exv1w1
Exhibit 1.1
EXECUTION COPY
6,000,000 Shares
and
6,000,000 Warrants
GRAYMARK HEALTHCARE, INC.
UNDERWRITING AGREEMENT
June 14, 2011
Roth Capital Partners, LLC
24 Corporate Plaza
Newport Beach, CA 92660
Ladies and Gentlemen:
Graymark Healthcare, Inc., a Oklahoma corporation (the “Company”), proposes, subject
to the terms and conditions stated herein, to issue and sell to Roth Capital Partners, LLC (the
“Underwriter”) an aggregate of (i) 6,000,000 authorized but unissued shares (the “Firm
Shares”) of Common Stock, par value $0.0001 per share (the “Common Stock”), of the
Company and (ii) warrants (the “Firm Warrants” to purchase up to 6,000,000 shares of Common
Stock of the company (the “Firm Warrant Shares”). The Company has granted the Underwriter
the option to purchase an aggregate of up to (i) 900,000 additional shares of Common Stock (the
“Option Shares”) and/or (ii) warrants (the “Option Warrants”) to purchase up to
900,000 shares of Common Stock of the Company (the “Option Warrant Shares”) and together
with the Firm Warrant Shares, the “Warrant Shares”) as may be necessary to cover
over-allotments made in connection with the offering. The Firm Shares and Option Shares are
collectively referred to as the “Shares” and the Firm Warrants and the Option Warrants are
collectively referred to as the “Warrants”. The Shares, the Warrants and the Warrant Shares
are collectively referred to as the “Securities”. The Firm Shares and the Firm Warrants
shall be sold together as a fixed combination, each consisting of one Share and a Warrant to
purchase one share of Common Stock. The Option Shares and the Option Warrants may be sold either
together or separately in any combination to be determined by the Underwriter. The Shares and the
Warrants shall be immediately separable and transferable upon issuance. The terms of the Warrants
are set forth in the form of Warrant attached as Exhibit A hereto.
The Company and the Underwriter hereby confirm their agreement 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-1
(File No. 333-164232) 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 (including post effective amendments) as may
have been required to the date of this Agreement. Such registration statement, as amended
(including any post effective amendments) has been declared effective by the Commission. Such
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registration statement, including amendments thereto (including post effective amendments
thereto) at the time of effectiveness thereof (the “Effective Time”), the exhibits and any
schedules thereto at the Effective Time or thereafter during the period of effectiveness, and the
documents and other information (if any) deemed to be a part thereof or included therein by the
Securities Act or otherwise pursuant to the Rules and Regulations at the Effective Time or
thereafter during the period of effectiveness, is herein called the “Registration
Statement.” If the Company has filed or files an abbreviated registration statement pursuant
to Rule 462(b) under the Securities Act (the “Rule 462 Registration Statement”), then any
reference herein to the term Registration Statement shall include such Rule 462 Registration
Statement.
The term “Preliminary Prospectus” as used herein means a preliminary prospectus as
contemplated by Rule 430, Rule 430A or Rule 430B, of the Rules and Regulations included at any time
as part of, or deemed to be part of or included in, the registration statement. The term
“Prospectus” means the final prospectus in connection with this offering as first filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no such filing is
required, the form of final prospectus included in the Registration Statement at the effective
date. except that if any prospectus filed by the Company with the Commission pursuant to Rule
424(b) of the Rules and Regulations or any other such prospectus provided to the Underwriters by
the Company for use in connection with the offering of the Shares (whether or not required to be
filed by the Company with the Commission pursuant to Rule 424(b) of the Rules and Regulations, but
not including a “free writing prospectus” as defined in Rule 405 of the Rules and Regulations)
differs from the prospectus on file at the time the Registration Statement is or was declared
effective by the Commission, the term “Prospectus” shall refer to such differing prospectus from
and after the time such prospectus is filed with the Commission or transmitted to the Commission
for filing pursuant to such Rule 424(b) or from and after the time of its first use within the
meaning of the Rules and Regulations.
For purposes of this Agreement, all references to the Registration Statement, the Rule 462
Registration Statement, a 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
Interactive Data Electronic Applications system. All references in this Agreement to financial
statements and schedules and other information which is “described,” “contained,” “included” or
“stated” in the Registration Statement, the Rule 462 Registration Statement, a Preliminary
Prospectus, or the Prospectus (or other references of like import) shall be deemed to mean and
include all such financial statements, pro forma financial information and schedules and other
information which is deemed by the Rules and Regulations to be a part of or included in the
Registration Statement, the Rule 462 Registration Statement, a Preliminary Prospectus, or the
Prospectus, as the case may be.
2. Representations and Warranties of the Company Regarding the Offering.
(a) The Company represents and warrants to, and agrees with, the Underwriter, as of the date
hereof and as of the Closing Date (as defined in Section 4(d) below) and as of each Option Closing
Date (as defined below), except as otherwise indicated, as follows:
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(i) At each time of effectiveness, at the date hereof and at the Closing Date, the
Registration Statement and any post-effective amendment thereto complied or will comply in
all material respects with the requirements of the Securities Act and the Rules and
Regulations and did not, does 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 Time of Sale Disclosure Package (as defined in
Section 2(a)(iii)(A)(1) below) as of the date hereof, the time of first use, and at the
Closing Date and on each Option closing Date, if any, and the Prospectus, as amended or
supplemented as of its date, at the time of filing pursuant to Rule 424(b) under the
Securities Act and at the Closing Date and on each Option Closing Date, if any, does 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, in the light of
the circumstances under which they were made, not misleading. The representations and
warranties set forth in the two immediately preceding sentences shall not apply to
statements in or omissions from the Registration Statement, the Time of Sale Disclosure
Package or any Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Underwriter specifically for use in the preparation thereof.
The Registration Statement contains all exhibits and schedules required to be filed by the
Securities Act or the Rules and Regulations. No order preventing or suspending the
effectiveness or use of the Registration Statement or any Prospectus is in effect and no
proceedings for such purpose have been instituted or are pending, or, to the knowledge of
the Company, are contemplated or threatened by the Commission.
(ii) [Reserved]
(iii) (A) The Company has not made, used, prepared, authorized, approved or referred to
any Issuer Free Writing Prospectus (as defined below) in the sale of Shares, except for
those Issuer Free Writing Prospectuses identified in Schedule I hereto. The Company has
filed all Issuer Free Writing Prospectuses required to be so filed with the Commission, and
no order preventing or suspending the effectiveness or use of any Issuer Free Writing
Prospectus is in effect and no proceedings for such purpose have been instituted or are
pending, or, to the knowledge of the Company, are contemplated or threatened by the
Commission. When taken together with the rest of the Time of Sale Disclosure Package or the
Prospectus, since its first use and at all relevant times since then, no Issuer Free Writing
Prospectus has, does or will include (1) any untrue statement of a material fact or omission
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, or (2) information that
conflicted, conflicts or will conflict with the information contained in the Registration
Statement or the Prospectus. The representations and warranties set forth in the
immediately preceding sentence shall not apply to statements in or omissions from the Time
of Sale Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus in reliance
upon, and in conformity with, written information furnished to the Company by the
Underwriter specifically for use in the preparation thereof. As used in this paragraph and
elsewhere in this Agreement:
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(1) “Time of Sale Disclosure Package” means the Statutory Prospectus,
including any preliminary prospectus supplement deemed to be a part thereof, each
Issuer Free Writing Prospectus identified in Schedule I, and any description of the
transaction provided by the Underwriter included on Schedule II, all considered
together as of 2:30 p.m. pacific time on June 14, 2011.
(2) “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) or (d)(8) under the
Securities Act, 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.
(3) “Statutory Prospectus” means the prospectus that is included in the
Registration Statement immediately prior to effectiveness. 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 430A 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
Act.
(B) At the time of filing of the Registration Statement and at the date hereof, the
Company was not and is not an “ineligible issuer,” as defined in Rule 405 under the
Securities Act or 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 (as defined below), all other
conditions as may be applicable to its use as set forth in Rules 164 and 433 under the
Securities Act, including any legend, record-keeping or other requirements.
(iv) The financial statements of the Company, together with the related notes, included
in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus comply
in all material respects with the applicable requirements of the Securities Act and the
Exchange Act and present fairly in all material respects the financial condition of the
Company as of the dates indicated and the results of operations and changes in cash flows
for the periods therein specified in conformity with U.S. generally accepted accounting
principles consistently applied throughout the periods involved; and the supporting
schedules included in the Registration Statement present fairly in all material respects the
information required to be stated therein. No other financial statements, pro forma
financial information or schedules are required under the Securities Act to be included in
the Registration Statement, the Time of Sale Disclosure Package or the Prospectus. To the
Company’s knowledge, Eide Bailly LLP, which has expressed its opinion with respect to the
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
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with respect to the Company within the meaning of the Securities Act and the Rules and
Regulations.
(v) The Company had a reasonable basis for, and made in good faith, each
“forward-looking statement” (within the meaning of Section 27A of the Securities Act or
Section 21E of the Exchange Act) contained in the Registration Statement, the Time of Sale
Disclosure Package or the Prospectus, in each case at the time such “forward-looking
statement” was made.
(vi) All statistical or market-related data included in the Registration Statement, the
Time of Sale Disclosure Package or the Prospectus are based on or derived from sources that
the Company reasonably believes to be reliable and accurate, and the Company has obtained
the written consent to the use of such data from such sources, to the extent required, other
than such consents the failure of which to obtain is not reasonably likely to result in a
Material Adverse Effect.
(vii) There are no statutes, regulations, contracts or documents that are required to
be described in the Registration Statement, in the Time of Sale Disclosure Package and in
the Prospectus or required to be filed as exhibits to the Registration Statement by the
Securities Act or by the Rules and Regulations that have not been so described or filed.
The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is
included or approved for inclusion on the NASDAQ Capital Market. Except as described in the
Registration Statement, the Time of Sale Disclosure Package and the Prospectus, there is no
action pending by the Company or, to the Company’s knowledge, the NASDAQ Capital Market to
delist the Common Stock from the NASDAQ Capital Market, nor has the Company received any
notification that the NASDAQ Capital Market is contemplating terminating such listing. The
Company has submitted a Notification Form: Listing of Additional Shares with the NASDAQ
Capital Market with respect to the Shares.
(viii) The Company has not taken, directly or indirectly, any action that is designed
to or that has constituted or that would reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities.
(ix) The Company is not and during the past three years neither the Company nor any
predecessor was: (A) a blank check company as defined in Rule 419(a)(2) of the Securities
Act, (B) a shell company, other than a business combination shell company, each as defined
in Rule 405 of the Securities Act, or (C) an issuer for an offering of penny stock as
defined in Rule 3a51-1 of the Exchange Act.
(x) The Company is not and, after giving effect to the offering and sale of the
Securities and the application of the net proceeds thereof, will not be an “investment
company,” as such term is defined in the Investment Company Act of 1940, as amended.
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(xi) The Company was at the time of filing the Registration Statement, and at the time
of filing any post-effective amendment thereto, eligible to use Form S-3 under the
Securities Act.
(b) Any certificate signed by any officer of the Company and delivered to the Underwriter or
to the Underwriter’s counsel shall be deemed a representation and warranty by the Company to the
Underwriter as to the matters covered thereby.
3. Representations and Warranties Regarding the Company.
(a) The Company represents and warrants to and agrees with, the Underwriter, except as set
forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, as
follows:
(i) Each of the Company and its subsidiaries has been duly organized and is validly
existing as a corporation or other entity in good standing under the laws of its
jurisdiction of organization. Each of the Company and its subsidiaries has the corporate
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 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 or is reasonably likely to result in 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”). Except for those of the Company’s subsidiaries set forth on Exhibit 21 to the
Company’s Annual Report on Form 10-K, none of the Company’s subsidiaries is a “significant
subsidiary” (as such term is defined in Rule 1-02 of Regulation S-X promulgated under the
Securities Act).
(ii) The Company has the power and authority to enter into this Agreement and the
Warrants and to authorize, issue and sell the Securities as contemplated by this Agreement.
Each of this Agreement and the Warrants has been duly authorized, executed and delivered by
the Company, and constitutes a valid, legal and binding obligation of the Company,
enforceable against the Company 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.
(iii) The execution, delivery and performance of this Agreement and the Warrants and
the consummation of the transactions herein contemplated will not (A) result in a breach or
violation of any of the terms and provisions of, or constitute a default under, any law,
rule or regulation to which the Company or any subsidiary is subject, or by which any
property or asset of the Company or any subsidiary is bound or affected, except to the
extent such breach, violation or default is not reasonably likely to have a
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Material Adverse Effect, (B) conflict with, result in any violation or breach of, or
constitute a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) (a “Default Acceleration
Event”) of, any agreement, lease, credit facility, debt, note, bond, mortgage, indenture
or other instrument (the “Contracts”) or obligation or other understanding to which
the Company or any subsidiary is a party or by which any property or asset of the Company or
any subsidiary is bound or affected, except to the extent that such conflict, default,
termination, amendment, acceleration or cancellation right or Default Acceleration Event is
not reasonably likely to result in a Material Adverse Effect, or (C) 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, each as amended.
(iv) Neither the Company nor any of its subsidiaries is in violation, breach or default
under its certificate of incorporation, by-laws or other equivalent organizational or
governing documents, except where the violation, breach or default in the case of a
subsidiary of the Company is not reasonably likely to result in a Material Adverse Effect.
(v) All consents, approvals, orders, authorizations and filings required on the part of
the Company and its subsidiaries in connection with the execution, delivery or performance
of this Agreement have been obtained or made, other than such consents, approvals, orders,
authorizations and filings the failure of which to make or obtain is not reasonably likely
to result in a Material Adverse Effect.
(vi) All of the issued and outstanding shares of capital stock of the Company are duly
authorized and validly issued, fully paid and nonassessable, and have been issued in
compliance with all applicable securities laws, and conform to the description thereof in
the Registration Statement, the Time of Sale Disclosure Package and the Prospectus. Except
for the issuances of options or restricted stock in the ordinary course of business, since
the respective dates as of which information is provided in the Registration Statement, the
Time of Sale Disclosure Package or the Prospectus, the Company has not entered into or
granted any convertible or exchangeable securities, options, warrants, agreements, contracts
or other rights in existence to purchase or acquire from the Company any shares of the
capital stock of the Company. The Shares, when issued, will be duly authorized and validly
issued, fully paid and nonassessable, will be issued in compliance with all applicable
securities laws, and will be free of preemptive, registration or similar rights and will
conform to the description of the capital stock of the Company contained in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus. The Warrant Shares, when
issued, paid for and delivered upon due exercise of the Warrants, will be duly authorized
and validly issued, fully paid and nonassessable, will be issued in compliance with all
applicable securities laws, and will be free of preemptive, registration or similar rights.
The Warrant Shares have been reserved for issuance. The Securities, when issued, will
conform in all material respects to the descriptions thereof set forth in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus. Except as otherwise
stated in the Registration Statement, in the Time of Sale Disclosure Package and in the
Prospectus,
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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 certificate of incorporation, by-laws or any agreement or other instrument to
which the Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound. Neither the filing of the Registration Statement nor the
offering or sale of the Shares 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, other than such rights that have been waived.
(vii) Each of the Company and its subsidiaries has (A) filed all returns (as
hereinafter defined) required to be filed with taxing authorities prior to the date hereof
or has duly obtained extensions of time for the filing thereof and (B) has paid all taxes
(as hereinafter defined) shown as due on such returns that were filed and has paid all taxes
imposed on or assessed against the Company or such respective subsidiary, except, in all
cases, for any such amounts that the Company or a Subsidiary is contesting in good faith and
except in any case in which the failure to so file or pay would not reasonably be expected
to have a Material Adverse Effect. Except as disclosed in writing to the Underwriter, (i)
no issues have been raised (and are currently pending) by any taxing authority in connection
with any of the returns or taxes asserted as due from the Company or its subsidiaries, and
(ii) no waivers of statutes of limitation with respect to the returns or collection of taxes
have been given by or requested from the Company or its subsidiaries. The term
“taxes” mean all federal, state, local, foreign, and other net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other taxes, fees,
assessments, or charges of any kind whatever, together with any interest and any penalties,
additions to tax, or additional amounts with respect thereto. The term “returns”
means all returns, declarations, reports, statements, and other documents required to be
filed in respect to taxes.
(viii) Since the respective dates as of which information is given in the Registration
Statement, the Time of Sale Disclosure Package or the Prospectus, (A) neither the Company
nor any of its subsidiaries has incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions other than in the ordinary course of
business, (B) the Company has not declared or paid any dividends or made any distribution of
any kind with respect to its capital stock, (C) except as a result of the reverse stock
split described in the Registration Statement, the Time of Sale Disclosure Package and the
Prospectus, there has not been any change in the capital stock of the Company or any of its
subsidiaries (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 the issuance
of restricted stock awards or restricted stock units under the Company’s existing stock
awards plan, or any new grants thereof in the ordinary course of business), (D) there has
not been any material change in the Company’s long-term or short-term debt, and (E) there
has not been the occurrence of any Material Adverse Effect.
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(ix) There is not pending or, to the knowledge of the Company, threatened, 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 is the subject before or by any court or governmental
agency, authority or body, or any arbitrator or mediator, which is reasonably likely to
result in a Material Adverse Effect.
(x) The Company and each of its subsidiaries holds, and is in compliance with, all
franchises, grants, authorizations, licenses, permits, easements, consents, certificates and
orders (“Permits”) of any governmental or self-regulatory agency, authority or body
required for the conduct of its business, and all such Permits are in full force and effect,
in each case except where the failure to hold, or comply with, any of them is not reasonably
likely to result in a Material Adverse Effect.
(xi) The Company and its subsidiaries have good and marketable title to all property
(whether real or personal) described in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus as being owned by them that 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 those that are not reasonably likely to
result in a Material Adverse Effect. 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 and its subsidiaries.
(xii) The Company and each of its subsidiaries owns or possesses or has valid right to
use all patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses, inventions, trade secrets
and similar rights (“Intellectual Property”) necessary for the conduct of the
business of the Company and its subsidiaries as currently carried on and as described in the
Registration Statement, the Time of Sale Disclosure Package and the Prospectus. To the
knowledge of the Company, no action or use by the Company or any of its subsidiaries will
involve or give rise to any infringement of, or license or similar fees for, any
Intellectual Property of others, except where such action, use, license or fee is not
reasonably likely to result in a Material Adverse Effect. Neither the Company nor any of
its subsidiaries has received any notice alleging any such infringement or fee.
(xiii) 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 in the United States 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 disclosed in the Registration Statement, in the Time of Sale
Disclosure Package and in the Prospectus, the Company’s internal control over financial
reporting is effective and none of the Company, its board of directors and audit committee
is aware of any “significant deficiencies” or “material
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weaknesses” (each as defined by the Public Company Accounting Oversight Board) in its
internal control over financial reporting, or any fraud, whether or not material, that
involves management or other employees of the Company who have a significant role in the
Company’s internal controls; and since the end of the latest audited fiscal year, there has
been no change in the Company’s internal control over financial reporting (whether or not
remediated) that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting. The Company’s board of directors has,
validly appointed an audit committee to oversee internal accounting controls whose
composition satisfies the applicable requirements of the applicable stock exchange rules
(the “Exchange Rules”) and the Company’s board of directors and/or the audit
committee has adopted a charter that satisfies the requirements of the Exchange Rules.
(xiv) 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 designed to reasonably ensure that material information relating to the Company,
including its subsidiaries, that is required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is made known to the principal executive
officer and the principal financial officer. 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.
(xv) The Company and each of its subsidiaries has complied with, is not in violation
of, and has not received any notice of violation relating to any law, rule or regulation
relating to the conduct of its business, or the ownership or operation of its property and
assets, including, without limitation, (A) the Currency and Foreign Transactions Reporting
Act of 1970, as amended, or any money laundering laws, rules or regulations, (B) any laws,
rules or regulations related to health, safety or the environment, including those relating
to the regulation of hazardous substances, (C) the Sarbanes-Oxley Act and the rules and
regulations of the Commission thereunder, (D) the Foreign Corrupt Practices Act of 1977 and
the rules and regulations thereunder, and (E) the Employment Retirement Income Security Act
of 1974 and the rules and regulations thereunder, in each case except where the failure to
be in compliance is not reasonably likely to result in a Material Adverse Effect.
(xvi) Neither the Company nor any of its subsidiaries nor, to the knowledge of the
Company, any director, officer, employee, representative, agent or affiliate of the Company
or 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 the offering of the Securities
contemplated hereby, or lend, contribute or otherwise make available such proceeds to any
person or entity, for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC.
(xvii) The Company and each of its subsidiaries carries, or is covered by, insurance in
such amounts and covering such risks as in the Company’s reasonable
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judgment is adequate for the conduct of its business and as is customary for similarly
sized companies engaged in similar businesses in similar industries.
(xviii) Each employee benefit plan, within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), for which the Company
or any member of its “Controlled Group” (defined as any organization which is a member of a
controlled group of corporations within the meaning of Section 414 of the Internal Revenue
Code of 1986, as amended (the “Code”)) would have any liability (each, a
“Plan”) has been maintained in compliance in all material respects with its terms
and the requirements of any applicable statutes, orders, rules and regulations, including
but not limited to ERISA and the Code; (ii) no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan
excluding transactions effected pursuant to a statutory or administrative exemption; (iii)
for each Plan that is subject to the funding rules of Section 412 of the Code or Section 302
of ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code, whether
or not waived, has occurred or is reasonably expected to occur; (iv) the fair market value
of the assets of each Plan exceeds the present value of all benefits accrued under such Plan
(determined based on those assumptions used to fund such Plan); (v) no “reportable event”
(within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to
occur; and (vi) neither the Company nor any member of the Controlled Group has incurred, nor
reasonably expects to incur, any liability under Title IV of ERISA (other than contributions
to the Plan or premiums to the PBGC, in the ordinary course and without default) in respect
of a Plan (including a “multiemployer plan”, within the meaning of Section 4001(a)(3) of
ERISA).
(xix) No labor dispute with the employees of the Company or any of its subsidiaries
exists or, to the knowledge of the Company, is imminent, that is reasonably likely to result
in a Material Adverse Effect.
(xx) To the Company’s knowledge, neither the Company nor any of its subsidiaries is in
violation, breach or default of any Contract that is reasonably likely to result in a
Material Adverse Effect.
(xxi) Except for this Agreement, the Company is not a party to any contract, agreement
or understanding with any person that would give rise to a valid claim against the Company
or the Underwriter for a brokerage commission, finder’s fee or like payment in connection
with the offering and sale of the Shares.
(xxii) To the Company’s knowledge, no transaction has occurred between or among the
Company and its subsidiaries, on the one hand, and any of the Company’s officers, directors
or owner of 5% or more of the Company’s Common Stock or any affiliate or affiliates of any
such officer, director or 5% owner that is required to be described that is not so described
in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus. The
Company has not, directly or indirectly, extended or maintained credit, or arranged for the
extension of credit, or renewed an extension of credit, in the form of a personal loan to or
for any of its directors or
11
executive officers in violation of applicable laws, including Section 402 of the
Sarbanes-Oxley Act.
(xxiii) The Company has not distributed and will not distribute any prospectus or other
offering material in connection with the offering and sale of the Shares other than the Time
of Sale Disclosure Package, Issuer Free Writing Prospectus identified in Schedule I hereto,
or the Prospectus or other materials permitted by the Securities Act to be distributed by
the Company.
(b) Any certificate signed by any officer of the Company and delivered to the Underwriter or
to the Underwriter’s counsel shall be deemed a representation and warranty by the Company to the
Underwriter as to the matters covered thereby.
4. 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, the Company agrees to issue and sell the Firm
Shares and the Firm Warrants to the Underwriter, and the Underwriter agrees to purchase the Firm
Shares and the Firm Warrants. The purchase price for each Firm Share shall be $1.3205 per share
(the “Per Share Price”) and each Firm Warrant shall be $0.0095 per Warrant (the “Per
Warrant Price” and together with the Per Share Price, the “Purchase Price”).
(b) The Company hereby grants to the Underwriter the option to purchase some or all of the
Option Shares and/or the Option Warrants (either separately or together) and, upon the basis of the
warranties and representations and subject to the terms and conditions herein set forth, the
Underwriter shall have the right to purchase all or any portion of the Option Shares at the Per
Share Price and/or the Option Warrants at the Per Warrant Price (either separately or together) as
may be necessary to cover over-allotments made in connection with the transactions contemplated
hereby. This option may be exercised by the Underwriters at any time and from time to time on or
before the thirtieth (30th) day following the date hereof, by written notice to the Company (the
“Option Notice”). The Option Notice shall set forth the aggregate number of Option Shares
and/or Option Warrants as to which the option is being exercised, and the date and time when the
Option Shares and/or the Option Warrants 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 (as defined below) nor earlier than the first business
day after the date on which the option shall have been exercised nor later than the fifth business
day after the date on which the option shall have been exercised unless the Company and the
Underwriter otherwise agree.
(c) Payment of the purchase price for and delivery of the Option Shares and/or the Option
Warrants shall be made on an Option Closing Date in the same manner and at the same office as the
payment for the Firm Shares and the Firm Warrants as set forth in subparagraph (d) below.
(d) The Firm Shares and the Firm Warrants will be delivered by the Company to the Underwriter
against payment of the purchase price therefor by wire transfer of same day funds payable to the
order of the Company at the offices of Roth Capital Partners, LLC, 24
12
Corporate Plaza, Newport Beach, CA 92660, or such other location as may be mutually
acceptable, at 6:00 a.m. PDT, 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 Underwriter and the Company
determine pursuant to Rule 15c6-1(a) under the Exchange Act, or, in the case of the Option Shares
and the Option Warrants, at such date and time set forth in the Option Notice. The time and date
of delivery of the Firm Shares and the Firm Warrants is referred to herein as the “Closing
Date.”
(e) On the Closing Date or any Option Closing Date, the Company shall deliver the Firm Shares
and the Firm Warrants or the Option Shares and/or the Option Warrants, as applicable, which shall
be registered in the name or names and shall be in such denominations as the Underwriter may
request at least one (1) business day before the Closing Date, to the Underwriter, which delivery
shall (a) with respect to the Firm Shares and any Option Shares, shall be made through the
facilities of the Depository Trust Company’s DWAC system, and (b) with respect to the Firm Warrants
and any Option Warrants, shall be made by physical delivery to be received or directed by the
Underwriter no later than one (1) business day following the respective Closing Date.
(f) As partial consideration, on the Closing Date and the Option Closing Date, the Company
shall pay to the Underwriter, in cash, a corporate finance fee equal to two percent (2%) of the
gross proceeds received by the Company from the sale of the Firm Shares and Firm Warrants on the
Closing Date and the Option Shares and/or the Option Warrants on the Option Closing Date.
5. Covenants.
(a) The Company covenants and agrees with the Underwriter as follows:
(i) To prepare the Prospectus in a form approved by the Underwriter and to file such
Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission’s
close of business on the second business day following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under
the Securities Act.
(ii) During the period beginning on the date hereof and ending on the date that the
Prospectus is no longer required by law to be delivered in connection with sales by an
underwriter or dealer (the “Prospectus Delivery Period”), prior to amending or
supplementing the Registration Statement, including any Rule 462 Registration Statement, the
Time of Sale Disclosure Package or the Prospectus, the Company shall furnish to the
Underwriter for review and comment a copy of each such proposed amendment or supplement, and
the Company shall not file any such proposed amendment or supplement to which the
Underwriter reasonably objects.
(iii) From the date of this Agreement until the end of the Prospectus Delivery Period,
the Company shall promptly advise the Underwriter in writing (A) of the receipt of any
comments of, or requests for additional or supplemental information
13
from, the Commission, (B) of the time and date of any filing of any post-effective
amendment to the Registration Statement or any amendment or supplement to the Time of Sale
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, (C) of the time
and date that any post-effective amendment to the Registration Statement becomes effective
and (D) of the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending its use or the use of
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 during the
Prospectus Delivery Period, 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 164(b) of the Securities Act).
(iv)(A) During the Prospectus Delivery Period, the Company will comply 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, as now and
hereafter amended, 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, the Registration Statement and the Prospectus. If during such period any event
occurs as the 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 under which such statement was made,
not misleading, or if during such period it is necessary or appropriate in the opinion of
the Company or its counsel or the Underwriter or its counsel 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, the Company will promptly notify the Underwriter 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) so as to correct such statement
or omission or effect such compliance.
(B) If during the Prospectus Delivery Period there occurred or occurs an event or
development the result of which is that such Issuer Free Writing Prospectus conflicted or
would conflict with the information contained in the Registration Statement or any
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 Underwriter and has promptly
amended or will promptly amend or supplement, at its own expense,
14
such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue
statement or omission.
(v) 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 Underwriter
reasonably designates 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 as a dealer in securities in any
jurisdiction in which it is not so qualified, to execute a general consent to service of
process in any state or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise subject.
(vi) The Company will furnish to the Underwriter and counsel for the Underwriter copies
of the Registration Statement, each 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 Underwriter may from time to time reasonably request.
(vii) 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.
(viii) 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
reasonable expenses (including transfer taxes allocated to the respective transferees)
incurred in connection with the delivery to the Underwriter of the Securities, (B) all
expenses and fees (including, without limitation, fees and expenses of the Company’s
counsel) 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, the Time of Sale Disclosure Package, the
Prospectus, any Issuer Free Writing Prospectus and any amendment thereof or supplement
thereto, (C) the fees and expenses of any transfer agent or registrar, (D) listing fees, if
any, and (E) all other costs and expenses incident to the performance of its obligations
hereunder that are not otherwise specifically provided for herein. In addition to the
foregoing, on the Closing Date, the Company will reimburse the Underwriter for (x) its
reasonable out-of-pocket expenses (exclusive of any legal fees and disbursements of its
counsel) actually incurred by it in connection with this offering, in an amount up to
$25,000 (inclusive of the $20,000 expense advancement previously delivered to the
Underwriter, which will be refunded to the Company to the extent not used) and (y) the fees
and disbursements of Underwriter’s counsel actually incurred in connection with this
offering in an amount up to $100,000. Notwithstanding anything to the contrary contained
herein, the Company shall not be required to pay or reimburse the underwriter for any fees,
expenses and disbursements in excess of the $25,000 reimbursement for out-of-pocket expenses
and the $100,000 reimbursement for Underwriter’s counsel fees and expenses referred to in
the foregoing sentence. If this Agreement is terminated by the
15
Underwriter in accordance with the provisions of Section 6 or Section 9, the Company
will, subject to the limitations contained in the preceding sentence, reimburse the
Underwriter for all out-of-pocket disbursements (including, but not limited to, reasonable
fees and disbursements of counsel, travel expenses, postage, facsimile and telephone
charges) actually incurred by the Underwriter in connection with its investigation,
preparing to market and marketing the Securities or in contemplation of performing its
obligations hereunder.
(ix) The Company intends to 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.
(x) The Company has not taken and will not take, directly or indirectly, during the
Prospectus Delivery Period, any action designed to or which might reasonably be expected to
cause or result in, or that has constituted, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the Securities.
(xi) The Company represents and agrees that, unless it obtains the prior written
consent of the Underwriter, and the Underwriter represents and agrees that, unless it
obtains the prior written consent of the Company, it has not made and will not make any
offer relating to the Securities that would constitute an Issuer Free Writing Prospectus;
provided that the prior written consent of the parties hereto shall be deemed to have been
given in respect of information to be included in any free writing prospectuses identified
in Schedule I. Any such free writing prospectus consented to by the Company and the
Underwriter 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 or 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.
(xii) The Company hereby agrees that, without the prior written consent of the
Underwriter, it will not, during the period ending 90 days after the date hereof
(“Lock-Up Period”), (i) offer, pledge, issue, sell, contract to sell, purchase,
contract to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or exchangeable for
Common Stock; or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise; or (iii) file any registration
statement with the Commission relating to the offering of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock (other than a
registration statement on Form S-4 and Form S-8). The restrictions contained in the
preceding sentence shall not apply to (1) the Securities to be sold hereunder, (2) the
issuance of Common Stock upon the exercise of options or warrants disclosed as outstanding
in the Registration Statement (excluding exhibits
16
thereto) or the Prospectus, (3) the issuance of employee stock options not exercisable
during the Lock-Up Period and the grant of restricted stock awards or restricted stock units
pursuant to equity incentive plans described in the Registration Statement (excluding
exhibits thereto) and the Prospectus, or (4) the issuance of the Warrant Shares.
Notwithstanding the foregoing, to the extent that the Underwriter is at such time providing
research coverage to the Company and is subject to the restrictions set forth in FINRA Rule
2711(f)(4), then if (x) the Company issues an earnings release or material news, or a
material event relating to the Company occurs, during the last 17 days of the Lock-Up
Period, or (y) prior to the expiration of the Lock-Up Period, the Company announces that it
will release earnings results during the 16-day period beginning on the last day of the
Lock-Up Period, the restrictions imposed by this clause shall continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the
occurrence of the material news or material event, unless the Underwriter waives such
extension in writing; provided, however, that this sentence shall not apply if the research
published or distributed on the Company is compliant with Rule 139 of the Securities Act and
the Company’s securities are “actively traded” as defined in Rule 101(c)(1) of Regulation M
of the Exchange Act.
6. Conditions of the Underwriter’s Obligations. The obligations of the Underwriter hereunder
to purchase the Securities are subject to the accuracy of, as of the date hereof, at the Closing
Date and on each Option Closing Date (as if made on the Closing Date or such Option Closing Date,
as applicable) and compliance in all material respects with, all representations, warranties and
agreements of the Company contained herein, the performance by the Company of its obligations
hereunder and 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 164(b) under the Securities Act); the Registration Statement shall
remain effective; no stop order suspending the effectiveness of the Registration Statement or any
part thereof, any Rule 462 Registration Statement, 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 or the Underwriter 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
Underwriter’s satisfaction.
(b) FINRA shall have raised no objection to the fairness and reasonableness of the
underwriting terms and arrangements.
(c) The Underwriter shall not have reasonably determined, and advised the Company, that there
exists (i) any untrue statement or alleged untrue statement of a material fact in the Registration
Statement or any omission or alleged omission of a material fact required to be stated therein or
necessary in order to make the statements therein, not misleading, (ii) any
17
untrue statement or alleged untrue statement of a material fact in Prospectus (or any
amendment or supplement thereto), any Issuer Free Writing Prospectus or the Time of Sale Disclosure
Package, or any omission or alleged omission of a material fact required to be stated therein in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading.
(d) On the Closing Date and each Option Closing Date, if any, there shall have been furnished
to the Underwriter the opinion and negative assurance letters of Greenberg Traurig LLP, dated the
Closing Date or the relevant Option Closing Date, as the case may be, and addressed to the
Underwriter, in form and substance reasonably satisfactory to the Underwriter, to the effect set
forth in Schedule III.
(e) On the Closing Date and each Option Closing Date, there shall have been furnished to the
Underwriter the opinion of McAfee & Taft, dated the Closing Date or the relevant Option Closing
Date, as the case may be, and addressed to the Underwriter, in form and substance reasonably
satisfactory to the Underwriter, to the effect set forth in Schedule IV.
(f) On the Closing Date and each Option Closing Date, there shall have been furnished to the
Underwriter the opinion and negative assurance letters of Goodwin Procter LLP, dated the Closing
Date or the relevant Option Closing Date, as the case may be, and addressed to the Underwriter, in
form and substance reasonably satisfactory to the Underwriter.
(g) The Underwriter shall have received a letter of Eide Bailly LLP, on the date hereof and on
the Closing Date and on each Option Closing Date, addressed to the Underwriter, confirming that
they are independent public accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the qualifications of accountants under
Rule 2-01 of Regulation S-X of the Commission, and confirming, as of the date of each such letter
(or, with respect to matters involving changes or developments since the respective dates as of
which specified financial information is given in the Time of Sale Disclosure Package, as of a date
not prior to the date hereof or more than five days prior to the date of such letter), the
conclusions and findings of said firm with respect to the financial information and other matters
required by the Underwriter.
(h) On the Closing Date and on each Option Closing Date, there shall have been furnished to
the Underwriter a certificate, dated the Closing Date and each Option Closing Date and addressed to
the Underwriter, signed by the chief executive officer and the chief financial officer of the
Company, in their capacity as officers 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 Option
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 or the
Option Closing Date, as applicable;
(ii) No stop order or other order (A) suspending the effectiveness of the Registration
Statement or any part thereof or any amendment thereof, (B) suspending the qualification of
the Securities for offering or sale, or (C) suspending or preventing the
18
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 their knowledge, is contemplated by the Commission or any state or regulatory body; and
(iii) There has been no occurrence of any event resulting or reasonably likely to
result in a Material Adverse Effect during the period from and after the date of this
Agreement and prior to the Closing Date or the Option Closing Date, as applicable.
(i) [Reserved].
(j) On or before the date hereof, the Underwriter shall have received duly executed “lock-up”
agreements, in a form attached as Exhibit A hereto, between the Underwriter and the individuals
listed on Schedule V.
(k) The Shares have been duly listed, subject to notice of issuance, on the Nasdaq Capital
Market.
(l) The Company shall have furnished to the Underwriter and its counsel such additional
documents, certificates and evidence as the Underwriter or its counsel may have reasonably
requested.
If any condition specified in this Section 6 shall not have been fulfilled when and as
required to be fulfilled, this Agreement may be terminated by the Underwriter by notice to the
Company at any time at or prior to the Closing Date or an Option Closing Date, as applicable, and
such termination shall be without liability of any party to any other party, except that Section
5(a)(viii), Section 7 and Section 8 shall survive any such termination and remain in full force and
effect.
7. Indemnification and Contribution.
(a) The Company agrees to indemnify, defend and hold harmless the Underwriter, its affiliates,
directors and officers and employees, and each person, if any, who controls the Underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against
any losses, claims, damages or liabilities to which the Underwriter or such person 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) any
untrue statement or alleged untrue statement of a material fact contained in the Registration
Statement or caused by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained 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, including any roadshow or investor presentations
made to investors by the Company (whether in person or electronically) (“Marketing
Materials”), 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 in order to make the statements
therein, in light of the circumstances under which they
19
were made, not misleading or (iii) any
untrue statement or alleged untrue statement of a material
fact contained in Prospectus (or any amendment or supplement thereto), any Issuer Free Writing
Prospectus or the Time of Sale Disclosure Package, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading, and
will reimburse the Underwriter for any legal or other expenses reasonably incurred by it in
connection with evaluating, investigating or defending against such loss, claim, damage, liability
or action; 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, 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 the Underwriter specifically for use in the preparation
thereof.
(b) The Underwriter will indemnify, defend and hold harmless the Company, its affiliates,
directors, officers and employees, and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and 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 (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration Statement or caused by
any omission or alleged omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any Marketing Materials, 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 in order to make the statements therein, in light of the circumstances
under which they were made, not misleading or (iii) any untrue statement or alleged untrue
statement of a material fact contained in Prospectus (or any amendment or supplement thereto), any
Issuer Free Writing Prospectus or the Time of Sale Disclosure Package, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading, 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,
the Time of Sale Disclosure Package, the Prospectus, or any amendment or supplement, or any Issuer
Free Writing Prospectus or Marketing Materials in reliance upon and in conformity with written
information furnished to the Company by the 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 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 failure to notify the indemnifying party shall not
relieve the indemnifying party from any liability that it may have to
20
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 reasonably
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; provided, however, that if (i) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the indemnifying party, (ii) a
conflict or potential conflict exists (based on advice of counsel to the indemnified party) between
the indemnified party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified party), or (iii)
the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after receiving notice of the
commencement of the action, the indemnified party shall have the right to employ a single counsel
to represent it in any claim in respect of which indemnity may be sought under subsection (a) or
(b) of this Section 7, 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 indemnified party as
incurred.
The indemnifying party under this Section 7 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. 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 a party or could be named and
indemnity was or would be sought hereunder by such indemnified party, unless such settlement,
compromise or consent (a) includes an unconditional release of such indemnified party from all
liability for 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 7 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
Underwriter on the other from the offering and sale 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 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
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Company on
the one hand and the 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 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 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 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 that 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 that is
the subject of this subsection (d). Notwithstanding the provisions of this subsection (d),
the Underwriter shall not be required to contribute any amount in excess of the amount of the
Underwriter’s commissions referenced in Section 4(a) actually received by the Underwriter pursuant
to this Agreement. 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) The obligations of the Company under this Section 7 shall be in addition to any liability
that 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 Underwriter within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act; and the obligations of the
Underwriter under this Section 7 shall be in addition to any liability that the Underwriter may
otherwise have and the benefits of such obligations shall extend, upon the same terms and
conditions, to the Company and its officers, directors and each person who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act.
(f) For purposes of this Agreement, the Underwriter confirms, and the Company acknowledges,
that there is no information concerning the Underwriter furnished in writing to the Company by the
Underwriter specifically for preparation of or inclusion in the Registration Statement, the Time of
Sale Disclosure Package, the Prospectus or any Permitted Issuer Free Writing Prospectus, other than
the statements set forth in the last paragraph on the cover page of the Prospectus and the
statements set forth in the “Underwriting” section of the Prospectus and the Prospectus included in
the Time of Sale Disclosure Package, only insofar as such statements relate to the amount of
selling concession and re-allowance or to over-allotment and related activities that may be
undertaken by the Underwriter.
8. 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 Underwriter and the Company contained in Section 5(a)(viii) and
Section 7 hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter or any controlling
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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 Underwriter hereunder.
9. Termination of this Agreement.
(a) The Underwriter 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 or any Option Closing
Date (as to the Option Shares and Option Warrants to be purchased on such Option Closing Date
only), if (i) trading in the Company’s Common Stock shall have been suspended by the Commission or
the NASDAQ Capital Market or trading in securities generally on the NASDAQ Global Market, NASDAQ
Capital Market, New York Stock Exchange or NYSE Alternext shall have been suspended, (ii) minimum
or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities
shall have been required, on the NASDAQ Global Market, NASDAQ Capital Market, New York Stock
Exchange or NYSE Alternext, by such exchange or by order of the Commission or any other
governmental authority having jurisdiction, (iii) a banking moratorium shall have been declared by
federal or New York state authorities, (iv) there shall have occurred any attack on, outbreak or
escalation of hostilities or act of terrorism involving the United States, any declaration by the
United States of a national emergency or war, any substantial change in financial markets, any
substantial change or development involving a prospective substantial change in United States or
international political, financial or economic conditions or any other calamity or crisis, or (v)
the Company suffers any loss by strike, fire, flood, earthquake, accident or other calamity,
whether or not covered by insurance, the effect of which, in each case described in this subsection
(a), in the Underwriter’s reasonable judgment is material and adverse and makes it impractical or
inadvisable to proceed with the completion of the sale of and payment for the Securities. Any such
termination shall be without liability of any party to any other party except that the provisions
of Section 5(a)(viii) and Section 7 hereof shall at all times be effective and shall survive such
termination.
(b) If the Underwriter elects to terminate this Agreement as provided in this Section, the
Company shall be notified promptly by the Underwriter by telephone, confirmed by letter.
10. Notices. Except as otherwise provided herein, all communications hereunder shall be in
writing and, if to the Underwriter, shall be mailed, delivered or telecopied to Roth Capital
Partners, LLC, 24 Corporate Plaza, Newport Beach, CA 92660, telecopy number: (949) 720-7227,
Attention: Managing Director, with a copy to Goodwin Procter LLP, The New York Times Building, 620
8th Avenue, New York, NY 10018, Attention: Michael D. Maline, Esq., telecopy number:
(212) 355-3333; and if to the Company, shall be mailed, delivered or telecopied to it at Graymark
Healthcare, Inc., 210 Park Avenue, Suite 1350, Oklahoma City, OK 73102, telecopy number: (405)
601-4550, Attention: Stanton Nelson, with a copy to Greenberg Traurig LLP, One International
Place, Boston, MA 02110, telecopy number: (617) 310-6001, Attention: Robert E. Puopolo, Esq; 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.
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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 7. 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 Underwriter.
12. Absence of Fiduciary Relationship. The Company acknowledges and agrees that: (a) the
Underwriter has been retained solely to act as underwriter in connection with the sale of the
Securities and that no fiduciary, advisory or agency relationship between the Company and the
Underwriter has been created in respect of any of the transactions contemplated by this Agreement,
irrespective of whether the Underwriter has advised or is 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 Underwriter 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 Underwriter
and its affiliates are engaged in a broad range of transactions that may involve interests that
differ from those of the Company and that the Underwriter has no obligation to disclose such
interest and transactions to the Company by virtue of any fiduciary, advisory or agency
relationship; (d) it has been advised that the Underwriter is acting, in respect of the
transactions contemplated by this Agreement, solely for the benefit of the Underwriter, and not on
behalf of the Company.
13. Amendments and Waivers. No supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. The failure of a party to
exercise any right or remedy shall not be deemed or constitute a waiver of such right or remedy in
the future. No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any
such waiver be deemed or constitute a continuing waiver unless otherwise expressly provided.
14. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph,
clause or provision of this Agreement shall not affect the validity or enforceability of any other
section, paragraph, clause or provision.
15. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
16. 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.
24
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 Underwriter in accordance with
its terms.
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Very truly yours, |
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GRAYMARK HEALTHCARE, INC. |
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By: |
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/s/ Stanton Nelson |
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Name: |
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Stanton Nelson |
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Title: |
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CEO |
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Confirmed as of the date first above-
mentioned by the Underwriter.
ROTH CAPITAL PARTNERS, LLC
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By: |
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/s/ Aaron M. Gurewitz |
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Name: |
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Aaron M. Gurewitz |
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Title:
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Head of Equity Capital Markets |
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[Signature page to Underwriting Agreement]
SCHEDULE I
Issuer Free Writing Prospectus
None
SCHEDULE II
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Issuer:
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Graymark Healthcare, Inc. (the “Company”) |
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Symbol:
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GRMH |
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Security:
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6,000,000 shares of common stock, par value
$0.0001 per share and warrants to purchase
6,000,000 shares of common stock |
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Over-allotment option:
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900,000 shares of common stock, par value
$0.0001 per share and warrants to purchase
900,000 shares of common stock |
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Public offering price:
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$1.40 per fixed combination |
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Underwriting discounts and
commissions:
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$0.07 per fixed combination |
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Net proceeds (excluding
the over-allotment):
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$6,872,000 million (after deducting the
underwriter’s discounts and commissions and
estimated offering expenses payable by the
Company) |
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Trade date:
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June 15, 2011 |
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Settlement date:
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June 20, 2011 |
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Underwriter:
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Roth Capital Partners, LLC |
SCHEDULE III
Greenberg Traurig Opinions
SCHEDULE IV
McAfee & Taft Opinions
SCHEDULE
Individuals Subject to Lockups
Stanton Nelson
Edward M. Carriero, Jr.
Grant A. Christianson
Joseph Harroz, Jr.
Scott Mueller
S. Edward Dakil, M.D.
Steven List
Exhibit A
Form Lock-Up Agreement
June __, 2011
Roth Capital Partners, LLC
24 Corporate Plaza
Newport Beach, California 92660
Ladies and Gentlemen:
The undersigned understands that Roth Capital Partners, LLC (“Roth”) proposes to enter
into an Underwriting Agreement (the “Underwriting Agreement”) with Graymark Healthcare,
Inc., a Oklahoma corporation (the “Company”) providing for the public offering (the
“Public Offering”) by Roth of shares of the Company’s common stock, $0.0001 par value per
share (the “Common Stock”) and warrants to purchase shares of Common Stock.
To induce Roth to continue its efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Roth, it will not, during the period
commencing on the date hereof and ending 90 days after the date of the Prospectus supplement
relating to the Public Offering (the “Prospectus”) (the “Lock-Up Period”), (1)
offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock, or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (a) transactions relating to shares of Common Stock or other securities
acquired in open market transactions after the completion of the Public Offering, provided that no
filing under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) shall be required or shall be voluntarily made in connection with subsequent sales of
Common Stock or other securities acquired in such open market transactions, (b) transfers of shares
of Common Stock or any security convertible into Common Stock as a bona fide gift, by will or
intestacy or to a family member or trust for the benefit of a family member; provided that in the
case of any transfer or distribution pursuant to clause (b), (i) each donee or distributee shall
sign and deliver a lock-up letter substantially in the form of this letter and (ii) if the
undersigned is required to file a report under Section 16(a) of the Exchange Act, reporting a
reduction in beneficial ownership of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock during the Lock-Up Period, the undersigned shall include a
statement in such report to the effect that such transfer is being made as a gift, by will or
intestate succession, as applicable, or (c) forfeitures of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock to satisfy tax withholding
obligations of the undersigned in connection with the vesting of restricted stock pursuant to the
Company’s stock incentive plans, which forfeitures may require the undersigned to file a report
under Section 16(a) of the Exchange Act reporting a reduction in beneficial
ownership of Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock during the Lock-Up Period. In addition, the undersigned agrees that, without the
prior written consent of Roth, it will not, during the period commencing on the date hereof and
ending 90 days after the date of the Prospectus, make any demand for or exercise any right with
respect to, the registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock. The undersigned also agrees and consents to the
entry of stop transfer instructions with the Company’s transfer agent and registrar against the
transfer of the undersigned’s shares of Common Stock except in compliance with the foregoing
restrictions.
To the extent Roth is at such time providing research coverage to the Company and subject to
the restrictions set forth in FINRA Rule 2711(f)(4), then if (i) the Company issues an earnings
release or material news, or a material event relating to the Company occurs, during the last 17
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 16-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 18-day period beginning on the issuance of the earnings release or the occurrence
of the material news or material event, unless Roth waives such extension; provided, however, that
this sentence shall not apply if the research published or distributed on the Company is compliant
under Rule 139 of the Securities Act of 1933, as amended, and the Company’s securities are actively
traded as defined in Rule 101(c)(1) of Regulation M of the Exchange Act.
No provision in this agreement shall be deemed to restrict or prohibit the exercise or
exchange by the undersigned of any option or warrant to acquire shares of Common Stock, or
securities exchangeable or exercisable for or convertible into Common Stock, provided that the
undersigned does not transfer the Common Stock acquired on such exercise or exchange during the
Lock-Up Period, unless otherwise permitted pursuant to the terms of this agreement. In addition,
no provision herein shall be deemed to restrict or prohibit the entry into or modification of a
written plan meeting the requirements of Rule 10b5-1 under the Exchange Act at any time (other than
the entry into or modification of such a plan in such a manner as to cause the sale of any shares
of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock
within the Lock-Up Period).
The undersigned understands that the Company and Roth are relying upon this agreement in
proceeding toward consummation of the Public Offering. The undersigned further understands that
this agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal
representatives, successors and assigns.
The undersigned understands that, if (i) the Underwriting Agreement is not executed by June
30, 2011, (ii) the Company notifies Roth in writing that it does not intend to proceed with the
Public Offering or (iii) the Underwriting Agreement (other than the provisions thereof which
survive termination) shall terminate or be terminated prior to payment for and delivery of the
Common Stock to be sold thereunder, the undersigned shall be released from all obligations under
this letter agreement.
Whether or not the Public Offering actually occurs depends on a number of factors, including
market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement,
the terms of which are subject to negotiation between the Company and Roth.
This letter agreement shall be governed by, and construed in accordance with, the laws of the
State of New York.
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Very truly yours, |
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(Name)
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(Address)
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