UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 22, 2014
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DOCUMENT SECURITY SYSTEMS, INC. |
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(Exact name of registrant as specified in its charter) |
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New York |
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001-32146 |
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16-1229730 |
(State or other jurisdiction of
incorporation) |
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(Commission
File Number) |
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(IRS Employer ID Number) |
28 E. Main Street, Suite 1525
Rochester, New York |
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14614 |
(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code |
(585) 325-3610 |
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. Entry into a Material Definitive Agreement
On December 23, 2014, we entered into
an underwriting agreement with National Securities Corporation, as representative of the underwriters named in
the underwriting agreement, relating to the public offering by us of 3,300,000 shares of common stock. The shares are being
sold at a public offering price of $0.45 per share. The underwriters will purchase the shares at a price of $0.414 per
share, representing an 8% discount from the public offering price. Under the terms of the underwriting agreement, we have
granted the underwriters an option for a period of 45 days from the date of the underwriting agreement to purchase up to
an additional 495,000 shares of common stock, with an over-allotment price to the underwriters of $0.414 per share.
The net proceeds to us are expected
to be approximately $1,196,200, assuming no exercise of the underwriters’ over-allotment option and after deducting
underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise the
over-allotment option in full, the total net proceeds to us of the offering, after deducting underwriting discounts and
commissions and estimated offering expenses, are expected to be approximately $1,401,130. The offering is expected to close on
December 29, 2014, subject to the satisfaction of customary closing conditions.
The offering is being made pursuant
to a prospectus supplement dated December 23, 2014 and the accompanying prospectus dated November 1, 2013, pursuant to our
existing shelf registration statement on Form S-3 (File No. 333-191704), which was filed with the Securities and Exchange
Commission on October 11, 2013 and declared effective by the Commission on November 1, 2013.
The underwriting agreement contains customary
representations, warranties, and agreements by us, and customary conditions to closing, indemnification obligations of us and the
underwriters, including for liabilities under the Securities Act of 1933, as amended, other obligations of the parties, and termination
provisions.
The underwriting agreement is included
as an exhibit to this Current Report on Form 8-K to provide investors and security holders with information regarding its terms.
It is not intended to provide any other factual information about our company. The representations, warranties and covenants contained
in the underwriting agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit
of the parties to the underwriting agreement, and may be subject to limitations agreed upon by the parties, including being qualified
by confidential disclosures exchanged between the parties in connection with the execution of the underwriting agreement.
A copy of the opinion of Wyrick Robbins
Yates & Ponton LLP relating to the legality of the issuance and sale of the shares is attached as Exhibit 5.1 hereto. A copy
of the underwriting agreement is filed herewith as Exhibit 1.1, and is incorporated herein by reference. The foregoing descriptions
of the underwriting agreement does not purport to be complete and is qualified in its entirety by reference to such Exhibit.
Item 8.01. Other Events.
Reference is made to the description of
the offering in Item 1.01. We, and our officers and directors, agreed in the underwriting agreement, subject to certain exceptions,
not to offer and sell any shares of our common stock or securities convertible into or exercisable or exchangeable for shares of
our common stock for a period of 90 days following the date of the underwriting agreement, without the written consent of the representative
of the underwriters.
On December 22, 2014 and December 23,
2014, we issued press releases announcing the offering and the pricing of the offering, respectively. Copies of the press
releases are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits
Exhibit No. |
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Description |
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1.1 |
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Underwriting Agreement dated as of December 23, 2014, by and between
Document Security Systems, Inc. and National Securities Corporation as representative of the several underwriters named
therein. |
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5.1 |
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Opinion of Wyrick Robbins Yates & Ponton LLP. |
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23.1 |
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Consent of Wyrick Robbins Yates & Ponton LLP (contained in Exhibit 5.1 above). |
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99.1 |
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Press release of Document Security Systems, Inc. issued December 22,
2014. |
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99.2 |
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Press release of Document Security Systems, Inc. issued December 23,
2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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DOCUMENT SECURITY SYSTEMS, INC. |
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Date: December 23, 2014 |
/s/ Jeffrey Ronaldi |
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By: Jeffrey Ronaldi |
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Title: Chief Executive Officer |
Exhibit
1.1
3,300,000
SHARES
DOCUMENT
SECURITY SYSTEMS, INC.
COMMON STOCK
UNDERWRITING
AGREEMENT
December 23, 2014
National Securities Corporation
As representative of the several Underwriters
Named in Schedule VII hereto
410 Park Avenue
14th Floor
New York, NY 10022
Chardan Capital Markets, LLC
17 State Street
Suite 1600
New York, NY 10004
Ladies and Gentlemen:
Document Security
Systems, Inc., a New York corporation (the “Company”) proposes, subject to the terms and conditions stated
herein, to issue and sell to the Underwriters named in Schedule VI hereto (the “Underwriters”), for whom National
Securities Corporation is acting as representative (the “Representative”), an aggregate of 3,300,000 authorized
but unissued shares (the “Firm Shares”) and, at the election of the Underwriters, up to
495,000 additional shares (the “Additional Shares”) of Common Stock, $.02 par value per share (the
“Common Stock”), of the Company (the Firm Shares and the Additional Shares that the Underwriters elect to
purchase pursuant to Section 3 hereof being collectively called the “Securities”).
The Company and the
Underwriters hereby confirm their agreement with respect to the purchase and sale of the Securities as follows:
1. REGISTRATION
STATEMENT AND PROSPECTUS. The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”)
a registration statement on Form S-3 (File No. 333-191704) under the Securities Act of 1933, as amended (the “Securities
Act”), and the rules and regulations (the “Rules and Regulations”) of the Commission thereunder, and
such amendments to such registration statement as may have been required to the date of this Agreement. Such registration statement
has been declared effective by the Commission. Such registration statement, including amendments thereto, the exhibits and any
schedules thereto, the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act and
the documents and information otherwise deemed to be a part thereof or included therein by Rule 430B under the Securities Act or
otherwise pursuant to the Rules and Regulations, is herein called the “Registration Statement.” The Registration
Statement at the time it originally became effective is herein called the “Original Registration Statement.”
The Company proposes
to file with the Commission pursuant to Rule 424 under the Securities Act a final prospectus supplement relating to the Securities
to a form of prospectus included in the Registration Statement relating to the Securities in the form heretofore delivered to the
Underwriters. Such prospectus in the form in which it appears in the Registration Statement is hereinafter called the “Base
Prospectus.” Such supplemental form of prospectus, in the form in which it shall be filed with the Commission pursuant
to Rule 424(b) (including the Base Prospectus as so supplemented) is hereinafter called the “Prospectus.” Any
preliminary form of Prospectus which is filed or used prior to filing of the Prospectus is hereinafter called a “Preliminary
Prospectus.” Any reference herein to the Base Prospectus, any Preliminary Prospectus or the Prospectus shall be deemed
to include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act as of the date
of such prospectus.
For purposes of this
Agreement, all references to the Registration Statement, the Base Prospectus, any Preliminary Prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System (“EDGAR”). All references in this Agreement to amendments or supplements
to the Registration Statement, the Base Prospectus, any Preliminary Prospectus or the Prospectus shall be deemed to mean and include
the subsequent filing of any document under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
which is deemed to be incorporated by reference therein or otherwise deemed by the Rules and Regulations to be a part thereof.
2. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
(a) The
Company represents and warrants to, and agrees
with, the Underwriters as follows:
(i) No
order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission and each Preliminary Prospectus,
at the time of filing or the time of first use within the meaning of the Rules and Regulations, complied in all material respects
with the requirements of the Securities Act and the Rules and Regulations and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; except that the foregoing shall not apply to statements in or omissions
from any Preliminary Prospectus in reliance upon, and in conformity with, written information furnished to the Company by the Representative
specifically for use in the preparation thereof.
(ii) The
Company has complied to the Commission’s satisfaction with all requests of the Commission for additional or supplemental
information. The Registration Statement has become and remains effective as provided in Section 12 of the Exchange Act. No stop
order suspending the effectiveness of the Registration Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or threatened by the Commission.
(iii) Each
part of the Registration Statement and any post-effective amendment thereto, at the time such part became effective (including
each deemed effective date with respect to the Underwriters pursuant to Rule 430B under the Securities Act), at all other subsequent
times until the expiration of the Prospectus Delivery Period (as defined below), and at the Closing Date (as hereinafter defined),
and the Prospectus (or any amendment or supplement to the Prospectus), at the time of filing or the time of first use within the
meaning of the Rules and Regulations, at all subsequent times until expiration of the Prospectus Delivery Period, and at the Closing
Date complied and will comply in all material respects with the applicable requirements and provisions of the Securities Act, the
Rules and Regulations and the Exchange Act and did not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus,
as amended or supplemented, as of its date, or the time of first use within the meaning of the Rules and Regulations, at all subsequent
times until the expiration of the Prospectus Delivery Period, and at the Closing Date, did not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The interactive data in eXtensible Business Reporting Language included
or incorporated by reference in the Registration Statement and the Prospectus fairly presents the information called for in all
material respects and is prepared in accordance with the rules and regulations of the Commission applicable thereto. The representations
and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Registration
Statement or any post-effective amendment thereto, or the Prospectus, or any amendments or supplements thereto, made in reliance
upon and in conformity with written information relating to the Underwriters furnished to the Company by the Representative, specifically
for use in the preparation thereof.
(iv) Neither
(A) the Issuer General Free Writing Prospectus(es) issued at or prior to the Time of Sale, the Statutory Prospectus and the information
set forth in Schedule I to this Agreement, all considered together (collectively, the “Time of Sale Disclosure
Package”), nor (B) any individual Issuer Limited-Use Free Writing Prospectus, when considered together with the Time
of Sale Disclosure Package, includes or included as of the Time of Sale any untrue statement of a material fact or omits or omitted
as of the Time of Sale 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 any Statutory
Prospectus included in the Registration Statement or any Issuer Free Writing Prospectus based upon and in conformity with written
information furnished to the Company by the Representative specifically for use therein. As used in this paragraph and elsewhere
in this Agreement:
(1) “Time
of Sale” means 4:00 p.m. (Eastern time) on the date of this Agreement.
(2) “Statutory
Prospectus” as of any time means the Preliminary Prospectus that is included in the Registration Statement immediately
prior to that time. For purposes of this definition, information contained in a form of prospectus that is deemed retroactively
to be a part of the Registration Statement pursuant to Rule 430B under the Securities Act shall be considered to be included in
the Statutory Prospectus as of the actual time that form of prospectus is filed with the Commission pursuant to Rule 424(b) under
the Securities Act.
(3) “Issuer
Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 under the Securities
Act, relating to the Securities that (A) is required to be filed with the Commission by the Company, or (B) is exempt from filing
pursuant to Rule 433(d)(5)(i) under the Securities Act because it contains a description of the Securities or of the offering that
does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required
to be filed, in the form retained in the Company’s records pursuant to Rule 433(g) under the Securities Act.
(4) “Issuer
General Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to
prospective investors, as evidenced by its being specified in Schedule II to this Agreement.
(5) “Issuer
Limited-Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Free Writing
Prospectus.
(v) (A) Each
Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the Prospectus Delivery Period or until
any earlier date that the Company notified or notifies the Underwriters as described in Section 4(a)(iii)(B), did not, does not
and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration
Statement, any Statutory Prospectus or the Prospectus. 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 Underwriters
specifically for use therein.
(B) 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) under the Securities Act) of the Securities and at the date hereof, the Company was
not and is not an “ineligible issuer,” as defined in Rule 405 under the Securities Act, including the Company or any
subsidiary in the preceding three years not having been convicted of a felony or misdemeanor or having been made the subject of
a judicial or administrative decree or order as described 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), nor an “excluded issuer”
as defined in Rule 164 under the Securities Act.
(C) Each
Issuer Free Writing Prospectus satisfied, as of its issue date and at all subsequent times through the Prospectus Delivery Period,
all other conditions to use thereof as set forth in Rules 164 and 433 under the Securities Act.
(vi) The
financial statements of the Company, together with the related notes, included or incorporated by reference in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus comply in all material respects with the requirements of the
Securities Act and the Exchange Act and fairly present the consolidated financial condition of the Company and its subsidiaries
as of the dates indicated and the consolidated results of operations and changes in cash flows for the periods therein specified
in conformity with generally accepted accounting principles consistently applied throughout the periods involved; and the supporting
schedules included in the Registration Statement present fairly the information required to be stated therein. No other financial
statements or schedules are required to be included in the Registration Statement, the Time of Sale Disclosure Package or the Prospectus.
There is no pro forma or as adjusted financial information which is required to be included in the Registration Statement, the
Time of Sale Disclosure Package, or the Prospectus or a document incorporated by reference therein in accordance with the Securities
Act and the Rules and Regulations which has not been included or incorporated as so required. To the Company’s knowledge,
Freed Maxick CPAs, P.C., which has expressed its opinion with respect to the audited financial statements and schedules filed as
a part of the Registration Statement and included in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus,
is an independent public accounting firm within the meaning of the Securities Act and the Rules and Regulations and such accountant
is not in violation of the auditor independence requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).
(vii) Each
of the Company and its subsidiaries has been duly organized and is validly existing as a corporation (or other legal entity) in
good standing under the laws of its jurisdiction of incorporation (or formation). Each of the Company and its subsidiaries has
the corporate (or as applicable, such other legal entity) power and authority to own its properties and conduct its business as
currently being carried on and as described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus,
and is duly qualified to do business as a foreign corporation (or other legal entity) in good standing in each jurisdiction in
which it owns or leases real property or in which the conduct of its business makes such qualification necessary and in which the
failure to so qualify would have a material adverse effect upon the business, prospects, properties, operations, condition (financial
or otherwise) or results of operations of the Company and its subsidiaries, taken as a whole, or in its ability to perform its
obligations under this Agreement (“Material Adverse Effect”).
(viii) Except
as contemplated in the Time of Sale Disclosure Package and in the Prospectus, subsequent to the respective dates as of which information
is given in the Time of Sale Disclosure Package, neither the Company nor any of its subsidiaries has incurred any material liabilities
or obligations, direct or contingent, or entered into any material transactions, or declared or paid any dividends or made any
distribution of any kind with respect to its capital stock; and there has not been any change in the capital stock (other than
a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstanding options
or warrants), or any material change in the short-term or long-term debt, or any issuance of options, warrants, convertible securities
or other rights to purchase the capital stock, of the Company or any of its subsidiaries, or any material adverse change in the
financial condition, business, prospects, property, operations or results of operations of the Company and its subsidiaries, taken
as a whole (“Material Adverse Change”).
(ix) Except
as set forth in the Time of Sale Disclosure Package and the Prospectus, there is not pending or, to the knowledge of the Company,
threatened or contemplated, any action, suit or proceeding to which the Company or any of its subsidiaries is a party or of which
any property or assets of the Company or any of its subsidiaries is the subject before or by any court or governmental agency,
authority or body, or any arbitrator, which, individually or in the aggregate, might result in any Material Adverse Change.
(x) This
Agreement has been duly authorized, executed and delivered by the Company, and constitutes a valid, legal and binding obligation
of the Company, enforceable in accordance with its terms, except as rights to indemnity hereunder may be limited by federal or
state securities laws and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and subject to general principles of equity. The execution, delivery and performance
of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any statute, any agreement or instrument to which the Company is
a party or by which it is bound or to which any of its property is subject, or any order, rule, regulation or decree of any court
or governmental agency or body having jurisdiction over the Company or any of its properties except for violations and defaults
which individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. The execution, delivery
and performance of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation
of any of the terms and provisions of, or constitute a default under, the Company’s charter or by-laws. No consent, approval,
authorization or order of, or filing with, any court or governmental agency or body is required for the execution, delivery and
performance of this Agreement or for the consummation of the transactions contemplated hereby, including the issuance or sale of
the Securities by the Company, except such as may be required under the Securities Act, state securities or blue sky laws, or the
NYSE MKT listing rules; and the Company has the power and authority to enter into this Agreement and to authorize, issue and sell
the Securities as contemplated by this Agreement.
(xi) All
of the issued and outstanding shares of capital stock of the Company, including the outstanding shares of Common Stock, are duly
authorized and validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities
laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities
that have not been waived in writing (a copy of which has been delivered to counsel to the Underwriters); the Securities which
may be sold hereunder by the Company have been duly authorized and, when issued, delivered and paid for in accordance with the
terms of this Agreement, will have been validly issued and will be fully paid and nonassessable; and the capital stock of the Company,
including the Common Stock, conforms to the description thereof in the Registration Statement, in the Time of Sale Disclosure Package
and in the Prospectus. Except as otherwise stated in the Registration Statement, in the Time of Sale Disclosure Package and in
the Prospectus, there are no preemptive rights or other rights to subscribe for or to purchase, or any restriction upon the voting
or transfer of, any shares of Common Stock pursuant to the Company’s charter, by-laws or any agreement or other instrument
to which the Company is a party or by which the Company is bound. Neither the filing of the Registration Statement nor the offering
or sale of the Securities as contemplated by this Agreement gives rise to any rights for or relating to the registration of any
shares of Common Stock or other securities of the Company that have not been waived. All of the issued and outstanding shares of
capital stock of each of the Company’s subsidiaries have been duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise described in the Registration Statement, in the Time of Sale Disclosure Package and in
the Prospectus and except for any directors’ qualifying shares, the Company owns of record and beneficially, free and clear
of any security interests, claims, liens, proxies, equities or other encumbrances, all of the issued and outstanding shares of
such stock. Except as described in the Registration Statement, in the Time of Sale Disclosure Package and in the Prospectus, there
are no options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company or any subsidiary
of the Company any shares of the capital stock of the Company or any subsidiary of the Company. The Company has an authorized and
outstanding capitalization as set forth in the Registration Statement, in the Time of Sale Disclosure Package and in the Prospectus.
(xii) The
Company and each of its subsidiaries holds, and is operating in compliance in all material respects with, all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates and orders of any governmental or self-regulatory body required
for the conduct of its business and all such franchises, grants, authorizations, licenses, permits, easements, consents, certifications
and orders are valid and in full force and effect in all material respects; and the Company and each of its subsidiaries is in
compliance in all material respects with all applicable federal, state, local and foreign laws, regulations, orders and decrees.
(xiii) The
Company and its subsidiaries have good and marketable title to all property (whether real or personal) described in the Registration
Statement, in the Time of Sale Disclosure Package and in the Prospectus as being owned by them which are material to the business
of the Company, in each case free and clear of all liens, claims, security interests, other encumbrances or defects except such
as are described in the Registration Statement, in the Time of Sale Disclosure Package and in the Prospectus. The property held
under lease by the Company and its subsidiaries is held by them under valid, subsisting and enforceable leases with only such exceptions
with respect to any particular lease as do not interfere in any material respect with the conduct of the business of the Company
or its subsidiaries.
(xiv) The
Company and each of its subsidiaries owns or possesses all patents, patent applications, trademarks, service marks, tradenames,
trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and rights necessary for the
conduct of the business of the Company and its subsidiaries as currently carried on and as described in the Registration Statement,
in the Time of Sale Disclosure Package and in the Prospectus; except as stated in the Registration Statement, in the Time of Sale
Disclosure Package and in the Prospectus, to the knowledge of the Company, no name which the Company or any of its subsidiaries
uses and no other aspect of the business of the Company or any of its subsidiaries will involve or give rise to any infringement
of, or license or similar fees for, any patents, patent applications, trademarks, service marks, tradenames, trademark registrations,
service mark registrations, copyrights, licenses, inventions, trade secrets or other similar rights of others material to the business
or prospects of the Company and its subsidiaries and neither the Company nor any of its subsidiaries has received any notice alleging
any such infringement or fee.
(xv) Neither
the Company nor any of its subsidiaries is in violation of its respective charter or by-laws or in breach of or otherwise in default,
and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the performance of any
material obligation, agreement or condition contained in any bond, debenture, note, indenture, loan agreement or any other material
contract, lease or other instrument to which it is subject or by which any of them may be bound, or to which any of the material
property or assets of the Company or any of its subsidiaries is subject.
(xvi) The
Company and its subsidiaries have timely filed all federal, state and local income tax returns required to be filed and are not
in default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto, other
than any which the Company or any of its subsidiaries is contesting in good faith.
(xvii) The
Company has not distributed and will not distribute any prospectus or other offering material in connection with the offering and
sale of the Securities other than any Preliminary Prospectus, the Time of Sale Disclosure Package or the Prospectus or other materials
permitted by the Securities Act to be distributed by the Company; provided, however, that, except as set forth on
Schedule II, the Company has not made and will not make any offer relating to the Securities that would constitute a “free
writing prospectus” as defined in Rule 405 under the Securities Act, except in accordance with the provisions of Section
4(a)(xiv) of this Agreement.
(xviii)
The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is listed on the NYSE MKT and the Company has
taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange
Act or delisting the Common Stock from the NYSE MKT nor has the Company received any notification that the Commission or the NYSE
MKT is contemplating terminating such registration or listing, the Company has complied in all material respects with the applicable
requirements of the NYSE MKT for maintenance of inclusion of the Common Stock on the NYSE MKT.
(xix) Other
than the subsidiaries of the Company listed on Schedule III hereto, the Company, directly or indirectly, owns no capital
stock or other equity or ownership or proprietary interest in any corporation, partnership, association, trust or other entity,
except as described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus.
(xx) The
Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability
for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization;
and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. Except as described in the Registration Statement, in the Time of Sale Disclosure Package
and in the Prospectus, since December 31, 2013, there has been (i) no material weakness or significant deficiencies in the Company’s
internal control over financial reporting (whether or not remediated), (ii) 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 and (iii) no fraud, whether or not material, that involves management or other employees who have a significant
role in the Company’s internal control over financial reporting.
(xxi) Other
than as contemplated by this Agreement, the Company has not incurred any liability for any finder’s or broker’s fee
or agent’s commission in connection with the execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xxii) The
Company carries, or is covered by, insurance in such amounts and covering such risks as is adequate for the conduct of its business
and the value of its properties and as is customary for companies engaged in similar businesses in similar industries.
(xxiii) The
Company is not and, after giving effect to the offering and sale of the Securities, will not be an “investment company,”
as such term is defined in the Investment Company Act of 1940, as amended.
(xxiv) As
of the filing date of the Registration Statement and as of any update of the Registration Statement pursuant to Section 10(a)(3)
of the Securities Act (including the filing of any Annual Report on Form 10-K), the Company was eligible to file a “shelf”
Registration Statement on Form S-3 with the Commission pursuant to General Instructions I.A. and I.B.6. of Form S-3 adopted by
the Commission.
(xxv) The
Firm Shares and the Additional Shares are eligible to be registered pursuant to the Prospectus, filed as a part of the Company’s
effective Registration Statement pursuant to General Instruction I.B.6. of Form S-3, adopted by the Commission.
(xxvi) The
documents incorporated by reference in the Time of Sale Disclosure Package, the Registration Statement and in the Prospectus, when
they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements
of the Securities Act or the Exchange Act, as applicable, and were filed on a timely basis with the Commission and none of such
documents contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading; any further documents so filed and incorporated
by reference in the Time of Sale Disclosure Package, the Registration Statement or in the Prospectus, when such documents are filed
with the Commission, will conform in all material respects to the requirements of the Exchange Act, and will not contain an untrue
statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(xxvii) The
Company is in substantial compliance with all applicable provisions of the Sarbanes-Oxley Act and the rules and regulations of
the Commission thereunder that are effective with respect to the Company and its subsidiaries on the date of this Agreement, except
where such noncompliance would not have, individually or in the aggregate, a Material Adverse Effect, and except as disclosed in
the Registration Statement, the Time of Sale Disclosure Package and the Prospectus.
(xxviii)
The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Exchange
Act) and such controls and procedures are effective in ensuring that material information relating to the Company, including its
subsidiaries, is made known to the principal executive officer and the principal financial officer, except as disclosed in the
Registration Statement, the Time of Sale Disclosure Package and the Prospectus. The Company has utilized such controls and procedures
in preparing and evaluating the disclosures in the Registration Statement, in the Time of Sale Disclosure Package and in the Prospectus.
(xxix)
Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any of its directors, officers, agents,
employees, affiliates or other person acting on their behalf is aware of or has taken any action, directly or indirectly, that
has violated or 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. The Company and its subsidiaries have instituted and maintain policies and procedures
designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
(xxx) The
operations of the Company and its subsidiaries are and have been conducted at all times, in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar applicable
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 knowledge of the Company, threatened.
(xxxi) Neither
the Company nor any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds
of this offering of the Securities contemplated hereby, 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.
(xxxii) No
approval of the stockholders of the Company under the rules and regulations of NYSE MKT is required for the Company to issue and
deliver the Securities to the Underwriters.
(b) Any
certificate signed by any officer of the Company and delivered to the Underwriters or to the Underwriters’ Counsel shall
be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.
3. PURCHASE,
SALE AND DELIVERY OF SECURITIES.
(a) On
the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein
set forth, (i) the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price equal to $0.414 per share or such higher price so
that the underwriting discount, following the offering of the shares and the price to the public as contemplated by the
Prospectus, with respect to each such share is 8% (the “Per Share Price”), the Firm Shares as set forth
opposite the name of such Underwriter on Schedule VI hereto and (ii) in the event and to the extent that the
Underwriters shall exercise the election to purchase Additional Shares as provided below, the Company agrees to issue and
sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the
Company, at the purchase price per share set forth in clause (a)(i) of this Section 3, that portion of the number of
Additional Shares as to which such election shall have been exercised (to be adjusted so as to eliminate fractional shares)
determined by multiplying such number of Additional Shares by a fraction, the numerator of which is the maximum number of
Additional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule
VI hereto and the denominator of which is the maximum number of Additional Shares that all of the Underwriters are
entitled to purchase hereunder.
As referenced in Section
3(a)(ii) above, the Company hereby grants to the several Underwriters the option to purchase from the Company an aggregate of up
to 495,000 Additional Shares, at the Per Share Price. This option may be exercised by the Representative on behalf of the
Underwriters at any time (but not more than once) on or before the date that is forty-five (45) days following the date hereof,
by written notice to the Company. Such notice shall set forth the aggregate number of Additional Shares as to which the option
is being exercised, and the date and time when the Additional Shares are to be delivered (such date and time being herein referred
to as the "Option Closing Date"); provided, however, that the Option Closing Date shall not be earlier
than the Closing Date nor later than three business days after the date on which the option shall have been exercised unless the
Company and the Underwriters otherwise agree.
Payment of the purchase price and delivery
for the Additional Shares shall be made at the Option Closing Date in the same manner and at the same office as the payment for
the Firm Shares as set forth in subparagraph (b) below.
(b) The
Securities will be delivered by the Company to the Underwriters for the Underwriters’ accounts against payment of the purchase
price therefor by wire transfer of same day funds payable to the order of the Company, as appropriate, at the offices of National
Securities Corporation, 410 Park Avenue, 14th Floor, New York, NY 10022, or such other location as may be mutually acceptable,
(1) with respect to the Firm Shares, at 8:00 a.m. Pacific time on the third (or if the Firm Shares are priced, as contemplated
by Rule 15c6-1(c) under the Exchange Act, after 4:30 p.m. Eastern time, the fourth) full business day following the date hereof,
or at such other time and date as the Representative and the Company determine pursuant to Rule 15c6-1(a) under the Exchange Act
(such time and date of delivery being herein referred to as the “Closing Date”) and (2) with respect to the
Additional Shares, at 8:00 a.m. Pacific time on the Option Closing Date. If the Representative so elects, delivery of the Securities
may be made by credit through full fast transfer to the account at The Depository Trust Company designated by the Representative.
Certificates representing the Securities, in definitive form and in such denominations and registered in such names as the Representative
may request upon at least two business days’ prior notice to the Company, will be made available for checking and packaging
not later than 10:30 a.m., Pacific time, on the business day next preceding the applicable closing date at the offices of National
Securities Corporation, 410 Park Avenue, 14th Floor, New York, NY 10022, or such other location as may be mutually acceptable.
(c) The
Company hereby confirms its engagement of Chardan Capital Markets, LLC as, and Chardan Capital Markets, LLC hereby
confirms its agreement with the Company to render services as, a “qualified independent underwriter” within the meaning
of FINRA Rule 5121 with respect to the offering and sale of the Securities and, in acting as such “qualified independent
underwriter,” Chardan Capital Markets, LLC agrees to undertake the legal responsibilities and liabilities of an underwriter
under the 1933 Act, specifically including those inherent in Section 11 thereof and confirms that it meets the requirements under
FINRA Rule 5121 to act as such “qualified independent underwriter.” Chardan Capital Markets, LLC, solely in its capacity
as qualified independent underwriter and not otherwise, is referred to herein as the “QIU.” The Company shall
pay Chardan Capital Markets, LLC a fee of $50,000 in consideration for its services and expenses as a “qualified independent
underwriter.” Chardan Capital Markets, LLC shall receive no other compensation in connection with the transactions contemplated
by this Agreement.
4. COVENANTS.
(a) The
Company covenants and agrees with the Underwriters as follows:
(i) During
the period beginning on the date hereof and ending on the later of the Closing Date or such date, as in the opinion of counsel
for the Underwriters, the Prospectus is no longer required by law to be delivered (or in lieu thereof the notice referred to in
Rule 173(a) under the Securities Act is no longer required to be provided), in connection with sales by an underwriter or dealer
(the “Prospectus Delivery Period”), prior to amending or supplementing the Registration Statement, the Time
of Sale Disclosure Package or the Prospectus, the Company shall furnish to the Underwriters for review a copy of each such proposed
amendment or supplement, and the Company shall not file any such proposed amendment or supplement to which the Underwriters reasonably
object.
(ii) During
the Prospectus Delivery Period, the Company shall promptly advise the Underwriters in writing (i) of the receipt of any comments
of, or requests for additional or supplemental information from, the Commission, (ii) of the time and date of any filing of any
post-effective amendment to the Registration Statement or any amendment or supplement to any Preliminary Prospectus, the Time of
Sale Disclosure Package or the Prospectus, (iii) of the time and date that any post-effective amendment to the Registration Statement
becomes effective and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or of any order preventing or suspending its use or the use of any Preliminary
Prospectus, the Time of Sale Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, or of any proceedings to
remove, suspend or terminate from listing or quotation the Common Stock from any securities exchange upon which it is listed for
trading or included or designated for quotation, or of the threatening or initiation of any proceedings for any of such purposes.
If the Commission shall enter any such stop order at any time, the Company will use its reasonable efforts to obtain the lifting
of such order at the earliest possible moment. Additionally, the Company agrees that it shall comply with the provisions of Rules
424(b), 430A and 430B, as applicable, under the Securities Act and will use its reasonable efforts to confirm that any filings
made by the Company under Rule 424(b) or Rule 433 were received in a timely manner by the Commission (without reliance on Rule
424(b)(8) or Rule 164(b)).
(iii) (A) During
the Prospectus Delivery Period, the Company will comply as far as it is able with all requirements imposed upon it by the Securities
Act, as now and hereafter amended, and by the Rules and Regulations, as from time to time in force, and by the Exchange Act so
far as necessary to permit the continuance of sales of or dealings in the Securities as contemplated by the provisions hereof,
the Time of Sale Disclosure Package, and the Registration Statement and the Prospectus. If during such period any event occurs
as a result of which the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the Time of Sale Disclosure
Package ) would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary or appropriate
in the opinion of the Company or its counsel or the Underwriters or counsel to the Underwriters to amend the Registration Statement
or supplement the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the Time of Sale Disclosure
Package ) to comply with the Securities Act or to file under the Exchange Act any document which would be deemed to be incorporated
by reference in the Prospectus in order to comply with the Securities Act or the Exchange Act, the Company will promptly notify
the Underwriters and will amend the Registration Statement or supplement the Prospectus (or if the Prospectus is not yet available
to prospective purchasers, the Time of Sale Disclosure Package) or file such document (at the expense of the Company) so as to
correct such statement or omission or effect such compliance.
(B) If
at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result
of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement,
the Statutory Prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted or would
omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at
that subsequent time, not misleading, the Company has promptly notified or promptly will notify the Underwriters and has promptly
amended or will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such
conflict, untrue statement or omission.
(iv) The
Company shall take or cause to be taken all necessary action to qualify the Securities for sale under the securities laws of such
jurisdictions as the Underwriters reasonably designate and to continue such qualifications in effect so long as required for the
distribution of the Securities, except that the Company shall not be required in connection therewith to qualify as a foreign corporation
or to execute a general consent to service of process in any state.
(v) The
Company will furnish to the Underwriters and counsel for the Underwriters copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, any Issuer Free Writing Prospectus, and all amendments and supplements to such documents, in each case
as soon as available and in such quantities as the Underwriters may from time to time reasonably request.
(vi) The
Company will make generally available to its security holders as soon as practicable, but in any event not later than 15 months
after the end of the Company’s current fiscal quarter, an earnings statement (which need not be audited) covering a 12-month
period that shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Rules and Regulations.
(vii) The
Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay or cause
to be paid (A) all expenses (including transfer taxes allocated to the respective transferees) incurred in connection with the
delivery to the Underwriters of the Securities, (B) all expenses and fees of the Company in connection with the preparation, printing,
filing, delivery, and shipping of the Registration Statement (including the financial statements therein and all amendments, schedules,
and exhibits thereto), the Securities, each Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus and any
amendment thereof or supplement thereto, and the printing, delivery, and shipping of this Agreement and other underwriting documents,
including Blue Sky Memoranda (covering the states and other applicable jurisdictions), (C) all filing fees in connection with the
qualification of the Securities for offering and sale by the Underwriters or by dealers under the securities or blue sky laws of
the states and other jurisdictions which the Underwriters shall designate, (D) the fees and expenses of any transfer agent or registrar,
(E) the filing fees incident to any required review and approval by the Financial Industry Regulatory Authority (“FINRA”)
of the terms of the sale of the Securities, (F) listing fees, if any, and (G) the fees of Chardan Capital Markets, LLC qualified
independent underwriter due under Section 3(c), (G) all other costs and expenses incident to the performance of its obligations
hereunder that are not otherwise specifically provided for herein. If this Agreement is terminated by the Underwriters pursuant
to Section 8 hereof or if the sale of the Securities provided for herein is not consummated by reason of any failure, refusal or
inability on the part of the Company to perform any agreement on its part to be performed, or because any other condition of the
Underwriters’ obligations hereunder required to be fulfilled by the Company is not fulfilled, the Company will reimburse
the Underwriters for all out-of-pocket disbursements (including but not limited to reasonable fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges) incurred by the Underwriters in connection with their
investigation, preparing to market and marketing the Securities or in contemplation of performing their obligations hereunder not
to exceed $50,000 in the aggregate. Notwithstanding anything contained herein, at the Closing, the maximum amount payable by the
Company for Underwriters’ counsel fees (“Underwriter’s Counsel Fees”), Underwriter’s disbursements
and expenses pursuant to this Section 4(a)(vii) shall be $90,000, which shall include the Underwriter’s Counsel Fees, which
shall not exceed $75,000. The Company has, prior to the execution of this Agreement, forwarded payment of $25,000 to counsel selected
by the Underwriter, with such payment being credited towards the Underwriter’s Counsel Fees.
(viii) The
Company will apply the net proceeds from the sale of the Securities to be sold by it hereunder for the purposes set forth in the
Time of Sale Disclosure Package and in the Prospectus.
(ix) None
of the Company and its subsidiaries has taken or will take and, to the Company’s knowledge, none of its or their employees,
officers or directors has taken or will take, directly or indirectly, any action designed to or which might reasonably be expected
to cause or result in, or which has constituted, the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities.
(x) The
Company will not incur any liability for any finder’s or broker’s fee or agent’s commission in connection with
the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.
(xi) During
the Prospectus Delivery Period, the Company will file on a timely basis with the Commission such periodic and special reports as
required by the Rules and Regulations.
(xii) The
Company and its subsidiaries will maintain such controls and other procedures, including without limitation those applicable to
the Company and required by Sections 302 and 906 of the Sarbanes-Oxley Act and the applicable regulations thereunder, that are
designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms,
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 Exchange Act is accumulated and communicated to the Company’s management,
including its principal executive officer and its principal financial officer, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure, to ensure that material information relating to Company, including its
subsidiaries, is made known to them by others within those entities, subject to the representation in Section 2(a)(xx).
(xiii) The
Company and its subsidiaries will substantially comply with all effective applicable provisions of the Sarbanes-Oxley Act, subject
to the representation in Section 2(a)(xx).
(xiv) The
Company represents and agrees that, unless it obtains the prior written consent of the Representative, and the Underwriters represent
and agree that, unless they obtain the prior written consent of the Company, they have not made and will not make any offer relating
to the Securities that would constitute an “issuer free writing prospectus,” as defined in Rule 433 under the Securities
Act, or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405 under the Securities Act,
required to be filed with the Commission; 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 II. Any such free writing prospectus consented
to by the Company and the Underwriters is hereinafter referred to as a “Permitted Free Writing Prospectus.”
The Company represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an “issuer
free writing prospectus,” as defined in Rule 433, and has complied and will comply with the requirements of Rule 433 applicable
to any Permitted Free Writing Prospectus, including timely Commission filing where required, legending and record keeping.
(xv) The
Company will not, for a period of ninety (90) days from the date of the Prospectus (the “Lock-Up Period”), without
the prior written consent of the Underwriters, directly or indirectly offer, sell, assign, transfer, pledge, contract to sell,
or otherwise dispose of, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common
Stock, other than (A) the Company’s sale of the Securities hereunder, (B) the issuance of Common Stock or any equity awards
(including the issuance of Common Stock upon exercise or settlement of such equity awards) pursuant to the Company’s employee
benefit plans, stock option and employee stock purchase plans or other employee compensation plans as such plans are in existence
on the date hereof and described in the Prospectus, and (C) the issuance of Common Stock pursuant to the vesting or exercises of
options, restricted stock units, warrants, convertible notes or rights outstanding on the date hereof. The Company will cause each
director and executive officer listed on Schedule V to furnish to the Underwriters, prior to the Closing Date, a letter,
substantially in the form of Schedule IV hereto, pursuant to which each such person shall agree, among other things, subject
to the terms and conditions set forth in each such letter, not to directly or indirectly offer, sell, assign, transfer, pledge,
contract to sell, or otherwise dispose of, any shares of Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, not to engage in any swap or other agreement or arrangement that transfers, in whole or in part, directly or
indirectly, the economic risk of ownership of Common Stock or any such securities, during the period of ninety (90) days from the
date of the Prospectus, without the prior written consent of the Underwriters. The Company also agrees that during such ninety
(90) day period, the Company will not file any registration statement, preliminary prospectus or prospectus, or any amendment or
supplement thereto, under the Securities Act for any such transaction or which registers, or offers for sale, Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, except for registration statements on Form S-8 relating
to employee benefit plans. The Company hereby agrees that (1) if it issues an earnings release or material news, or
if a material event relating to the Company occurs, during the last seventeen days of the Lock-Up Period, or (2) if prior to the
expiration of the Lock-Up Period, the Company announces that it will release earnings results during the sixteen-day period beginning
on the last day of the Lock-Up Period, the restrictions imposed by this Section 4(a)(xv) shall continue to apply until the expiration
of the eighteen-day period beginning on the issuance of the earnings release or the occurrence of the material news or material
event.
5. CONDITIONS
OF THE UNDERWRITERS’ OBLIGATIONS. The obligations of the Underwriters hereunder are subject to the accuracy, as of the date
hereof and at the Closing Date (as if made at the Closing Date), of and compliance with all representations, warranties and agreements
of the Company contained herein, to the performance by the Company of its obligations hereunder and to the following additional
conditions:
(a) If
filing of the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, is required under the
Securities Act or the Rules and Regulations, the Company shall have filed the Prospectus (or such amendment or supplement) or such
Issuer Free Writing Prospectus with the Commission in the manner and within the time period so required (without reliance on Rule
424(b)(8) or Rule 164(b)); the Registration Statement shall remain effective; no stop order suspending the effectiveness of the
Registration Statement or any part thereof, or any amendment thereof, nor suspending or preventing the use of the Time of Sale
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus shall have been issued; no proceedings for the issuance
of such an order shall have been initiated or threatened; any request of the Commission for additional information (to be included
in the Registration Statement, the Time of Sale Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus or otherwise)
shall have been complied with to the Underwriters’ satisfaction; and FINRA shall have raised no objection to the fairness
and reasonableness of the underwriting terms and arrangements.
(b) The
Underwriters shall not have advised the Company that the Registration Statement, the Time of Sale Disclosure Package or the Prospectus,
or any amendment thereof or supplement thereto, or any Issuer Free Writing Prospectus, contains an untrue statement of fact which,
in the Underwriters’ opinion, is material, or omits to state a fact which, in the Underwriters’ opinion, is material
and is required to be stated therein or necessary to make the statements therein not misleading.
(c) Except
as contemplated in the Time of Sale Disclosure Package and in the Prospectus, subsequent to the respective dates as of which information
is given in the Time of Sale Disclosure Package, neither the Company nor any of its subsidiaries shall have incurred any material
liabilities or obligations, direct or contingent, or entered into any material transactions, or declared or paid any dividends
or made any distribution of any kind with respect to its capital stock; and there shall not have been any change in the capital
stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the exercise
of outstanding options, warrants or convertible notes), or any material change in the short-term or long-term debt of the Company
except for the extinguishment thereof, or any issuance of options, warrants, convertible securities or other rights to purchase
the capital stock of the Company or any of the Company’s subsidiaries, or any Material Adverse Change or any development
involving a prospective Material Adverse Change (whether or not arising in the ordinary course of business), or any loss by strike,
fire, flood, earthquake, accident or other calamity, whether or not covered by insurance, incurred by the Company or any of the
Company’s subsidiaries, the effect of which, in any such case described above, in the Representative’s judgment, makes
it impractical or inadvisable to offer or deliver the Securities on the terms and in the manner contemplated in the Time of Sale
Disclosure Package, the Registration Statement and in the Prospectus.
(d) On
or after the Time of Sale (i) no downgrading shall have occurred in the rating accorded any of the Company’s securities by
any “nationally recognized statistical organization,” as that term is defined by the Commission for purposes of Rule
436(g)(2) under the Securities Act, and (ii) no such organization shall have publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the Company’s securities.
(e) On
the Closing Date, there shall have been furnished to the Underwriters the opinion of Wyrick Robbins Yates & Ponton LLP, counsel
for the Company, dated the Closing Date and addressed to the Underwriters, in form and substance reasonably satisfactory to the
Underwriters.
In rendering such opinion,
such counsel may rely (i) as to matters of law other than New York, Delaware and federal law, upon the opinion or opinions of local
counsel provided that the extent of such reliance is specified in such opinion and that such counsel shall state that such opinion
or opinions of local counsel are satisfactory to them and that they believe they and the Underwriters are justified in relying
thereon and (ii) as to matters of fact, to the extent such counsel deems reasonable upon certificates of officers of the Company
and its subsidiaries provided that the extent of such reliance is specified in such opinion.
(f) On
the Closing Date, there shall have been furnished to the Underwriters the negative assurance letter of Duane Morris LLP, counsel
to the Underwriters, dated the Closing Date and addressed to the Underwriters in form and substance reasonably satisfactory to
the Underwriters.
(g) On
the date of the Prospectus at a time prior to the execution of this Agreement, on the effective date of any post-effective amendment
to the Registration Statement filed subsequent to the date of this Agreement and also at each of the Closing Date and the Option
Closing Date, the Underwriters shall have received a letter of Freed Maxick CPAs, P.C., dated the respective dates of delivery
thereof, and addressed to the Underwriters, in form and substance satisfactory to the Underwriters.
(h) On
the Closing Date, there shall have been furnished to the Underwriters a certificate, dated the Closing Date and addressed to the
Underwriters, signed by the chief executive officer or the chief financial officer of the Company, to the effect that:
(i) The
representations and warranties of the Company in this Agreement are true and correct, in all material respects, as if made at and
as of the Closing 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 the Closing Date;
(ii) No
stop order or other order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereof
or the qualification of the Securities for offering or sale nor suspending or preventing the use of the Time of Sale Disclosure
Package, the Prospectus or any Issuer Free Writing Prospectus, has been issued, and no proceeding for that purpose has been instituted
or, to the best of their knowledge, is contemplated by the Commission or any state or regulatory body; and
(iii) The
signers of said certificate have carefully examined the Registration Statement, the Time of Sale Disclosure Package and the Prospectus,
and any amendments thereof or supplements thereto (including any documents filed under the Exchange Act and deemed to be incorporated
by reference into the Time of Sale Disclosure Package, the Registration Statement or the Prospectus), and
(A) each
part of the Registration Statement and the Prospectus, and any amendments thereof or supplements thereto (including any documents
filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus) contain, and contained, when such
part of the Registration Statement (or such amendment) became effective, all statements and information required to be included
therein, each part of the Registration Statement, or any amendment thereof, does not contain, and did not contain, when such part
of the Registration Statement (or such amendment) became effective, any untrue statement of a material fact or omit to state, and
did not omit to state when such part of the Registration Statement (or such amendment) became effective, any material fact required
to be stated therein or necessary to make the statements therein not misleading, and the Prospectus, as amended or supplemented,
does not include and did not include as of its date, or the time of first use within the meaning of the Rules and Regulations,
any untrue statement of a material fact or omit to state and did not omit to state as of its date, or the time of first use within
the meaning of the Rules and Regulations, a material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading,
(B) neither
(1) the Time of Sale Disclosure Package nor (2) any individual Issuer Limited-Use Free Writing Prospectus, when considered together
with the Time of Sale Disclosure Package, include, nor included as of the Time of Sale any untrue statement of a material fact
or omits, or omitted as of the Time of Sale, 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,
(C) since
the Time of Sale, there has occurred no event required to be set forth in an amended or supplemented prospectus which has not been
so set forth, and there has been no document required to be filed under the Exchange Act that upon such filing would be deemed
to be incorporated by reference into the Time of Sale Disclosure Package, the Registration Statement or into the Prospectus that
has not been so filed,
(D) subsequent
to the respective dates as of which information is given in the Time of Sale Disclosure Package, neither the Company nor any of
its subsidiaries has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions,
not in the ordinary course of business, or declared or paid any dividends or made any distribution of any kind with respect to
its capital stock, and except as disclosed in the Time of Sale Disclosure Package and in the Prospectus, there has not been any
change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares
upon the exercise of outstanding options, warrants or convertible notes), or any material change in the short-term or long-term
debt except for the extinguishment thereof, or any issuance of options, warrants, convertible securities or other rights to purchase
the capital stock, of the Company or any of its subsidiaries, or any Material Adverse Change or any development involving a prospective
Material Adverse Change (whether or not arising in the ordinary course of business), or any loss by strike, fire, flood, earthquake,
accident or other calamity, whether or not covered by insurance, incurred by the Company or any of its subsidiaries, and
(E) except
as stated in the Time of Sale Disclosure Package and in the Prospectus, there is not pending, or, to the knowledge of the Company,
threatened or contemplated, any action, suit or proceeding to which the Company or any of its subsidiaries is a party before or
by any court or governmental agency, authority or body, or any arbitrator, which might result in any Material Adverse Change.
(i) The
Company shall have furnished to the Underwriters and counsel for the Underwriters such additional documents, certificates and evidence
as the Underwriters or counsel for the Underwriters may have reasonably requested.
(j) The
Underwriters shall have received the written agreements, substantially in the form of Schedule IV hereto, of the directors
and executive officers of the Company listed on Schedule V to this Agreement.
All such opinions, certificates,
letters and other documents will be in compliance with the provisions hereof only if they are satisfactory in form and substance
to the Underwriters and counsel for the Underwriters in their reasonable opinion. The Company will furnish the Underwriters with
such conformed copies of such opinions, certificates, letters and other documents as the Underwriters shall reasonably request.
6. INDEMNIFICATION
AND CONTRIBUTION.
(a) The
Company agrees to indemnify and hold harmless the Underwriters against any losses, claims, damages or liabilities to which the
Underwriters may become subject, under the Securities Act or otherwise (including in settlement of any litigation if such settlement
is effected with the written consent of the Company), insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, including the information deemed to be a part of the Registration Statement at the time of effectiveness
and at any subsequent time pursuant to Rules 430A and 430B of the Rules and Regulations, if applicable, any Preliminary Prospectus,
the Time of Sale Disclosure Package, the Prospectus, or any amendment or supplement thereto (including any documents filed under
the Exchange Act and deemed to be incorporated by reference into the Prospectus), any Issuer Free Writing Prospectus or in any
materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the
offering of the Common Stock (“Marketing Materials”), including any roadshow or investor presentations made
to investors by the Company (whether in person or electronically) 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
will reimburse the Underwriters for any legal or other expenses reasonably incurred by it in connection with investigating or defending
against such loss, claim, damage, liability or action; or (ii) in whole or in part upon any inaccuracy in the representations and
warranties of the Company contained herein; or (iii) in whole or in part upon any failure of the Company to perform its obligations
hereunder or under law; provided, however, that the Company shall not be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Time of Sale Disclosure Package,
the Prospectus, or any such amendment or supplement, any Issuer Free Writing Prospectus or in any Marketing Materials, in reliance
upon and in conformity with written information furnished to the Company by the Underwriters specifically for use in the preparation
thereof.
In addition to their other obligations under
this Section 6(a), the Company agrees that, as an interim measure during the pendency of any claim, action, investigation, inquiry
or other proceeding arising out of or based upon any statement or omission, or any alleged statement or omission, described in
this Section 6(a), it will reimburse the Underwriters on a monthly basis for all reasonable legal fees or other expenses incurred
in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability of the Company’s obligation to reimburse the
Underwriters for such expenses and the possibility that such payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is so held to have been improper, the Underwriters shall
promptly return it to the Company, together with interest, compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) announced from time to time by Wells Fargo Bank, N.A. (the
“Prime Rate”). Any such interim reimbursement payments which are not made to the Underwriters within 30 days
of a request for reimbursement shall bear interest at the Prime Rate from the date of such request. This indemnity agreement shall
be in addition to any liabilities which they may otherwise have.
(b) Each
of the Underwriters will severally and not jointly indemnify and hold harmless the Company against any losses, claims, damages
or liabilities to which the Company may become subject, under the Securities Act or otherwise (including in settlement of any litigation,
if such settlement is effected with the written consent of such Underwriter), insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus, or any
amendment or supplement thereto or any Issuer Free Writing Prospectus, 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,
in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus,
or any amendment or supplement thereto, or any Issuer Free Writing Prospectus in reliance upon and in conformity with written information
furnished to the Company by an Underwriter with respect to such Underwriter specifically for use in the preparation thereof, and
will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating
or defending against any such loss, claim, damage, liability or action.
(c) Promptly
after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve the indemnifying
party from any liability that it may have to any indemnified party except to the extent such indemnifying party has been materially
prejudiced by such failure. In case any such action shall be brought against any indemnified party, and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party, and after notice from the indemnifying party to such indemnified party of the indemnifying party’s
election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection
for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if, in the sole judgment of the Underwriters, it is advisable for the
Underwriters to be represented by separate counsel, the Underwriters shall have the right to employ a single counsel to represent
the Underwriters in any claim in respect of which indemnity may be sought by the Underwriters under subsection (a) of this Section
6, in which event the reasonable fees and expenses of such separate counsel shall be borne by the indemnifying party or parties
and reimbursed to the Underwriters as incurred (in accordance with the provisions of the second paragraph in subsection (a) above).
In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or circumstances.
The indemnifying party
under this Section 6 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled
with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel to which it is entitled under this Section 6, the indemnifying party agrees that it shall be liable
for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being entered into, and (iii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement (other than
with respect to fees and expenses that the indemnifying party is contesting in good faith). No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any
pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity
was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (a) includes an
unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or
proceeding and (b) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf
of any indemnified party.
(d) If
the indemnification provided for in this Section 6 is unavailable or insufficient to hold harmless an indemnified party under subsection
(a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result
of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above, (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and the respective Underwriter on the other from the offering
of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the respective Underwriter on the other in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the respective Underwriter on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts
and commissions received by the respective Underwriter, in each case as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the
respective Underwriter and the parties’ relevant intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the respective Underwriter agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were to be determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the first sentence of this subsection (d). The amount
paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending against any action or claim which is the subject of this subsection (d). Notwithstanding the provisions
of this subsection (d), the respective Underwriter shall not be required to contribute any amount in excess of the amount by which
the total price at which the Securities underwritten by it were offered to the public exceeds the amount of any damages that the
respective Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
(e) In
addition to, and without limitation of the Company’s obligation to indemnify Chardan Capital Markets, LLC
in its capacity as an Underwriter, the Company also agrees to indemnify and hold harmless the QIU, its affiliates, and its and
their officers, directors, employees, partners and members and each person, if any, who controls the QIU within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against
any and all loss, liability, claim, damage and expense whatsoever, as incurred, based upon or arising out of or relating to the
QIU’s participation as a “qualified independent underwriter” within the meaning of FINRA Rule 5121 in connection
with the offering of the Securities;
(ii) against
any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement
of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon or arising out of or relating to the QIU’s participation as a “qualified independent underwriter”
within the meaning of FINRA Rule 5121 in connection with the offering of the Securities; provided that (subject to Section 6(d)
below) any such settlement is effected with the written consent of the Company.
(iii) against
any and all expense whatsoever (including the fees and disbursements of counsel chosen by the QIU) reasonably incurred in investigating,
preparing for or defending against any litigation, or any investigation or proceeding by any governmental body or agency, commenced
or threatened, or any claim whatsoever based upon or arising out of or relating to the QIU’s participation as “qualified
independent underwriter” within the meaning of FINRA Rule 5121 in connection with the offering of the Securities, to the
extent any such expense is not paid under (i) or (ii) above.
(f) The
obligations of the Company under this Section 6 shall be in addition to any liability which the Company may otherwise have and
the benefits of such obligations shall extend, upon the same terms and conditions, to each person, if any, who controls the respective
Underwriter within the meaning of the Securities Act; and the obligations of the respective Underwriter under this Section 6 shall
be in addition to any liability that the respective Underwriter may otherwise have and the benefits of such obligations shall extend,
upon the same terms and conditions, to each director of the Company (including any person who, with his consent, is named in the
Registration Statement as about to become a director of the Company), to each officer of the Company who has signed the Registration
Statement and to each person, if any, who controls the Company within the meaning of the Securities Act.
(g) Each
Underwriter confirms severally and not jointly and the Company acknowledges that the only information concerning the Underwriters
furnished in writing to the Company by the Underwriters specifically for inclusion in the Registration Statement, any Preliminary
Prospectus, the Time of Sale Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus are the statements contained
in the third paragraph under the heading “Underwriting” and the information under the sub-headers “Stabilization”
and “Passive Market Making,” under the caption “Underwriting (Conflict of Interest)” in the Prospectus.
7. REPRESENTATIONS
AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties, and agreements of the Company herein or in certificates delivered
pursuant hereto, including but not limited to the agreements of the Underwriters and the Company contained in Section 6 hereof,
shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriters or
any controlling person thereof, or the Company or any of its officers, directors, or controlling persons, and shall survive delivery
of, and payment for, the Securities to and by the Underwriters hereunder.
8. TERMINATION
OF THIS AGREEMENT.
(a) The
Underwriters shall have the right to terminate this Agreement by giving notice to the Company as hereinafter specified at any time
at or prior to the Closing Date, if (i) the Company shall have failed, refused or been unable, at or prior to the Closing Date,
to perform any material agreement on its part to be performed hereunder, (ii) any condition of the Underwriters’ obligations
hereunder is not fulfilled, (iii) trading in the Company’s Common Stock shall have been suspended by the Commission or the
NYSE MKT or trading in securities generally on the NYSE MKT shall have been suspended, (iv) minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have been required, on the NYSE MKT, by such Exchange
or by order of the Commission or any other governmental authority having jurisdiction (which includes the Company’s Common
Stock), or (v) a banking moratorium shall have been declared by federal or state authorities which prevents payment by an Underwriter
pursuant to Section 3. Any such termination shall be without liability of any party to any other party except that the provisions
of Section 4(a)(vii) and Section 6 hereof shall at all times be effective and shall survive such termination.
(b) If
the Representative elects to terminate this Agreement as provided in this Section, the Company shall be notified promptly by the
Representative by telephone, confirmed by letter.
9. DEFAULT
BY THE COMPANY. If the Company shall fail at the Closing Date or at the Option Closing Date to sell and deliver the Securities
which it is obligated to sell hereunder, then this Agreement shall terminate without any liability on the part of the Underwriters
or, except as provided in Section 4(a)(vii), any non-defaulting party. No action taken pursuant to this Section shall relieve the
Company from liability, if any, in respect of such default.
10. NOTICES.
Except as otherwise provided herein, all communications hereunder shall be in writing and, if to the Underwriters, shall be
mailed, delivered or telecopied to National Securities Corporation, 410 Park Avenue, 14th Floor, New York, NY
10022, fax: (212) 380-2828 Attention: Jonathan Rich; if to the Company, shall be mailed, delivered or telecopied to it at
First Federal Plaza, 28 East Main Street, Suite 1525, Rochester, NY 14614, fax: (585) 325-2977 Attention: Jeff Ronaldi;
or in each case to such other address as the person to be notified may have requested in writing. Any party to this
Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for
such purpose.
11. PERSONS
ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns and the controlling persons, officers and directors referred to in Section 6. Nothing in this
Agreement is intended or shall be construed to give to any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The term “successors and assigns” as herein
used shall not include any purchaser, as such purchaser, of any of the Securities from the Underwriters.
12. ABSENCE
OF FIDUCIARY RELATIONSHIP. The Company acknowledges and agrees that: (a) the Underwriters have been retained solely to act as underwriters
in connection with the sale of the Securities and that no fiduciary, advisory or agency relationship between the Company and the
Underwriters has been created in respect of any of the transactions contemplated by this Agreement, irrespective of whether the
Underwriters have advised or are advising the Company on other matters; (b) the price and other terms of the Securities set forth
in this Agreement were established by the Company following discussions and arms-length negotiations with the Underwriters and
the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions
contemplated by this Agreement; (c) it has been advised that the Underwriters and their affiliates are engaged in a broad range
of transactions which may involve interests that differ from those of the Company and that the Underwriters have no obligation
to disclose such interest and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; and (d)
it has been advised that the Underwriters are acting, in respect of the transactions contemplated by this Agreement, solely for
the benefit of the Underwriters, and not on behalf of the Company.
13. GOVERNING
LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
without reference to its conflict of laws provisions. The parties hereby irrevocably and unconditionally: submit to the
jurisdiction of the federal and state courts located in the State of New York, for any dispute related to this Agreement or any
of the matters contemplated hereby; consent to service of process by registered or certified mail return receipt requested or by
any other manner provided by applicable law; and waive any right to claim that any action, proceeding or litigation so commenced
has been commenced in an inconvenient forum.
14. COUNTERPARTS.
This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts
shall each be deemed to be an original and all such counterparts shall together constitute one and the same instrument.
[Signature Page Follows]
Please sign and return
to the Company the enclosed duplicates of this letter whereupon this letter will become a binding agreement between the Company
and the Underwriters in accordance with its terms.
|
Very truly yours, |
|
|
|
DOCUMENT SECURITY SYSTEMS, INC. |
|
|
|
By: |
/s/ Jeff Ronaldi |
|
|
Name: Jeff Ronaldi |
|
|
Title: Chief Executive Officer |
Confirmed as of the date first above
mentioned by the Underwriters.
By: |
/s/ Jonathan C. Rich |
|
|
Name: Jonathan C. Rich |
|
|
Title: Executive Vice President |
|
For itself and as Representative of each of the Underwriters
Schedule I
Time of Sale Disclosure Package
None.
Schedule II
Issuer General Free Writing Prospectuses
None.
Schedule III
Subsidiaries
DSS Administrative Group, Inc. |
(New York) |
|
|
Plastic Printing Professionals, Inc. |
(New York) |
|
|
Secuprint Inc. |
(New York) |
|
|
Premier Packaging Corporation |
(New York) |
|
|
ExtraDev, Inc. |
(New York) |
|
|
DSS Technology Management, Inc. |
(Delaware) |
|
|
Bascom Research, LLC |
(Virginia) |
|
|
VirtualAgility Technology Investment, LLC |
(Delaware) |
(investment only; not wholly-owned) |
|
Schedule IV
Form of Lockup Agreement
National Securities Corporation
410 Park Avenue
14th Floor
New York, NY 10022
December __, 2014
Re: Document Security Systems, Inc. – Public Offering
of Shares
Dear Sirs:
In order to induce National
Securities Corporation (the “Underwriter”) to enter into an underwriting agreement with Document Security Systems,
Inc., a New York corporation (the “Company”), with respect to the public offering (the “Offering”)
of shares of the Company’s Common Stock, par value $0.02 per share (“Common Stock”), the undersigned hereby
agrees that for a period (the “lock-up period”) of ninety (90) days following the date of the final prospectus
supplement filed by the Company with the Securities and Exchange Commission in connection with such Offering (the “Prospectus
Supplement”), the undersigned will not, without the prior written consent of the Underwriters, directly or indirectly,
(i) offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, any shares of Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock (including, without limitation, shares of Common Stock or any
such securities which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the same may be amended or supplemented
from time to time (such shares or securities, the “Beneficially Owned Shares”)), (ii) enter into any swap, hedge
or other agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of any Beneficially Owned
Shares, Common Stock or securities convertible into or exercisable or exchangeable for Common Stock, or (iii) engage in any short
selling of any Beneficially Owned Shares, Common Stock or securities convertible into or exercisable or exchangeable for Common
Stock. The foregoing sentence shall not apply to (a) transfers of any Beneficially Owned Shares, Common Stock or securities convertible
into or exercisable or exchangeable for Common Stock as a bona fide gift, (b) in the case of a natural person, transfers of any
Beneficially Owned Shares, Common Stock or securities convertible into or exercisable or exchangeable for Common Stock by will
or intestate succession or to any trust for the direct or indirect benefit of, or any corporation, partnership, limited liability
company or other entity controlled by, the undersigned or any member of the immediate family of the undersigned, (c) the distribution
of shares of Common Stock to limited partners, members or stockholders in the ordinary course of business of a fund or entity owned
or controlled by the undersigned, or (d) transactions pursuant to a trading plan established pursuant to Rule 10b5-1 of the Exchange
Act prior to the date of this letter and disclosed to the Underwriting on or prior to the date hereof; provided that in
the case of any transfer or distribution pursuant to clause (a) or (b), each donee shall agree to be bound by the terms of this
Agreement.
For the purposes of
the immediately preceding paragraph, “immediate family” shall mean spouse, domestic partner, lineal descendant
(including adopted children), father, mother, brother or sister of the transferor.
If (i) the Company issues
an earnings release or material news or a material event relating to the Company occurs during the last seventeen days of the lock-up
period, or (ii) prior to the expiration of the lock-up period, the Company announces that it will release earnings results during
the sixteen-day period beginning on the last day of the lock-up period, the restrictions imposed by this Agreement shall continue
to apply until the expiration of the eighteen-day period beginning on the issuance of the earnings release or the occurrence of
the material news or material event.
In addition, the undersigned
hereby waives, from the date hereof until the expiration of the ninety (90) day period following the date of the Prospectus Supplement,
any and all rights, if any, to request or demand registration pursuant to the Securities Act of 1933, as amended, of any shares
of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock that are registered in the name
of the undersigned or that are Beneficially Owned Shares. In order to enable the aforesaid covenants to be enforced, the undersigned
hereby consents to the placing of legends and/or stop transfer orders with the transfer agent of the Common Stock with respect
to any shares of Common Stock, securities convertible into or exercisable or exchangeable for Common Stock or Beneficially Owned
Shares.
If (i) the Company
notifies the Underwriter in writing that it does not intend to proceed with the Offering, (ii) for any reason the Offering is terminated
prior to the payment for and delivery of the Common Stock or (iii) the Offering shall not have been completed by _______, 2014,
then upon the occurrence of any such event, this Agreement shall immediately be terminated and the undersigned shall be released
from its obligations hereunder.
[Signatory]
Schedule V
Directors and Executive Officers
1. |
Jeffrey Ronaldi |
CEO, Director |
2. |
Philip Jones |
Chief Financial Officer |
3. |
Robert Bzdick |
President, Director |
4. |
Peter Hardigan |
Chief Operating Officer, Director |
5. |
David Wicker |
Vice President of Research and Development |
6. |
Michael Caton |
Chief Technology Officer |
7. |
Jeffrey D’Angelo |
Vice President, General Counsel |
8. |
Robert Fagenson |
Chairman of the Board and Director |
9. |
Ira A. Greenstein |
Director |
10. |
Warren Hurwitz |
Director |
11. |
David Klein |
Director |
12. |
Jonathon Perrelli |
Director |
Schedule VI
Underwriters
Underwriter |
|
Firm Shares |
|
Additional Shares |
|
|
|
|
|
|
|
National Securities Corporation |
|
3,300,000 |
|
495,000 |
|
Exhibit 5.1
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607
December 23,
2014
Board of Directors
Document Security Systems, Inc.
First Federal Plaza
28 East Main Street, Suite 1525
Rochester, New York 14614
Ladies and Gentlemen:
We have acted as counsel to Document
Security Systems, Inc., a New York corporation (the “Company”), in connection with the issuance and sale of up to
an aggregate 3,300,000 shares of the Company’s common stock, $0.02 par value per share (the “Common
Stock”), pursuant to the registration statement on Form S-3 (Registration Statement No. 333-191704), as filed by the
Company with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Act of 1933, as
amended (the “Act”), as declared effective by the Commission on November 1, 2013 (the registration statement, as
it may be amended from time to time, is herein referred to as the “Registration Statement”), together with the
exhibits to the Registration Statement and the documents incorporated by reference therein and the related base prospectus
which forms a part of and is included in the Registration Statement and the related prospectus supplement in the form filed
with the Commission pursuant to Rule 424(b) under the Act (together, the “Prospectus”).
The shares of Common Stock are to be sold
pursuant to an Underwriting Agreement, dated as of December 23, 2014, by and between the Company and National Securities Corporation
as representative of the several underwriters identified therein (the “Underwriting Agreement”), a copy of which has
been filed as an exhibit to the Company’s Current Report on Form 8-K filed on December 23, 2014.
In connection with this opinion, we have
examined and relied upon the Registration Statement and the Prospectus, the Company’s Certificate of Incorporation, as amended
to date, the Company’s Third Amended and Restated Bylaws, as amended to date, the Underwriting Agreement and such instruments,
documents, certificates and records that we have deemed relevant and necessary for the basis of our opinion hereinafter expressed.
In such examination, we have assumed: (i) the authenticity of original documents and the genuineness of all signatures; (ii) the
conformity to the originals of all documents submitted to us as copies; (iii) the truth, accuracy and completeness of the
information, representations and warranties contained in the records, documents, instruments and certificates we have reviewed;
and (iv) the due execution and delivery of all documents where due execution and delivery are a prerequisite to the effectiveness
thereof.
Based upon the foregoing, we are of the
opinion that the Common Stock, when issued and sold in accordance with the Underwriting Agreement, the Registration Statement and
the Prospectus, will be duly authorized, validly issued, fully paid and non-assessable.
This opinion is limited to the New York
Business Corporation Law, including the statutory provisions of the New York Business Corporation Law and all applicable provisions
of the New York Constitution and reported judicial decisions interpreting these laws.
We hereby consent to the use of our name
wherever it appears in the Registration Statement and the Prospectus, and in any amendment or supplement thereto, the filing of
this opinion as an exhibit to a current report on Form 8-K of the Company and the incorporation by reference of this opinion in
the Registration Statement.
In giving this consent, we do not admit
that we are within the category of persons whose consent is required by Section 7 of the Securities Act or the rules and regulations
promulgated thereunder by the Commission.
|
Very truly yours, |
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/s/ Wyrick Robbins Yates & Ponton LLP |
Exhibit 99.1
Document Security Systems Commences Registered
Direct Offering of Common Stock
ROCHESTER, NY — December 22, 2014 — Document
Security Systems, Inc. (NYSE MKT: DSS), (DSS), a leader in anti-counterfeiting and authentication solutions, today
announced that it is proposing to offer shares of its common stock in an underwritten public offering. DSS expects to grant the
underwriter a 45-day option to purchase up to an additional 15 percent of the shares of common stock offered in the public offering
to cover over-allotments, if any. DSS intends to use the net proceeds from the offering primarily for working capital and other
general corporate purposes. The final terms of the offering will depend on market and other conditions at the time of pricing,
and there can be no assurance as to whether or when the offering may be completed, or as to the actual size or terms of the offering.
National Securities Corporation, a wholly owned subsidiary of
National Holdings, Inc. (OTCBB: NHLD), is acting as sole book-running manager for the offering. Chardan Capital Markets, LLC is
acting as a “qualified independent underwriter” for this offering.
The securities described above are being offered pursuant to
a shelf registration statement (File No. 333-191704), which was declared effective by the United States Securities and Exchange
Commission (“SEC”) on November 1, 2013. This press release shall not constitute an offer to sell or the solicitation
of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction
in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of
any such state or jurisdiction. When filed with the SEC, copies of the prospectus supplement and the accompanying base prospectus
relating to this offering may be obtained at the SEC’s website at http://www.sec.gov, or by request to National Securities
Corporation at the following address:
National Securities Corporation
410 Park Ave, 14th Floor
New York, NY 10022
Attn: Kim Addarich
Telephone: (212)-417-8164
Email: prospectusrequest@nationalsecurities.com
About Document Security Systems
Document Security Systems, Inc.’s
(NYSE MKT: DSS) products and solutions are used by governments, corporations and financial institutions to defeat fraud and to
protect brands and digital information from the expanding world-wide counterfeiting problem. DSS technologies help ensure the authenticity
of both digital and physical financial instruments, identification documents, sensitive publications, brand packaging and websites.
DSS continually invests in research
and development to meet the ever-changing security needs of its clients and offers licensing of its patented technologies through
its subsidiary, DSS Technology Management, Inc.
For more information on the AuthentiGuard
Suite, please visit www.authentiguard.com. For more information on DSS and its subsidiaries, please visit www.DSSsecure.com.
For More Information
Investor Relations
Document Security Systems
(585) 325-3610
Email: ir@documentsecurity.com
Forward-Looking Statements
Forward-looking statements that may
be contained in this press release, including, without limitation, statements related to the Company’s plans, strategies,
objectives, expectations, potential value, intentions and adequacy of resources, are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act and contain words such as “believes,” “anticipates,” “expects,”
“plans,” “intends” and similar words and phrases. These forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement.
In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties
that could result in those differences include, but are not limited to, the Company’s ability to complete the offering,
as well as the actual size and terms of the offering and its ability to raise additional capital, as well as those risks and uncertainties
disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December
31, 2013, filed with the Securities and Exchange Commission, and as amended by our subsequent periodic reports. Forward-looking
statements that may be contained in this press release are being made as of the date of its release, and the Company assumes no
obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected
in the forward-looking statements.
Exhibit 99.2
Document Security Systems Prices Offering
of Common Stock
ROCHESTER, NY — December 23, 2014 —
Document Security Systems, Inc. (NYSE MKT: DSS), (DSS), a leader in anti-counterfeiting and authentication
solutions, today announced the pricing of its previously announced underwritten public offering. DSS is offering 3.300,000
registered shares of its common stock at a price to the public of $0.45 per share, resulting in $1.485 million in gross
proceeds to DSS. In connection with the offering, the Company has also granted the underwriter a 45-day option to purchase up
to an additional 495,000 shares of common stock offered in the public offering to cover over-allotments, if any.
DSS intends to use the net proceeds from this offering for working
capital and other general corporate purposes.
The offering is expected to settle and close on December 29,
2014, subject to the satisfaction or waiver of customary closing conditions.
The securities described above are being offered pursuant to
a shelf registration statement (File No. 333-191704), which was declared effective by the United States Securities and Exchange
Commission (“SEC”) on November 1, 2013. A final prospectus supplement describing the terms of the offering will be
filed with the SEC. Any offer will be made only by means of a prospectus supplement and accompanying base prospectus forming a
part of the effective registration statement. Before investing, you should read the prospectus supplement and the accompanying
base prospectus, and other documents that the Company has filed or will file with the SEC, for information about the Company and
this offering.
This press release shall not constitute an offer to sell or
the solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in
any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under
the securities laws of any such state or jurisdiction. When filed with the SEC, copies of the prospectus supplement and the accompanying
base prospectus relating to this offering may be obtained at the SEC’s website at http://www.sec.gov, or by request
to National Securities Corporation at the following address:
National Securities Corporation
410 Park Ave, 14th Floor
New York, NY 10022
Attn: Kim Addarich
Telephone: (212)-417-8164
Email: prospectusrequest@nationalsecurities.com
About Document Security Systems
Document Security Systems, Inc.’s
(NYSE MKT: DSS) products and solutions are used by governments, corporations and financial institutions to defeat fraud and to
protect brands and digital information from the expanding world-wide counterfeiting problem. DSS technologies help ensure the authenticity
of both digital and physical financial instruments, identification documents, sensitive publications, brand packaging and websites.
DSS continually invests in research
and development to meet the ever-changing security needs of its clients and offers licensing of its patented technologies through
its subsidiary, DSS Technology Management, Inc.
For more information on the AuthentiGuard
Suite, please visit www.authentiguard.com. For more information on DSS and its subsidiaries, please visit www.DSSsecure.com.
For More Information
Investor Relations
Document Security Systems
(585) 325-3610
Email: ir@documentsecurity.com
Forward-Looking Statements
Forward-looking statements that may
be contained in this press release, including, without limitation, statements related to the Company’s plans, strategies,
objectives, expectations, potential value, intentions and adequacy of resources, are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act and contain words such as “believes,” “anticipates,” “expects,”
“plans,” “intends” and similar words and phrases. These forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement.
In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties
that could result in those differences include, but are not limited to, the Company’s ability to comply with the closing
conditions or other conditions that might prevent the closing of the offering, and the Company’s use of net proceeds from
the offering, and its ability to raise additional capital, as well as those risks and uncertainties disclosed in the “Risk
Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the
Securities and Exchange Commission, and as amended by our subsequent periodic reports. Forward-looking statements that may be
contained in this press release are being made as of the date of its release, and the Company assumes no obligation to update
the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking
statements.
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