make an informed decision regarding the Investor’s entering into
this Agreement. In particular, each Investor specifically confirms that in
connection with making this investment, he or she has reviewed the most recent
SEC periodic report on Form 10-K and the Company's subsequent SEC reports on
Forms 8-K and 10-Q previously provided by the Company. In addition, Investor
confirms that he or she is aware that the Company's prior and current SEC
reports are available to the Investor on line at www.sec.gov. Investor
also confirms that he or she has been advised that the proceeds of this offering
are to be utilized as provided in Section 4.1 below.

    

    2.3 Understanding of Risks
Associated with the Acquisition of the Securities.  Investor
understands that an investment in the Securities is speculative and subject to
numerous risks, including but not limited to the risks set forth in the
Company’s filings with the SEC under the heading “Risk Factors.”  Without
limiting those disclosures, the Company hereby specifically advises each
Investor that there is an extremely limited trading volume for the Company's
Common Stock, which is not currently listed on NASDAQ, and the Company cannot
and is not providing any assurance that this situation will change after
Investor's purchase hereunder.

    

    2.4 Understanding of Nature
of Securities.  Investor understands that:

     

    (a) 
the Securities have not been registered by the Company under the Act or any
State Act (as defined below), and the Company does not intend to register the
Securities for sale under the Act or any State Act in reliance, among other
things, on the exemptions from registration available under Regulation D and
under Section 25102(f) of the California Corporate Securities Law of 1968, as
amended.

     

    
      
        
        

      

      
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    (b) 
the Securities are “restricted securities” as that term is defined in
Rule 144 under the Act and, as such, may only be resold subject to six (6)
months or greater holding periods, which will only commence upon payment for the
Common Stock (or exercise and payment for the Warrant Shares), and any re-sale
is subject also to the volume and other limitations contained in  Rule
144, a copy of which is available to the Investor on request. 

     

    (c) the
certificates, if any, evidencing the Securities shall include provisions
substantially in the form of the legend set forth below, which Investor has
read, understands and agrees to be bound by:

     

    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR UNDER APPLICABLE STATE SECURITIES ACTS (THE “STATE
ACTS”). NOR IS SUCH REGISTRATION CONTEMPLATED.  SUCH SECURITIES
MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT OR THE STATE ACTS, EXCEPT UPON DELIVERY TO THE
COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE BOARD OF DIRECTORS OF THE
COMPANY AND TO LEGAL COUNSEL FOR THE COMPANY THAT REGISTRATION IS NOT REQUIRED
FOR SUCH TRANSFER OR THE SUBMISSION TO THE BOARD OF DIRECTORS AND SUCH COUNSEL
OF SATISFACTORY EVIDENCE THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE
ACT OR STATE ACTS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.

     

    (d) the
Company may, from time to time, make stop transfer notations in the Company’s
records to ensure compliance with the Act and any applicable State
Acts.

     

    (e)
Investor agrees, prior to any transfer of the Securities, to give written notice
to the Company expressing Investor's desire to effect such transfer and
describing briefly the proposed transfer.  Upon receiving such notice, the
Company shall present copies thereof to counsel for the Company and the
following provisions shall apply:

     

    (i)           
If, in the opinion of such counsel, the proposed transfer of such Securities may
be effected without registration of such Securities under the Act and the State
Acts, the Company shall promptly thereafter notify the person desiring to
transfer such Securities, whereupon such person shall be entitled to transfer
such Securities, all in accordance with the terms of the notice delivered by
such person to the Company and upon such further terms and conditions as shall
be required by the Company to ensure compliance with the Act and the State
Acts.

     

    (ii)          
If, in the opinion of such counsel, the proposed transfer of such Securities may
not be effected without registration of such Securities under the Act and the
State Acts, a copy of such opinion shall be promptly delivered to the person who
has proposed such transfer, and such proposed transfer shall not be made unless
such registration is then in effect.

     

    
      
        
        

      

      
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    2.5  
Investment
Intent.  Investor represents and warrants that:

     

    (a)    
Investor is acquiring the Securities for the Investor’s own account and not on
behalf of any other person.

     

    (b)   
Investor is the sole party in interest in this investment in the Securities and
is acquiring the Securities for investment and not for distribution or with the
intent of dividing Investor’s participation, profits or income , if
any,  with others or of selling, assigning, transferring or otherwise
disposing of the Securities.

     

    2.6 Further Assurances. 
Investor will execute and deliver to the Company any document, or do any other
act or thing, which the Company may reasonably request in connection with the
acquisition or transfer of the Securities.

    

    2.7 Ability to Bear
Economic Risk.  Investor has adequate means of providing for his or
her current needs and possible future contingencies, and has no need, and
anticipates no need in the foreseeable future, to sell the Securities which he
or she is acquiring pursuant to this Agreement. Investor is able to bear the
economic risks related to the acquisition of the Securities and, consequently,
without limiting the generality of the foregoing, is able to hold the Securities
for an indefinite period of time and has sufficient net worth to sustain a loss
of its entire interest in the Company in the event such loss should occur. 
Investor has no need for liquidity with respect to the Securities being
purchased hereunder.

     

    2.8 Tax Matters. 
Investor has reviewed with Investor’s own tax advisors the federal, state, local
and foreign tax consequences arising in connection with the acquisition of the
Securities (including any tax consequences that may result under recently
enacted tax legislation).  Investor is relying solely on such advisors and
not on any statements or representations of the Company or any of its agents and
understands that Investor (and not the Company) shall be responsible for
Investor’s own tax liability that may arise as a result of this
transaction.

     

    2.9 Accuracy of
Representations.  All of the representations and information
provided herein and any additional information that Investor has furnished to
the Company or its agents with respect to Investor’s financial position and
business experience is accurate and complete as of the date of this
Agreement.  If there should be any material adverse change in any such
representation or information prior to the Closing, Investor will immediately
furnish accurate and complete information concerning any such material change to
the Company.

     

    
      
        
        

      

      
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    2.10
Piggyback Registration
Rights.  If at any time following the Closing Date the Company
proposes to register any of the Securities under the Act (other than an
underwritten public offering or a registration on Form S-8 or S-4, or any
successor forms, relating to Common Stock issuable upon exercise of employee
stock options or in connection with any employee benefit or similar plan of the
Company or in connection with a direct or indirect acquisition by the Company of
another entity), whether or not for sale for its own account, the Company shall
each such time give prompt notice at least ten (10) days prior to the
anticipated filing date of the registration statement relating to such
registration to Investor, which notice shall offer Investor the opportunity to
include in such registration statement the number of Securities such Investor
may request. Upon the request of Investor made within five (5) days after
the receipt of notice from the Company (which request shall specify the number
and nature of the Securities intended to be registered by Investor, which may
include the shares of Common Stock issuable upon exercise of the
Warrants      (the "Warrant
Shares"), the Company shall use all reasonable efforts to effect the
registration under the Act of all Securities that the Company has been so
requested to register by the Investors, to the extent requisite to permit the
disposition of the Securities so to be registered, provided that if, at any time
after giving notice of its intention to register any Securities pursuant to this
Section 2.10 and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register such Securities, the Company shall give notice to Investor and,
thereupon, shall be relieved of its obligation to register any Securities in
connection with such registration. The obligations under this Section 2.10
shall expire when all of the Securities are saleable by Investors pursuant to
Rule 144 without limitation as to volume.

     

     

    ARTICLE
3

    

    REPRESENTATIONS
AND WARRANTIES

    OF
THE COMPANY

     

     The
Company represents and warrants to each of the Investors that, as of the date
hereof and as of the Closing:

    

    3.1 Issuance of
Securities.  The issuance of the Securities has been duly
authorized by all necessary corporate action and, when paid for and issued in
accordance with the terms of the Transaction Documents, the Securities will be
duly and validly issued, free and clear of all liens and encumbrances of the
Company. In addition, any Shares of Common Stock issued upon exercise of the
Warrants will be validly issued, fully paid and nonassessable and free and clear
from all preemptive or similar rights, and all liens and encumbrances of the
Company, with the holders being entitled to all rights accorded to a holder of
Common Stock.  Assuming the accuracy of each of the representations
and warranties set forth in Section 2 of this Agreement, the Company's offer and
issuance of the Securities to the Investors pursuant to this Agreement shall be
exempt from registration under the Act.

    

    
      
        
        

      

      
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    3.2 No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby (including, without limitation, the issuance
of Warrants and reservation for issuance and issuance of the Warrant Shares)
will not (i) result in a violation of any certificate of incorporation,
certificate of designation or bylaws or any other constituent document of the
Company or of any of its Subsidiaries, or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any federal or state law, rule, regulation, order,
judgment or decree (including securities laws applicable to the Company or any
of its Subsidiaries) by which any property or asset of the Company or any of its
Subsidiaries is bound or affected.

    

    3.3 Consents.  Neither
the Company nor any of its Subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms thereof, except for (a) the filing with the SEC of (i) a Form D
with respect to the transactions contemplated hereby and (ii) any registration
statements in accordance with Section 2.10 and (b) the filing with the
California Department of Corporations of a Notice pursuant to Section 25102(f)
of the California Corporate Securities Act of 1968, as amended.

    

    3.4 No General
Solicitation.  Neither the Company, nor any of its Subsidiaries
or Affiliates ( as defined below), nor any Person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with the offer or sale of the
Securities.

    

    3.5 Delisting from NASDAQ; No
Integrated Offering.  The Company has been delisted from
NASDAQ. In addition, none of the Company, its Subsidiaries, any of their
Affiliates, and any person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of the issuance of
any of the Securities under the Act, whether through integration with prior
offerings or otherwise.  None of the Company, its Subsidiaries, their
Affiliates and any person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of the
issuance of any of the Securities under the Act or cause the offering of the
Securities to be integrated with other offerings.

    

    
      
        
        

      

      
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    3.6 SEC Documents; Financial
Statements.  During the two (2) years prior to the date hereof,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements, notes and
documents incorporated by reference therein being hereinafter referred to as the
"SEC
Documents").  True, correct and complete copies of the SEC
Documents have been made available to the Investors through the EDGAR
system.  As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective filing dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).

    

    3.7 Foreign Corrupt
Practices.  Since January 1, 2007, neither the Company nor any
of its Subsidiaries nor any director, officer, agent, employee or other person
acting on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company or any of its Subsidiaries (i)
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated  any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.

     

    3.8 Sarbanes-Oxley
Act.  The Company is currently not subject to the requirements
of the Sarbanes-Oxley Act of 2002.

     

                   
3.9 Employee Relations
The Company and its Subsidiaries are in compliance with all federal,
state and local laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failures to be in compliance would not, in the aggregate,
reasonably be expected to result in a Material Adverse Effect (as defined in
Section 3.13 below).

     

    3.10 Intellectual Property
Rights

    

    (a) The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks and all applications and registrations therefor, patents, patent
rights, copyrights, original works of authorship (including computer software)
and all applications and registrations therefor, inventions, trade secrets and
other intellectual property rights ("Intellectual
Property Rights") necessary to conduct their respective businesses as now
conducted.

    

    
      
        
        

      

      
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              (b)  The
Company does not have any knowledge of any infringement by the Company or its
Subsidiaries of Intellectual Property Rights of others.  No claim,
action or proceeding has been brought, or to the knowledge of the Company, has
been threatened, by or against the Company or its Subsidiaries regarding the
infringement, misappropriation or other violation of any Intellectual Property
Rights, other than any claim, action or proceeding which has since been
resolved.  Neither the Company nor any of its Subsidiaries is aware of
any existing facts which are likely to give rise to any infringement of
Intellectual Property Rights of others or infringement claims, actions or
proceedings.  The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of their
material Intellectual Property Rights.

     

    3.11 Internal Accounting and
Disclosure Controls. Subject to the disclosures contained in the SEC
Documents, the Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management's general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. Subject to the disclosures contained in the SEC
Documents , the Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 1934 Act) that are designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the SEC,
including, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the 1934 Act is accumulated and communicated to the Company's
management, including its principal executive officer or officers and its
principal financial officer or officers, as appropriate.

    

    3.12 Manipulation of
Price.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result, or that could reasonably be expected to cause or result, in
the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii), sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.

    

    
      
        
        

      

      
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    3.13 Material Adverse
Effect. As used herein the term, "Material
Adverse Effect" means any material adverse effect on the business,
properties, assets, operations, results of operations or financial condition of
the Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby or in the other Transaction Documents, or on the authority
or ability of the Company to perform its obligations under the Transaction
Documents.

     

    

    ARTICLE
4

    COMPANY
COVENANTS

     

    4.1           Use of
Proceeds.  The Company will use the proceeds from the sale of
the Securities for general corporate purposes, including general and
administrative expenses and payment of outstanding liabilities, and not for the
redemption or repurchase of any of its or its Subsidiaries' equity
securities.

     

    4.2 Disclosure of Transactions
and Other Material Information.  On or before the fourth
business day following the Closing Date, the Company shall issue a press release
and file a Current Report on Form 8-K, in compliance with applicable SEC
regulations.

    

    ARTICLE
5

    INDEMNIFICATION

     

    The
Investors recognizes that the Company’s entering into this Agreement will be
based to a material extent upon the Investors' representations and warranties
set forth herein and Investors agree to indemnify and hold harmless the Company
and its officers, directors, counsel, employees and other agents from and
against any and all loss, damages, liabilities or expenses including reasonable
attorneys’ fees which any such person may incur by reason of or in connection
with any misrepresentation made by Investors in this Agreement or otherwise, any
breach by Investors of their agreements with the Company or any sale or
distribution of any Securities by Investors in violation of the Act or State
Acts.  All representations and warranties of Investors contained in this
Agreement shall survive this Agreement.

     

    ARTICLE
6

    MISCELLANEOUS
PROVISIONS

     

    6.1 Captions and
Headings. The Article and Section headings throughout this
Agreement are for convenience of reference only and shall in no way be deemed to
define, limit, or alter any provision of this Agreement.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    6.2 Entire Agreement;
Amendment.  This Agreement, together with the previously executed
non-disclosure agreements applicable to this transaction and the Class A and
Class B Warrant Agreements being entered into at the Closing set forth the
entire agreement and understanding of the Parties and shall supersede all prior
agreements and understandings.  No amendment of the Agreement shall be made
without the express written consent of the Parties.

     

    6.3 Severability. 
The invalidity or unenforceability of any particular provision of this Agreement
shall not affect any other provision hereof, and all other provisions hereof
shall continue to be enforceable to the maximum extent permitted by
law.

     

    6.4 Governing Law. 
This Agreement shall be governed by and construed in accordance with the laws of
the State of California, without reference to principles of conflicts of
laws.

     

    6.5 Notices.  All
notices, requests, demands, consents, and other communications hereunder shall
be transmitted in writing and shall be deemed to have been duly given when
hand-delivered or sent by certified mail, postage prepaid, with return receipt
requested, addressed to the Parties as follows:

    

     To
the Company:

    

    780 Montague Expressway, Suite 504, San
Jose, California95131, Attention: Chief
Executive Officer; and

    

     To
each Investor:

    

    As set forth on Exhibit 1

    

     Any
Party may change its address for purposes of this Section by giving notice
as provided herein.

    

    6.6 Counterparts.  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
all counterparts have been signed by each Party and delivered to the other
Parties; provided that a facsimile signature shall be considered due execution
and shall be binding upon the signatory thereto with the same force and effect
as if the signature were an original.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
Parties hereto as of the date first above written.

     

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	
                                                                                          NEOMAGIC
      CORPORATION

                                                                                        	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By: 	
                                                                                          /s/

                                                                                        	 	 	
                                                                                        	 
	 	
                                                                                          Douglas
      R. Young, Chief Executive Officer

                                                                                        	 	 	
                                                                                           

                                                                                        	 
	 	
                                                                                           

                                                                                        	 	 	
                                                                                           

                                                                                        	 

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

    

    13cdii_ex.htm

 

 

Exhibit 10.1

 

CONTINUOUS OFFERING PROGRAM AGREEMENT

 

October 14, 2009

Rodman & Renshaw, LLC

1251 Avenue of the Americas, 20th Floor

New York, NY 10020

	
  
	
Ladies and Gentlemen:

       

China Direct Industries, Inc., a corporation organized under the laws of Florida (the “Company”), confirms its agreement (this “Agreement”) with Rodman & Renshaw, LLC (the “Manager”)
as follows:

1. Description of Shares. The Company has issued and proposes to sell through or to the Manager, as sales agent and/or principal, shares (the “Shares”)
of the Company’s common stock, $0.0001 par value (“Common Stock”), with gross proceeds aggregating up to $5,201,330, from time to time during the term of this Agreement and on the terms set forth in Section 3 of this Agreement.  For purposes of selling the Shares through the Manager, the Company hereby appoints the Manager as exclusive agent of the Company for the purpose of soliciting purchases of the Shares
from the Company pursuant to this Agreement.

2. Representations and Warranties.  The Company represents and warrants to, and agrees with, the Manager at the Execution Time and on each such time the following
representations and warranties are repeated or deemed to be made pursuant to this Agreement, as set forth below.

(a) The Company meets the requirements for use of Form S-3 under the Act and has prepared and filed with the Commission a shelf registration statement, as defined in Rule 405 (File Number 333-151648) on Form S-3,
including a related Base Prospectus (the “Base Prospectus”), for registration under the Act of the offering and sale of the Shares. Such Registration Statement, including any amendments thereto filed prior to the Execution Time or prior to any such time this representation is repeated or deemed to be made, became effective upon filing. As filed, the Prospectus contains all information required by the Act and the rules thereunder, and,
except to the extent the Manager shall agree in writing to a modification, shall be in all substantive respects in the form furnished to the Manager prior to the Execution Time or prior to any such time this representation is repeated or deemed to be made. The Registration Statement, at the Execution Time, each such time this representation is repeated or deemed to be made, and at all times during which a prospectus is required by the Act to be delivered (whether physically or through compliance with Rule 172,
173 or any similar rule) in connection with any offer or sale of Shares, meets the requirements set forth in Rule 415(a)(1)(x). The initial Effective Date of the Registration Statement was not earlier than the date three years before the Execution Time. Any reference herein to the Registration Statement, the Base Prospectus, any Interim Prospectus Supplement or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Exchange Act on or before the Effective Date of the Registration Statement or the issue date of the Base Prospectus, any Interim Prospectus Supplement or the Prospectus, as the case may be; and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Base Prospectus, any Interim Prospectus Supplement or the Prospectus shall be deemed to refer to and include the filing of any document under
the Exchange Act after the Effective Date of the Registration Statement or the issue date of the Base Prospectus, any Interim Prospectus Supplement or the Prospectus, as the case may be, deemed to be incorporated therein by reference.

  

 

  

 

(b) To the extent that the Registration Statement is not available for the sales of the Shares as contemplated by this Agreement or the Company is not a “well known seasoned issuer” as defined in Rule 405 or otherwise
is unable to make the representations set forth in Section 2(e) at any time when such representations are required, the Company shall file a new registration statement with respect to any additional shares of Common Stock necessary to complete such sales of the Shares and shall cause such registration statement to become effective as promptly as practicable. After the effectiveness of any such registration statement, all references to “Registration Statement” included in this Agreement shall
be deemed to include such new registration statement, including all documents incorporated by reference therein pursuant to Item 12 of Form S-3, and all references to “Base Prospectus” included in this Agreement shall be deemed to include the final form of prospectus, including all documents incorporated therein by reference, included in any such registration statement at the time such registration statement became effective.

(c) On each Effective Date, at the Execution Time, at each Applicable Time, at each Settlement Date and at all times during which a prospectus is required by the Act to be delivered (whether physically or through compliance with Rule 172,
173 or any similar rule) in connection with any offer or sale of Shares, the Registration Statement complied and will comply in all material respects with the applicable requirements of the Act and the Exchange Act and the respective rules thereunder and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and on the date of any filing pursuant to Rule 424(b),
at the Execution Time, at each Applicable Time, on each Settlement Date and at all times during which a prospectus is required by the Act to be delivered (whether physically or through compliance with Rule 172, 173 or any similar rule) in connection with any offer or sale of Shares, the Prospectus (together with any supplement thereto) complied and will comply in all material respects with the applicable requirements of the Act and the Exchange Act and the respective rules thereunder and did not and will
not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the Registration Statement or the Prospectus
(or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by the Manager specifically for inclusion in the Registration Statement or the Prospectus (or any supplement thereto).

(d) At the Execution Time, at each Applicable Time and at each Settlement Date, the Disclosure Package does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Disclosure Package based upon and in conformity with written information furnished to the Company by the Manager specifically for use therein.

(e) The Company agrees to pay the fees required by the Commission relating to the Shares within the time required by Rule 456(b)(1) without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r).

  

- 2 -

  

(f) (i) At the earliest time after the filing of the Registration Statement that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2)) of the Shares and (ii) as of the
Execution Time and on each such time this representation is repeated or deemed to be made (with such date being used as the determination date for purposes of this clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405), without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an Ineligible Issuer.

(g) Each Issuer Free Writing Prospectus does not include any information the substance of which conflicts with the information contained in the Registration Statement, including any document incorporated therein by reference and any
prospectus supplement deemed to be a part thereof that has not been superseded or modified; and each Issuer Free Writing Prospectus does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 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 the Manager specifically for use therein.

(h) The Registration Statement is not the subject of a pending proceeding or examination under Section 8(d) or 8(e) of the Act, and the Company is not the subject of a pending proceeding under Section 8A of the Act in connection
with the offering of the Shares.

(i) The Common Stock is an “actively-traded security” exempted from the requirements of Rule 101 of Regulation M under the Exchange Act by subsection (c)(1) of such rule.

(j) The Company has not entered into any other sales agency agreements or other similar arrangements with any agent or any other representative in respect of at the market offerings of the Shares in accordance with Rule 415(a)(4)
of the Act.

(k) The Company has not taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares.

(l) There is no broker, finder or other party that is entitled to receive from the Company any brokerage or finder’s fee or other fee or commission as a result of any transactions contemplated by this Agreement other than the Manager.

(m) The consolidated financial statements incorporated by reference in the Disclosure Package and the Prospectus and any amendments thereof or supplements thereto present fairly in all material respects the consolidated financial position
of the Company and its subsidiaries as of the dates indicated and the consolidated results of their operations and cash flows for the periods specified and have been prepared in conformity with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved, except as indicated therein, and the supporting schedules incorporated by reference in the Disclosure Package and the Prospectus present
fairly the information required to be stated therein.

  

- 3 -

  

(n) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Florida, with power and authority (corporate and other) to own its properties and conduct its business
as it is now being conducted except where the failure to have such power or authority would not individually or in the aggregate have a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business (a “Material Adverse Effect”).

(o) The execution and delivery by the Company of this Agreement, the consummation by the Company of the transactions herein contemplated and the compliance by the Company with the terms hereof do not and will not conflict with, or result
in a breach or violation of, any of the terms or provisions of, or constitute a default under, the Certificate of Incorporation or Bylaws, as amended, of the Company or any of its subsidiaries or any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or by which any of the property or assets of the Company or any of its subsidiaries is subject (except for such
conflicts, breaches, violations and defaults as would not have a Material Adverse Effect and would not materially adversely affect the consummation by the Company of the transactions herein contemplated and the compliance by the Company with the terms hereof), nor will such action result in any violation of the provisions of the Certificate of Incorporation or Bylaws of the Company, or any statute or any order, rule or regulation of any court or governmental agency or body, having jurisdiction over the Company
or any of its subsidiaries or any of their respective properties; and except as disclosed in the Disclosure Package and the Prospectus, no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the performance by the Company of this Agreement or the consummation by the Company of the transactions contemplated by this Agreement, except such as are required under the Blue Sky or securities laws of the various states.

(p) This Agreement has been duly authorized by the Company. This Agreement has been duly executed and delivered by the Company.

(q)  Sherb & Co, LLP, who reported on the annual consolidated financial statements of the Company incorporated by reference in the Disclosure Package and the Prospectus, were, at the time such reports were prepared, independent
accountants as required by the Securities Act and the rules and regulations thereunder (the “Securities Act Regulations”).

(r) Other than as set forth in the disclosure package delivered concurrently with this Agreement (the “Disclosure Package”) and the Prospectus Supplement to
the Base Prospectus (the “Prospectus”), there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, in the reasonable judgment of the Company, individually or in the aggregate are likely to have a Material Adverse Effect; and, to the best of the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others.

(s) The Company has authorized capital stock as set forth in the Disclosure Package and the Prospectus, and all of the issued shares of capital stock of the Company (including the Shares) have been duly and validly authorized and issued
and are fully paid and non-assessable; the Shares are currently held in treasury; and all of the issued shares of capital stock of each material subsidiary of the Company have been fully and validly authorized and issued, are fully paid and non-assessable and, except for directors’ qualifying shares and other than pursuant to the Company’s senior secured exit financing facility or as disclosed in the Disclosure Package and the Prospectus, are owned directly or indirectly by the Company.

  

- 4 -

  

(t) The Company is subject to Section 13 of the Exchange Act.

(u) Except as otherwise disclosed in the Disclosure Package and the Prospectus, no labor problem or dispute with the employees of the Company or any of its subsidiaries, that could reasonably be expected to have a Material Adverse Effect,
exists or, to the knowledge of the Company, is threatened.

(v) Except as described in the Disclosure Package and the Prospectus the Company and each material subsidiary possess all licenses, certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, except to the extent that the failure to possess such licenses, certificates, authorizations or permits would not have a Material Adverse Effect; and to the Company’s knowledge neither the Company nor any Significant Subsidiary (as defined in Registration S-X under the Securities Act) has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit, with respect to which any
unfavorable decision, ruling or finding would singly or in the aggregate, result in a Material Adverse Effect.

(w) Except as otherwise disclosed in the Disclosure Package and the Prospectus, the Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to
the protection of human health (to the extent related to exposure to hazardous or toxic substances or wastes, pollutants or contaminants), the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“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; 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 where such non-compliance with Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not, individually or in the aggregate, result in a Material Adverse Effect.

(x) The Company is not, and after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Disclosure Package and the Prospectus, the Company will not be required to register
as an “investment company”, within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”).

(y) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the Disclosure Package
and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness identified by management or by the Company’s auditors and communicated to Management in the Company’s internal control over financial reporting (whether or not remediated) and (2) 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.

  

- 5 -

  

(z) Any statistical and market-related data included in the Disclosure Package and the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate, and where required, the Company has obtained
the written consent to the use of such data from such sources.

(aa) Neither the company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is aware of or has taken any action, directly or
indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA; and the Company, its subsidiaries and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to
continue to ensure, continued compliance therewith.

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

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

(dd) No holders of equity securities of the Company have rights to the registration of such equity securities under the Registration Statement.

(ee) There are no transfer taxes or other similar fees or charges under Federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or
the issuance by the Company or sale by the Company of the Securities. Any certificate signed by any officer of the Company and delivered to the Manager or counsel for the Manager in connection with this Agreement shall be deemed a representation and warranty by the Company, as to matters covered thereby, to the Manager.

3. Sale and Delivery of Shares.

(a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company will issue and agrees to sell Shares from time to time through the Manager, acting as sales agent, and the
Manager agrees to use its reasonable efforts to sell, as sales agent for the Company, the Shares on the following terms:

  

- 6 -

  

(i) The Shares are to be sold on a daily basis or otherwise as shall be agreed to by the Company and the Manager on any day that (A) is a trading day for the Nasdaq Global Market (“Trading
Market”), (B) the Company has instructed the Manager by telephone (confirmed promptly by electronic mail) to make such sales and (C) the Company has satisfied its obligations under Section 6 of this Agreement. The Company will designate the maximum amount of the Shares to be sold by the Manager daily (in any event not in excess of the amount available for issuance under the Prospectus and the currently effective Registration Statement) and the minimum price per Share at which such
Shares may be sold. Subject to the terms and conditions hereof, the Manager shall use its reasonable efforts to sell on a particular day all of the Shares designated for the sale by the Company on such day. The gross sales price of the Shares sold under this Section 3(a) shall be the market price for shares of the Company’s Common Stock sold by the Manager under this Section 3(a) on the Trading Market at the time of sale of such Shares.

(ii) The Company acknowledges and agrees that (A) there can be no assurance that the Manager will be successful in selling the Shares, (B) the Manager will incur no liability or obligation to the Company or any other person
or entity if it does not sell Shares for any reason other than a failure by the Manager to use its reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell such Shares as required under this Agreement, and (C) the Manager shall be under no obligation to purchase Shares on a principal basis pursuant to this Agreement.

(iii) The Company shall not authorize the issuance and sale of, and the Manager shall not be obligated to use its reasonable efforts to sell, any Share at a price lower than the minimum price therefor designated from time to time by
the Company’s Board of Directors (the “Board”), or a duly authorized committee thereof, and notified to the Manager in writing. The Company or the Manager may, upon notice to the other party hereto by telephone (confirmed promptly by electronic mail), suspend the offering of the Shares for any reason and at any time; provided, however,
that such suspension or termination shall not affect or impair the parties’ respective obligations with respect to the Shares sold hereunder prior to the giving of such notice.

(iv) The Manager may sell Shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act, including without limitation sales made directly on the Trading
Market on any other existing trading market for the Common Stock or to or through a market maker. The Manager may also sell Shares in privately negotiated transactions.

(v) The compensation to the Manager for sales of the Shares with respect to which the Manager acts as sales agent under this Agreement shall be 4% of the gross sales price of the Shares sold pursuant to this Section 3(a).  The
remaining proceeds, after further deduction for any transaction fees imposed by any governmental or self-regulatory organization in respect of such sales, shall constitute the net proceeds to the Company for such Shares (the “Net Proceeds”).

(vi) The Manager shall provide written confirmation (which may be by facsimile or electronic mail) to the Company following the close of trading on the Trading Market each day in which the Shares are sold under this Section 3(a)
setting forth the number of the Shares sold on such day, the aggregate gross sales proceeds and the Net Proceeds to the Company, and the compensation payable by the Company to the Manager with respect to such sales.

  

- 7 -

  

(vii) Settlement for sales of the Shares pursuant to this Section 3(a) will occur at 10:00 a.m. (Eastern Time), or at such time as the Company and the Manager may mutually agree, on the third business day following the date
on which such sales are made (each such day, a “Settlement Date”). On each Settlement Date, the Shares sold through the Manager for settlement on such date shall be issued and delivered by the Company to the Manager against payment of the Net Proceeds for the sale of such Shares. Settlement for all such Shares shall be effected by free delivery of the Shares to the Manager’s account at The Depository Trust Company (“DTC”)
via the DWAC system, in return for payments in same day funds delivered to the account designated by the Company. If the Company or its transfer agent (if applicable) shall default on its obligation to deliver the Shares on any Settlement Date, the Company shall (A) indemnify and hold the Manager harmless against any loss, claim or damage arising from or as a result of such default by the Company and (B) pay the Manager any commission to which it would otherwise be entitled absent such default. If the
Manager breaches this Agreement by failing to deliver the Net Proceeds on any Settlement Date for the Shares delivered by the Company, the Manager will pay the Company interest based on the effective overnight federal funds rate.

(viii) At each Applicable Time, Settlement Date, Representation Date (as defined in Section 4(k)) and Filing Date (as defined below in Section 4(w), the Company shall be deemed to have affirmed each representation and warranty
contained in this Agreement as if such representation and warranty were made as of such date, modified as necessary to relate to the Registration Statement and the Prospectus as amended as of such date. Any obligation of the Manager to use its reasonable efforts to sell the Shares on behalf of the Company shall be subject to the continuing accuracy of the representations and warranties of the Company herein, to the performance by the Company of its obligations hereunder and to the continuing satisfaction of the
additional conditions specified in Section 6 of this Agreement.

(b) Each sale of the Shares to the Manager shall be made in accordance with the terms of this Agreement which will provide for the sale of such Shares to, and the purchase thereof by, the Manager.

(c) Under no circumstances shall the number and aggregate amount of the Shares sold pursuant to this Agreement exceed (i) the aggregate amount set forth in Section 1, (ii) the number of shares of the Common Stock available for issuance
under the currently effective Registration Statement or (iii) the number and aggregate amount of Shares authorized from time to time to be issued and sold under this Agreement by the Board, or a duly authorized committee  thereof, and notified to the Manager in writing.

(d) If either party has reason to believe that the exemptive provisions set forth in Rule 101(c)(1) of Regulation M under the Exchange Act are not satisfied with respect to the Shares, it shall promptly notify the other party
and sales of the Shares under this Agreement shall be suspended until that or other exemptive provisions have been satisfied in the judgment of each party.

4. Agreements. The Company agrees with the Manager that:

  

- 8 -

  

(a) During any period when the delivery of a prospectus relating to the Shares is required (including in circumstances where such requirement may be satisfied pursuant to Rule 172, 173 or any similar rule) to be delivered under
the Act, the Company will not file any amendment of the Registration Statement or supplement (including any Interim Prospectus Supplement) to the Base Prospectus unless the Company has furnished to the Manager a copy for its review prior to filing and will not file any such proposed amendment or supplement to which the Manager reasonably objects. The Company has properly completed the Prospectus, in a form approved by the Manager, and filed such Prospectus, as amended at the Execution Time, with the Commission
pursuant to the applicable paragraph of Rule 424(b) by the Execution Time and will cause any supplement to the Prospectus to be properly completed, in a form approved by the Manager, and will file such supplement with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed thereby and will provide evidence reasonably satisfactory to the Manager of such timely filing. The Company will promptly advise the Manager (i) when the Prospectus, and any supplement
thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b), (ii) when, during any period when the delivery of a prospectus (whether physically or through compliance with Rule 172, 173 or any similar rule) is required under the Act in connection with the offering or sale of the Shares, any amendment to the Registration Statement shall have been filed or become effective, (iii) of any request by the Commission or its staff for any amendment of the Registration Statement,
or any Rule 462(b) Registration Statement, or for any supplement to the Prospectus or for any additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any notice objecting to its use or the institution or threatening of any proceeding for that purpose and (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the
institution or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the occurrence of any such suspension or objection to the use of the Registration Statement and, upon such issuance, occurrence or notice of objection, to obtain as soon as possible the withdrawal of such stop order or relief from such occurrence or objection, including, if necessary, by filing an amendment to the Registration Statement or a new registration statement
and using its best efforts to have such amendment or new registration statement declared effective as soon as practicable.

(b) If, at any time on or after an Applicable Time but prior to the related Settlement Date, any event occurs as a result of which the Disclosure Package would include any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the circumstances under which they were made or the circumstances then prevailing not misleading, the Company will (i) notify promptly the Manager so that any use of the Disclosure Package may cease until it is amended or supplemented; (ii) amend or supplement the Disclosure Package to correct such statement or omission; and (iii) supply any amendment or supplement to the Manager in such quantities as the Manager may reasonably request.

  

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(c) During any period when the delivery of a prospectus relating to the Shares is required (including in circumstances where such requirement may be satisfied pursuant to Rule 172, 173 or any similar rule) to be delivered under
the Act, any event occurs as a result of which the Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made at such time not misleading, or if it shall be necessary to amend the Registration Statement, file a new registration statement or supplement the Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, including
in connection with use or delivery of the Prospectus, the Company promptly will (i) notify the Manager of any such event, (ii) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 4, an amendment or supplement or new registration statement which will correct such statement or omission or effect such compliance, (iii) use its best efforts to have any amendment to the Registration Statement or new registration statement declared effective
as soon as practicable in order to avoid any disruption in use of the Prospectus and (iv) supply any supplemented Prospectus to the Manager in such quantities as the Manager may reasonably request.

(d) As soon as practicable, the Company will make generally available to its security holders and to the Manager an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a)
of the Act and Rule 158.

(e) The Company will furnish to the Manager and counsel for the Manager, without charge, signed copies of the Registration Statement (including exhibits thereto) and, so long as delivery of a prospectus by the Manager or dealer may be
required by the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172, 173 or any similar rule), as many copies of the Prospectus and each Issuer Free Writing Prospectus and any supplement thereto as the Manager may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering.

(f) The Company will arrange, if necessary, for the qualification of the Shares for sale under the laws of such jurisdictions as the Manager may designate and will maintain such qualifications in effect so long as required for the distribution
of the Shares; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Shares, in any jurisdiction where it is not now so subject.

(g) The Company agrees that, unless it has or shall have obtained the prior written consent of the Manager, and the Manager agrees with the Company that, unless it has or shall have obtained, as the case may be, the prior written consent
of the Company, it has not made and will not make any offer relating to the 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 by the Company with the Commission or retained by the Company under Rule 433; provided that the prior written consent of the parties hereto shall be deemed to have been given in respect of the Free Writing Prospectuses included in Schedule I hereto,
if any. Any such free writing prospectus consented to by the Manager or the Company is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company agrees that (i) it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and (ii) it has complied and will comply, as the case may be, with the requirements of Rules 164 and 433 applicable to any Permitted Free Writing Prospectus, including in respect
of timely filing with the Commission, legending and record keeping.

  

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(h) The Company will not offer, sell, contract to sell, pledge, or otherwise dispose of, (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition of (whether by actual disposition
or effective economic disposition due to cash settlement or otherwise) by the Company or any affiliate of the Company or any person in privity with the Company or any affiliate of the Company) directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, any other shares
of Common Stock or any securities convertible into, or exercisable, or exchangeable for, shares of Common Stock; or publicly announce an intention to effect any such transaction (i) without giving the Manager at least three Business Days’ prior written notice specifying the nature of the proposed transaction and the date of such proposed transaction and (ii) unless the Manager suspends acting under this Agreement for such period of time requested by the Company or as deemed appropriate by the
Manager in light of the proposed transaction; provided, however, that the Company may issue and sell Common Stock pursuant to any employee stock option plan, stock ownership plan or dividend reinvestment plan of the Company in effect at the Execution Time and, with as much notice as reasonably practicable, the Company may issue Common Stock issuable upon the conversion of securities
or the exercise of warrants outstanding at the Execution Time.

(i) Until the termination of this Agreement, the Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation in violation of the Act, Exchange Act or the rules and regulations thereunder of the price of any security of the Company to facilitate the sale or resale of the Shares or otherwise violate any provision of Regulation M under the Exchange Act.

(j) The Company will, at any time during the term of this Agreement, as supplemented from time to time, advise the Manager immediately after it shall have received notice or obtained knowledge thereof, of any information or fact that
would alter or affect any opinion, certificate, letter and other document provided to the Manager pursuant to Section 6 herein.

(k) Upon commencement of the offering of the Shares under this Agreement (and upon the recommencement of the offering of the Shares under this Agreement following the termination of a suspension of sales hereunder lasting more than 30
trading days), and each time that (i) the Registration Statement or the Prospectus shall be amended or supplemented, (ii) there is filed with the Commission any document incorporated by reference into the Prospectus (other than a Current Report on Form 8-K, unless the Manager shall otherwise reasonably request) or (iii) otherwise as the Manager may reasonably request after consultation with its counsel, the Company shall (such commencement or recommencement date and each such date referred
to in (i), (ii), (iii) and (iv) above, a “Representation Date”), the Company shall furnish or cause to be furnished to the Manager forthwith a certificate dated and delivered the date of such commencement or recommencement, effectiveness of such amendment, the date of filing with the Commission of such supplement or other document or promptly upon request, as the case may be, in form reasonably satisfactory to the Manager to
the effect that the statements contained in the certificate referred to in Section 6 of this Agreement which were last furnished to the Manager are true and correct at the time of such commencement or recommencement amendment, supplement, filing, or delivery, as the case may be, as though made at and as of such time (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such time) or, in lieu of such certificate, a certificate
of the same tenor as the certificate referred to in said Section 6, modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such certificate.

  

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(l) At each Representation Date, the Company shall furnish or cause to be furnished forthwith to the Manager and to counsel to the Manager a written opinion of  Schneider Weinberger & Beilly LLP, counsel to the Company
(“Company Counsel”), or other counsel reasonably satisfactory to the Manager, dated and delivered the date of commencement or recommencement, effectiveness of such amendment, the date of filing with the Commission of such supplement or other document, or promptly upon such request, as the case may be, in form and substance reasonably satisfactory to the Manager, of the same tenor as the opinions referred to in Section 6(b) of this
Agreement, but modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such opinion.

(m) Upon commencement of the offering of the Shares under this Agreement (and upon the recommencement of the offering of the Shares under this Agreement following the termination of a suspension of sales hereunder lasting more than 30
trading days), and each time that (i) the Registration Statement or the Prospectus shall be amended or supplemented to include additional amended financial information, (ii) the Company files a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K, or (iii) at the Manager’s request and upon reasonable advance notice to the Company, there is filed with the Commission any document which contains financial information (other than an Annual Report on Form 10-K) incorporated
by reference into the Prospectus, the Company shall cause (1) each of Sherb & Co, LLP (the “Accountants”), or other independent accountants satisfactory to the Manager forthwith to furnish the Manager a letter, and (2) the principal financial and accounting officer of the Company forthwith to furnish the Manager a certificate, in each case dated the date of commencement or recommencement, effectiveness of such amendment,
the date of filing of such supplement or other document with the Commission, in form satisfactory to the Manager, of the same tenor as the letters and certificate referred to in Section 6 of this Agreement but modified to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letters and certificate; provided, however, that the
Company will not be required to cause the Accountants to furnish such letters to the Manager in connection with the filing of a Current Report on Form 8-K unless (i) such Current Report on Form 8-K is filed at any time during which a prospectus relating to the Shares is required to be delivered under the Act and (ii) the Manager has requested such letter based upon the event or events reported in such Current Report on Form 8-K.

(n) Upon commencement of the offering of the Shares under this Agreement (and upon the recommencement of the offering of the Shares under this Agreement following the termination of a suspension of sales hereunder lasting more than 30
trading days), and at each Representation Date, the Company will conduct a due diligence session, in form and substance, reasonably satisfactory to the Manager, which shall include representatives of the management and the independent accountants of the Company. The Company shall cooperate timely with any reasonable due diligence request from or review conducted by the Manager or its agents from time to time in connection with the transactions contemplated by this Agreement, including, without limitation, providing
information and available documents and access to appropriate corporate officers and the Company’s agents during regular business hours and at the Company’s principal offices, and timely furnishing or causing to be furnished such certificates, letters and opinions from the Company, its officers and its agents, as the Manager may reasonably request.

(o) The Company consents to the Manager trading in the Common Stock for the Manager’s own account and for the account of its clients at the same time as sales of the Shares occur pursuant to this Agreement.

  

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(p) The Company will disclose in its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as applicable, the number of Shares sold through the Manager under this Agreement, the Net Proceeds to the Company and the
compensation paid by the Company with respect to sales of Shares pursuant to this Agreement during the relevant quarter.

(q) If to the knowledge of the Company, the conditions set forth in Section 6(a) shall not have been satisfied as of the applicable Settlement Date, the Company will offer to any person who has agreed to purchase Shares from the
Company as the result of an offer to purchase solicited by the Manager the right to refuse to purchase and pay for such Shares.

(r) Each acceptance by the Company of an offer to purchase the Shares hereunder, shall be deemed to be an affirmation to the Manager that the representations and warranties of the Company contained in or made pursuant to this Agreement
are true and correct as of the date of such acceptance, and an undertaking that such representations and warranties will be true and correct as of the Settlement Date for the Shares relating to such acceptance, as though made at and as of such date (except that such representations and warranties shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented relating to such Shares).

(s) The Company shall ensure that there are at all times sufficient shares of Common Stock to provide for the issuance, free of any preemptive rights, out of its authorized but unissued shares of Common Stock or shares of Common Stock
held in treasury, of the maximum aggregate number of Shares authorized for issuance by the Board pursuant to the terms of this Agreement. The Company will use its commercially reasonable efforts to cause the Shares to be listed for trading on the Trading Market and to maintain such listing.

(t) During any period when the delivery of a prospectus relating to the Shares is required (including in circumstances where such requirement may be satisfied pursuant to Rule 172, 173 or any similar rule) to be delivered under
the Act, the Company will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and the regulations thereunder.

(u) The Company shall cooperate with Manager and use its reasonable efforts to permit the Shares to be eligible for clearance and settlement through the facilities of DTC.

(v) The Company will apply the Net Proceeds from the sale of the Shares in the manner set forth in the Prospectus.

(w) On or prior to the earlier of (i) the date on which the Company shall file a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K in respect of any fiscal quarter in which sales of Shares were made by the Manager pursuant
to Section 3(a) of this Agreement and (ii) the date on which the Company shall be obligated to file such document referred to in clause (i) in respect of such quarter (each such date, and any date on which an amendment to any such document is filed, a “Filing Date”), the Company will file a prospectus supplement with the Commission under the applicable paragraph of Rule 424(b), which prospectus supplement will set forth,
with regard to such quarter, the number of the Shares sold through the Manager as agent pursuant to Section 3(a) of this Agreement, the Net Proceeds to the Company and the compensation paid by the Company with respect to such sales of the Shares pursuant to Section 3(a) of this Agreement and deliver such number of copies of each such prospectus supplement to the Trading Market as are required by such exchange.

  

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5. Payment of Expenses. The Company agrees to pay the costs and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions
contemplated hereby are consummated, including without limitation: (i) the preparation, printing or reproduction and filing with the Commission of the Registration Statement (including financial statements and exhibits thereto), the Prospectus and each Issuer Free Writing Prospectus, and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement,
the Prospectus, and each Issuer Free Writing Prospectus, and all amendments or supplements to any of them, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Shares; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Shares, including any stamp or transfer taxes in connection with the original issuance and sale of the Shares; (iv) the printing (or reproduction) and delivery of this Agreement, any blue sky
memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Shares; (v) the registration of the Shares under the Exchange Act and the listing of the Shares on the Trading Market; (vi) any registration or qualification of the Shares for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Manager relating to such registration and qualification);
(vii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Shares; (viii) the fees and expenses of the Company’s accountants and the fees and expenses of counsel (including local and special counsel) for the Company; (ix) the filing fee under FINRA Rule 5110; and (x) all other costs and expenses incident to the performance by the Company of its obligations hereunder. Additionally, the Company
shall reimburse the Manager for Manager’s incidental expense incurred, if any, by the Manager in connection therewith, on the next immediate Settlement Date (but only in event of a Settlement Date) out of the Net Proceeds, provided that no such reimbursement shall exceed 1% of the gross sales price and in no event greater than $10,000.

6. Conditions to the Obligations of the Manager. The obligations of the Manager under this Agreement shall be subject to (i) the accuracy of the representations and
warranties on the part of the Company contained herein as of the Execution Time, each Representation Date, and as of each Applicable Time and Settlement Date (ii) to the performance by the Company of its obligations hereunder and (iii) the following additional conditions:

(a) The Prospectus, and any supplement thereto, required by Rule 424 to be filed with the Commission have been filed in the manner and within the time period required by Rule 424(b) with respect to any sale of Shares; each
Interim Prospectus Supplement shall have been filed in the manner required by Rule 424(b) within the time period required by Section 3(a) of this Agreement; any other material required to be filed by the Company pursuant to Rule 433(d) under the Act, shall have been filed with the Commission within the applicable time periods prescribed for such filings by Rule 433; and no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use shall have been
issued and no proceedings for that purpose shall have been instituted or threatened.

(b) The Company shall have requested and caused the Company Counsel to furnish to the Manager, on every date specified in Section 4 of this Agreement, its opinion and negative assurance statement, dated as of such date and addressed
to the Manager in substantially the form attached hereto as Exhibit A.

  

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(c) In rendering such opinions, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Florida or the Federal laws of the United States, to the extent they deem proper
and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Manager and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (c) shall also include any supplements thereto at the Settlement Date.

(d) The Company shall have furnished or caused to be furnished to the Manager, on every date specified in Section 4 of this Agreement, a certificate of the Company, signed by the Chief Executive Officer or the President and the
principal financial or accounting officer of the Company, dated as of such date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Disclosure Package and the Prospectus and any supplements or amendments thereto and this Agreement and that:

(i) the representations and warranties of the Company in this Agreement are true and correct on and as of such date with the same effect as if made on such date and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to such date;

(ii) no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use has been issued and no proceedings for that purpose have been instituted or, to the Company’s knowledge, threatened;
and

(iii) since the date of the most recent financial statements included in the Disclosure Package, there has been no Material Adverse Effect on the condition (financial or otherwise), earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package and the Prospectus.

(e) The Company shall have requested and caused the Accountants to have furnished to the Manager, on every date specified in Section 4 hereof and to the extent requested by the Manager and upon reasonable advance notice in connection
with any offering of the Shares, letters (which may refer to letters previously delivered to the Manager), dated as of such date, in form and substance satisfactory to the Manager, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable rules and regulations adopted by the Commission thereunder and that they have performed a review of any unaudited interim financial information of the Company and included or incorporated by reference in
the Registration Statement and the Prospectus in accordance with Statement on Auditing Standards No. 100, and stating in effect that:

(i) in their opinion the audited financial statements and financial statement schedules and pro forma financial statements included or incorporated by reference in the Registration Statement and the Prospectus and reported on by them
comply as to form with the applicable accounting requirements of the Act and the Exchange Act and the related rules and regulations adopted by the Commission;

  

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(ii) on the basis of a reading of the latest unaudited financial statements made available by the Company and their respective subsidiaries; their limited review, in accordance with standards established under Statement on Auditing
Standards No. 100, of the unaudited interim financial information for the most recently reported quarter, carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and committees of the Company and their respective subsidiaries; and inquiries of certain officials
of the Company who have responsibility for financial and accounting matters of the Company and their respective subsidiaries as to transactions and events subsequent to the end of such quarter, nothing came to their attention which caused them to believe that:

1. any unaudited financial statements included or incorporated by reference in the Registration Statement and the Prospectus do not comply as to form with applicable accounting requirements of the Act and with the related rules and
regulations adopted by the Commission with respect to financial statements included or incorporated by reference in Quarterly Reports on Form 10-Q under the Exchange Act; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included or incorporated by reference in the Registration Statement and the Prospectus;

2. with respect to the period subsequent to the most recently reported quarter, there were any changes, at a specified date not more than five days prior to the date of the letter, in the long-term debt of the Company and their respective
subsidiaries or capital stock of the Company or decreases in the stockholders’ equity of the Company as compared with the amounts shown on such consolidated balance sheets included or incorporated by reference in the Registration Statement and the Prospectus, or for the period from the end of such period to such specified date there were any decreases, as compared with the corresponding period in the preceding year, in net revenues or income before income taxes or in total or per share amounts of net income
of the Company and their respective subsidiaries, except in all instances for changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Manager; or

3. the information included or incorporated by reference in the Registration Statement and the Prospectus in response to Regulation S-K, Item 301 (Selected Financial Data), Item 302 (Supplementary Financial Information),
Item 402 (Executive Compensation) and Item 503(d) (Ratio of Earnings to Fixed Charges) is not in conformity with the applicable disclosure requirements of Regulation S-K.

(iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information
derived from the general accounting records of the Company and its subsidiaries) set forth or incorporated by reference in the Registration Statement and the Prospectus and in Exhibit 12 to the Registration Statement, agrees with the accounting records of the Company and its subsidiaries, excluding any questions of legal interpretation; and

  

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(f) The Company shall have requested and caused its principal financial and accounting officer to have furnished to the Manager, on every date specified in Section 4 hereof and to the extent requested by the Manager in connection
with any offering of the Shares, a certificate as to certain financial information included in the Disclosure Package and the Prospectus, in form and substance reasonably satisfactory to the Manager.

(g) Since the respective dates as of which information is disclosed in the Registration Statement, the Disclosure Package and the Prospectus, except as otherwise stated therein, there shall not have been (i) any change or decrease
specified in the letter or letters referred to in paragraph (d) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package (exclusive of any amendment or supplement thereto) the effect
of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Manager, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Shares as contemplated by the Registration Statement (exclusive of any amendment thereof), the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto).

(h) The Company shall have paid the required Commission filing fees relating to the Shares within the time period required by Rule 456(b)(1)(i) of the Act without regard to the proviso therein and otherwise in accordance with Rules 456(b)
and 457(r) of the Act and, if applicable, shall have updated the “Calculation of Registration Fee” table in accordance with Rule 456(b)(1)(ii) either in a post-effective amendment to the Registration Statement or on the cover page of a prospectus filed pursuant to Rule 424(b).

(i) The Financial Industry Regulatory Authority shall not have raised any objection with respect to the fairness and reasonableness of the terms and arrangements under this Agreement.

(j) The Shares shall have been listed and admitted and authorized for trading on the Trading Market, and satisfactory evidence of such actions shall have been provided to the Manager.

(k) Prior to each Settlement Date, the Company shall have furnished to the Manager such further information, certificates and documents as the Manager may reasonably request.

If any of the conditions specified in this Section 6 shall not have been fulfilled when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Manager and counsel for the Manager, this Agreement
and all obligations of the Manager hereunder may be canceled at, or at any time prior to, any Settlement Date by the Manager. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing.

The documents required to be delivered by this Section 6 shall be delivered at the office of  Weinstein Smith LLP, counsel for the Manager, at 420 Lexington Ave., Suite 2620, New York, NY 10170, on each such date as provided in this Agreement.

7. Indemnification and Contribution.

  

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(a) The Company agrees to indemnify and hold harmless the Manager, the directors, officers, employees and agents of the Manager and each person who controls the Manager within the meaning of either the Act or the Exchange Act against
any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Shares as originally filed
or in any amendment thereof, or in the Base Prospectus, any Interim Prospectus Supplement, the Prospectus, any Issuer Free Writing Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by the Manager specifically for inclusion therein. This indemnity agreement will be in addition to any liability that the Company may otherwise have.

(b) The Manager agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Company within the meaning of either the Act or the
Exchange Act, to the same extent as the foregoing indemnity from the Company to the Manager, but only with reference to written information relating to the Manager furnished to the Company by the Manager specifically for inclusion in the documents referred to in the foregoing indemnity; provided, however, that in no case shall the Manager be responsible for any amount in excess of
the underwriting discount or commission, as the case may be, applicable to the Shares purchased and sold by the Manager hereunder. This indemnity agreement will be in addition to any liability which the Manager may otherwise have.

(c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other
than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however,
that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present
such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party,

  

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(iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such claim, action, suit or proceeding.

(d) In the event that the indemnity provided in paragraph (a), (b) or (c) of this Section 7 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Manager agree
to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending the same) (collectively “Losses”) to which the Company and the Manager may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Manager on the other from the offering of the Shares; provided, however,
that in no case shall the Manager be responsible for any amount in excess of the underwriting discount or commission, as the case may be, applicable to the Shares purchased and sold by the Manager hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Manager severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Manager
on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Manager shall be deemed to be equal to the total underwriting discounts and commissions, in each case as determined by this Agreement.  Relative fault shall be determined by reference
to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Manager on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Manager agree that it would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person who controls the Manager within the meaning of either the Act or the Exchange
Act and each director, officer, employee and agent of the Manager shall have the same rights to contribution as the Manager, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d).

  

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8. Termination.

(a) The Company shall have the right, by giving written notice as hereinafter specified, to terminate the provisions of this Agreement relating to the solicitation of offers to purchase the Shares in its sole discretion at any time.
Any such termination shall be without liability of any party to any other party except that (i) with respect to any pending sale, through the Manager for the Company, the obligations of the Company, including in respect of compensation of the Manager, shall remain in full force and effect notwithstanding the termination and (ii) the provisions of Sections 5, 7, 9, 10, 12 and 14 of this Agreement shall remain in full force and effect notwithstanding such termination.

(b) The Manager shall have the right, by giving written notice as hereinafter specified, to terminate the provisions of this Agreement relating to the solicitation of offers to purchase the Shares in its sole discretion at any time.
Any such termination shall be without liability of any party to any other party except that the provisions of Sections 5, 7, 9, 10, 12 and 14 of this Agreement shall remain in full force and effect notwithstanding such termination.

(c) This Agreement shall remain in full force and effect unless terminated pursuant to Sections 8(a) or (b) above or otherwise by mutual agreement of the parties; provided that
any such termination by mutual agreement shall in all cases be deemed to provide that Sections 5, 7 and 9 shall remain in full force and effect.

(d) Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided that such termination shall not be effective until
the close of business on the date of receipt of such notice by the Manager or the Company, as the case may be. If such termination shall occur prior to the Settlement Date for any sale of the Shares, such sale shall settle in accordance with the provisions of Section 3(a) of this Agreement.

(e) Upon any termination of this Agreement, the Company's obligation to pay Manager any fees actually earned on the sale of the Shares and otherwise payable under Section 3(a)(v), shall survive any expiration or termination of this Agreement,
as permitted by FINRA Rule 5110(f)(2)(d).  Upon any termination of this Agreement, the Company's obligation to reimburse Manager for out of pocket accountable expenses actually incurred by Manager and reimbursable upon closing of the Offering pursuant to Section 5, if any are otherwise due under Section 5 hereof, will survive any expiration or termination of this Agreement, as permitted by FINRA Rule 5110(f)(2)(d).

9. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and
of the Manager set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by the Manager or the Company or any of the officers, directors, employees, agents or controlling persons referred to in Section 7 hereof, and will survive delivery of and payment for the Shares. The provisions of Sections 5 and 7 hereof shall survive the termination or cancellation of this Agreement.

10. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Manager, will be mailed, delivered or facsimiled to the Rodman
& Renshaw, LLC General Counsel (fax no.: (212) 356-0520) 1251 Avenue of the Americas, New York, New York, 10020, Attention: General Counsel; or, if sent to the Company, will be mailed, delivered or facsimiled to China Direct Industries, Inc. fax no.: 954-337-3874 and confirmed to it at 431 Fairway Drive, Ste. 200, Deerfield Beach, FL 33441 attention of the General Counsel.

  

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11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors, employees,
agents and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder.

12. No Fiduciary Duty. The Company hereby acknowledges that (a) the purchase and sale of the Shares pursuant to this Agreement is an arm’s-length commercial transaction
between the Company, on the one hand, and the Manager and any affiliate through which it may be acting, on the other, (b) the Manager is acting solely as sales agent and/or principal in connection with the purchase and sale of the Company’s securities and not as a fiduciary of the Company and (c) the Company’s engagement of the Manager in connection with the offering and the process leading up to the offering is as independent contractors and not in any other capacity. Furthermore, the Company
agrees that it is solely responsible for making its own judgments in connection with the offering (irrespective of whether the Manager has advised or is currently advising the Company on related or other matters). The Company agrees that it will not claim that the Manager has rendered advisory services of any nature or respect, or owe an agency, fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.

13. Integration. This Agreement supersede all prior agreements and understandings (whether written or oral) between the Company and the Manager with respect to the subject
matter hereof.

14. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed
within the State of New York.

15. Waiver of Jury Trial. The Company hereby irrevocably waives, 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 or thereby.

16. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and
the same agreement.

17. Headings. The section headings used in this Agreement are for convenience only and shall not affect the construction hereof.

18. Definitions. The terms that follow, when used in this Agreement shall have the meanings indicated.

  “Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

 “Applicable Time” shall mean, with respect to any Shares, the time of sale of such Shares pursuant to this Agreement.

 

“Base Prospectus” shall mean the base prospectus referred to in Section 2(a) above contained in the Registration Statement at the Execution Time.

 “Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.

  

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“Commission” shall mean the Securities and Exchange Commission.

“Disclosure Package” shall mean (i) the Base Prospectus, (ii) the most recently filed Interim Prospectus Supplement, (iii) the Issuer Free Writing Prospectuses, if any, identified in Schedule I hereto
and (iv) any other Free Writing Prospectus that the parties hereto shall hereafter expressly agree in writing to treat as part of the Disclosure Package.

“Effective Date” shall mean each date and time that the Registration Statement and any post-effective amendment or amendments thereto became or becomes effective.

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

“Execution Time” shall mean the date and time that this Agreement is executed and delivered by the parties hereto.

“Free Writing Prospectus” shall mean a free writing prospectus, as defined in Rule 405.

“Interim Prospectus Supplement” shall mean the prospectus supplement relating to the Shares prepared and filed pursuant to Rule 424(b) from time to time as provided by Section 4 of this Agreement.

“Issuer Free Writing Prospectus” shall mean an issuer free writing prospectus, as defined in Rule 433.

“Prospectus” shall mean the Base Prospectus, as supplemented by the most recently filed Interim Prospectus Supplement (if any).

“Registration Statement” shall mean the registration statement referred to in Section 2(a) above, including exhibits and financial statements and any prospectus supplement relating to the Shares that is filed with the Commission pursuant to Rule 424(b)
and deemed part of such registration statement pursuant to Rule 430B, as amended on each Effective Date and, in the event any post-effective amendment thereto becomes effective, shall also mean such registration statement as so amended.

“Rule 158”, “Rule 163”, “Rule 164”, “Rule 172”,
“Rule 173”, “Rule 405”, “Rule 415”, “Rule 424”, “Rule 430B” and “Rule 433”
refer to such rules under the Act.

**********************

  

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the Manager.

Very truly yours,

CHINA DIRECT INDUSTRIES, INC.

By:/s/ James Wang

Name: James Wang

Title: Chief Executive Officer

The foregoing Agreement is hereby confirmed and accepted as of the date first written above.

RODMAN & RENSHAW, LLC

	
 

By:/s/ John Borer

Name: John Borer

Title: Sr. Managing Director

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