This
engagement letter agreement (this “Agreement”) sets forth the terms
under which Digital Offering LLC, a FINRA and SEC registered
broker-dealer (“we” or “Digital Offering”), is being
engaged to act as the managing broker dealer for Manufactured
Housing Properties Inc. (“you” or the “Company” and, together with
Digital Offering, the “Parties”) in connection with a
proposed best efforts Regulation A offering by the Company of its
securities (the “Securities”) which Securities may
be convertible preferred stock, common stock, convertible debt or
other securities and may be in the form of units that include
warrants in each case as determined by the Company after
consultation with Digital Offering.
The
terms of our engagement are as follows:
1. The
Offering.
(a) We
will seek to assist you to raise capital through a Regulation A,
Tier II offering (the “Offering”) of the Securities to accredited and
non-accredited investors (the “Investors”) in an exempt transaction under Regulation
A of the Securities Act of 1933, as amended (the
“Securities
Act”). We expect that the
Offering will result in gross proceeds to the Company of up to $10
million. The actual terms and amount of the Offering will depend on
market conditions, and will be subject to negotiation between the
Company, Digital Offering and the prospective
investors.
(b) The
Company expressly acknowledges that: (i) the Offering will be
undertaken an a “best efforts” basis, (ii) Digital
Offering will not be required to purchase any Securities from the
Company, and (iii) the execution of this Agreement does not
constitute a commitment by Digital Offering to consummate any
transaction contemplated hereunder and does not ensure a successful
Offering or the ability of Digital Offering to secure any financing
on behalf of the Company.
(c) During
the Term (as defined below), the Company and its affiliates agree
not to engage any other broker-dealer or intermediary and shall not
utilize a placement agent, broker-dealer or other intermediary to
solicit, negotiate with or enter into any agreement with any
investor or other financing source unless such engagement is
through Digital Offering. The Company represents and warrants that
the execution, delivery and performance of this Agreement does not
violate the terms of any agreement or understanding to which you or
your affiliates are a party or to which you or your affiliates are
bound with any other person or entity.
(d) You
acknowledge that we may ask other FINRA and SEC member
broker-dealers to participate as soliciting dealers
(“Soliciting
Dealers”) for the
Offering. Upon appointment of any such Soliciting Dealer, we shall
be permitted to re-allow all or part of our fees and expense
allowance as described below. Such Soliciting Dealer shall
automatically receive the benefits of this agreement, including the
indemnification rights provided for herein upon their execution of
a soliciting dealer agreement (the “Soliciting Dealer
Agreement”) with us that
confirms that such Soliciting Dealer is entitled to the benefits of
this agreement, including the indemnification rights provided for
herein. Unless otherwise agreed to by the Company, the Company will
not be responsible for paying any placement agency fees,
commissions or expense reimbursements to any Soliciting Dealers
retained by Digital Offering that are in excess of the fees and
expense reimbursement provided for in this Agreement. The
Soliciting Dealer Agreement shall be in such form as we reasonably
determine.
2. Fees
and Expenses.
(a) As
compensation to Digital Offering for its services hereunder, the
Company agrees to pay Digital Offering, concurrently with each
closing of the Offering, a cash placement fee (the
“Placement
Fee”) equal to 7% of the
gross proceeds of the Offering. In addition, on the date of each
closing of the Offering, the Company will issue to Digital Offering
a five-year placement agent warrant (the “Agent
Warrant”) for the
purchase a number of Securities that is equal to the quotient of
(i) five percent (5%) of the of the dollar amount of Securities
sold at such closing divided by the price per share paid by
investors for Securities sold at such closing, unless the
Securities sold in the Offering are not priced, in which case, such
amount would be divided by $2.50, which represents the conversion
price per share of preferred stock sold by the Company in its last
financing. The Agent Warrant will have an exercise price equal to
the price per share paid by investors in the Offering, or, if
priced Securities are not issued in the Offering, then an exercise
price equal to $2.50, which is the conversion price per share of
preferred stock sold by the Company in its last financing
transaction. The Agent Warrant will contain customary terms and
conditions, including without limitation, provisions for cashless
exercise and the Agent Warrant will be registered under the
offering statement for the Offering. Digital Offering understands
and agrees that there are significant restrictions pursuant to
Financial Industry Regulatory Authority, or FINRA Rule 5110 against
transferring the Agent Warrant and the underlying Securities during
the one hundred eighty (180) days after the qualification date of
the offering statement for the Offering and by its acceptance
thereof shall agree that it will not sell, transfer, assign, pledge
or hypothecate the Agent Warrant, or any portion thereof, or be the
subject of any hedging, short sale, derivative, put or call
transaction that would result in the effective economic disposition
of such securities for a period of one hundred eighty (180) days
following the qualification date of the offering statement for the
Offering to anyone other than (i) an underwriter or selected dealer
in connection with the Offering or (ii) a bona fide officer or
partner of Digital Offering or of any underwriter or selected
dealer; and only if any such transferee agrees to the foregoing
lock-up restrictions.
(b) The
Company will be responsible for paying or reimbursing Digital
Offering for all of its reasonable documented out-of-pocket
expenses related to the Offering including, without limitation,
legal fees, travel expenses, photocopying, and courier services
subject to a cap of $30,000. Except for the retainer amount,
Digital Offering’s out-of-pocket expenses shall be paid at
the closing and out of the proceeds of the Offering or upon
termination of this engagement by the Company or Digital
Offering.
(c) The
Company will pay a $15,000 refundable retainer to Digital Offering
within five days of executing this agreement. This retainer will be
used to cover actual expenses incurred by Digital Offering in
connection with the Offering. Upon the termination of this
Agreement for any reason, Digital Offering will return to the
Company the unused portion of such retainer.
(d) In
addition, the Company shall pay for fees and expenses incurred by
it in connection with the Offering, including without limitation,
(i) all filing fees and communication expenses relating to the
qualification of the Securities to be sold in the Offering with the
Securities and Exchange Commission (the “Commission”) and the filing of the offering materials
with the Financial Industry Regulatory Authority
(“FINRA”) under FINRA Rule 5110, (ii) the costs of
all mailing and printing of the Offering documents, the Offering
Statement (as defined below), the Offering Circular (as defined
below) and all amendments, supplements and exhibits thereto and as
many preliminary and final Offering Circulars as Cambria may
reasonably deem necessary, (iii) the costs of preparing, printing
and delivering electronic certificates representing such
Securities; (iv) the costs and expenses of the transfer agent for
such Securities; (v) the costs and expenses of the Company’s
accountants and the fees and expenses of the Company’s legal
counsel and other agents and representatives.
(e) Upon
the execution of the engagement letter, Digital Offering shall
obtain background checks on the Company’s officers, directors
and significant stockholders and obtain a due diligence report from
FactRight or a similar third-party due diligence service provider.
The expenses for the background check and due diligence report are
expected to be approximately $15,000 in the aggregate and will be
covered by retainer described in Section 2(c). Digital Offering
shall apply the retainer against these expenses. Digital
Offering’s engagement with these service providers will
permit Digital Offering to rely on these reports.
(f) The
Company will be required to make the Offering available online for
investors through the My IPO platform, which is operated by Cambria
Capital LLC, an affiliate of Digital Offering
(“Cambria”). Cambria is an SEC registered
broker-dealer that is a FINRA member and member of SIPC. The My IPO
platform is an online deal marketing, investor outreach and
technology platform that makes the process of investing simple.
Cambria will handle all KYC, CIP, AML, OFAC for investors
participating under the My IPO platform. Through the My IPO
platform, Cambria will provide for electronic subscriptions and
account set up. At each closing investor funds are journaled from
each funded customer My IPO brokerage account to the
Company’s My IPO brokerage account, then the Company may wire
these funds from its My IPO brokerage account to its operating bank
account. Each investor will have an online brokerage account with
My IPO. Free trading shares will be deposited into brokerage
account at closing electronically by the Company’s transfer
agent.
The fees payable by investors on the My IPO platform are currently
as follows:
●
Stock Deposit and
Issuance Fees: None
●
Online Trade Fees
(for public companies): $10
●
Broker Assisted
Trade Fees (for public companies): $50
●
No fees to
establish or maintain an individual brokerage account
The
Company will enter into a separate agreement with Cambria that is
mutually agreeable to Cambria and the Company in order to utilize
the My IPO platform.
(g) All
fees and any other amounts payable hereunder are payable in U.S.
dollars, free and clear of any United States or foreign withholding
taxes or deductions, and shall be payable to an account designated
by Digital Offering.
3. Term
of Engagement; Relationship of Parties.
(a) The
term of Digital Offering’s engagement hereunder (the
“Term”) shall commence on the mutual execution of
this Agreement and end on the earlier to occur of: (i) the closing
of the Offering and (ii) ten (10) business days after either party
gives the other written notice of termination hereunder. For the
avoidance of doubt, either Digital Offering or the Company may
terminate this Agreement at any time on 10 days’ prior
written notice. Upon termination, we will be entitled to collect
all fees, if any, earned through the date of termination, and the
Company will pay or reimburse Digital Offering for its
out-of-pocket expenses, subject to Section 2(b) hereof. The Company
agrees that: (a) any termination or completion of Digital
Offering’s engagement hereunder shall not affect the
Company’s obligation to indemnify Digital Offering, the
Soliciting Dealers and the affiliates of Digital Offering and the
Soliciting Dealers as provided for herein, (b) any termination of
Digital Offering’s engagement hereunder shall not affect the
Company’s obligation to pay fees as provided for in Section
3(b) hereof; and (c) any termination of Digital Offering’s
engagement hereunder shall not affect the Company’s
obligation to pay fees and reimburse the expenses accruing prior to
such termination as provided for herein.
(b) Notwithstanding
any termination of this Agreement pursuant to the terms hereof or
otherwise, if at any time after the termination of this agreement
and on or before the twelve (12) month period following the
termination of this Agreement (the “Residual
Period”), the Company
enters into a definitive commitment relating to the sale of
Securities to any person or entity (including such person or
entity’s affiliates, and each of its and such
affiliates’ respective equity holders, officers, directors,
employees, consultants, agents) that Digital Offering introduced to
the Company and/or with whom Digital Offering had substantive
communications with on behalf of the Company, the Company shall pay
to Digital Offering fees in accordance with the terms and
provisions of Section 2(a) hereof.
(c) Nothing
contained in this Agreement shall be construed to place Digital
Offering and the Company in the relationship of partners or joint
ventures. Neither Digital Offering nor the Company shall represent
itself as the agent or legal representative of the other for any
purpose whatsoever nor shall either have the power to obligate or
bind the other in any manner whatsoever. The Company’s
engagement of Digital Offering is not intended to confer rights
upon any person not a party hereto (including shareholders,
directors, officers, employees or creditors of the Company) as
against Digital Offering or its affiliates, or their respective
directors, officers, employees or agents, successors or assigns.
Digital Offering, in performing its services hereunder, shall at
all times be an independent contractor. No promises or
representations have been made, except as expressly set forth in
this Agreement, and the parties have not relied on any promises or
representations except as expressly set forth in this Agreement.
Nothing contained herein should be construed as creating any
fiduciary duties between the Company and Digital
Offering.
4. Right
of First Offer. The Company
agrees that if, but only if, the Offering is successfully
consummated, it shall provide Digital Offering the right of first
refusal for six (6) months from the date of the consummation of the
Offering to act as financial advisor or to act as joint financial
advisor on at least equal economic terms on any public or private
equity financing (collectively, “Future
Services”). If the
Company notifies Digital Offering of its intention to pursue an
activity that would enable Digital Offering to exercise its right
of first refusal to provide Future Services, Digital Offering shall
notify the Company of its election to provide such Future Services,
including notification of the compensation and other terms to which
Digital Offering claims to be entitled, within thirty (30) days of
written notice by the Company. In the event the Company engages
Digital Offering to provide such Future Services, Digital Offering
will be compensated on a basis to be mutually agreed upon. For the
avoidance of doubt, this right of first refusal shall not apply to
any transaction in which the Company does not engage a financial
advisor, investment bank, finder or similar
advisor.
5. Offering
Materials; Representations and Warranties.
(a) If
the proposed offering is a Regulation A offering, the Company
shall, as soon as practicable following the date hereof, prepare
and file with the Commission and the appropriate state securities
authorities, an Offering Statement on Form 1-A (the
“Offering
Statement”) under the
Securities Act, and an Offering Circular included therein (the
“Offering
Circular”) covering the
Securities to be sold in the Offering. The Offering Statement
(including the Offering Circular therein), and all amendments and
supplements thereto, will be in form satisfactory to Digital
Offering and counsel to Digital Offering and will contain such
interim and other financial statements and schedules as may be
required by the Securities Act and rules and regulations of the
Commission thereunder. Digital Offering and its counsel shall be
given the opportunity to make such review and investigation in
connection with the Offering Statement and the Company as they deem
desirable. Digital Offering and the Company shall mutually agree on
the use of proceeds of the Offering, which shall be described in
detail within the Offering Circular, it being further understood
and agreed that, except as may expressly approved by Digital
Offering, no proceeds from the Offering will be used to pay
outstanding loans owed by the Company to any Company officers,
directors or stockholders or to redeem any securities of the
Company.
(b) The
Offering Statement will include this Agreement as an exhibit to the
Offering Statement.
(c) You
hereby represent, warrant and agree with Digital Offering that upon
qualification of the Offering Statement, the Offering Circular will
comply with the Securities Act, Regulation A promulgated thereunder
and any other rules and regulations (as applicable) of the
Commission (the “Rules and
Regulations”), and the
Offering Circular and any and all authorized printed sales
literature or other sales materials prepared and authorized by the
Company for use with potential investors in connection with the
Offering (“Authorized Sales
Materials”), including
without limitation, all testing the waters material under Rule 255,
when used in conjunction with the Offering Circular, will not
contain any untrue statements of material facts or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein not misleading;
provided,
however,
that the foregoing provisions of this Section 5(c) will not
extend to such statements contained in or omitted from the Offering
Circular or Authorized Sales Materials as are primarily within the
knowledge of Digital Offering and are based upon information
furnished by Digital Offering in writing to the Company
specifically for inclusion therein.
(d) You
hereby authorize Digital Offering to transmit to the prospective
Investors the Offering Circular and Authorized Sales Materials. The
Company will advise Digital Offering immediately of the occurrence
of any event or any other change known to the Company which results
in the Offering Statement, including the Offering Circular, or the
Authorized Sales Materials containing an untrue statement of a
material fact or omitting to state a material fact required to be
stated therein or necessary to make the statements therein or
previously made, in light of the circumstances under which they
were made, not misleading.
(e) The
Company further agrees that Digital Offering may rely upon, and
shall be a third-party beneficiary of, the representations and
warranties and applicable covenants and agreements made to the
investors in connection with the Offering. In addition, immediately
prior to the initial closing of the Offering, the Company shall
execute and deliver to Digital Offering a representation letter in
form and substance reasonably satisfactory to Digital Offering (the
“Representation
Letter”) pursuant to
which it will make representations and warranties to Digital
Offering of the type that are customarily found in placement agency
and underwriting agreements for offerings like the Offering. Such
Representation Letter and the representations made therein are
incorporated into this Agreement by reference as if set forth in
full herein.
6. Conditions
to Initial Closing the Offering. The Offering shall be conditioned upon, among
other things, the following:
(a) Satisfactory
completion by Digital Offering of its due diligence investigation
and analysis of: (i) the Company’s business, prospects,
industry, financial condition and its arrangements with its
officers, directors, employees, affiliates, customers and
suppliers, (ii) the audited historical financial statements of the
Company as required by the SEC (including any relevant stub period
reviews), and (iii) the Company’s projected financial results
for the fiscal year ending December 31, 2018 and 2019;
(b) Approval
of the Offering by Digital Offering investment
committee;
(c) FINRA
shall not have finally determined that the compensation payable to
Digital Offering hereunder is unreasonable under FINRA Rule
5110;
(d) Neither
the Company nor any of its affiliates has, either prior to the
initial filing or the qualification date of the Offering Statement,
made any offer or sale of any securities which are required to be
“integrated” pursuant to the Securities Act or the
regulations thereunder with the offer and sale of the Securities
pursuant to the Offering Statement;
(e) The
Company maintaining a PCAOB registered firm of independent
certified public accountants acceptable to Digital Offering and the
Company, including, without limitation, the Company’s
existing auditor (which Digital Offering agrees is acceptable),
which will have responsibility for the preparation of the financial
statements and the financial exhibits to be included in the
Offering Statement, it being agreed that the Company will continue
to engage a PCAOB registered accounting firm of comparable quality
(as may be determined by the Company’s audit committee or
board of directors) for a period of at least three years after the
Closing so long as the Company is required to file reports with the
SEC during such period;
(f) The
Company maintaining a transfer agent that is FAST eligible for the
Company’s Securities reasonably acceptable to Digital
Offering and continuing to retain such transfer agent for a period
of two (2) years after the Closing;
7. Indemnification,
Contribution, and Confidentiality. The Company agrees to indemnify Digital Offering
and its controlling persons, representatives, and agents in
accordance with the indemnification provisions set forth in
Appendix I hereto, and the parties agree to the confidentiality
provisions of Appendix II hereto, all of which are incorporated
herein by reference. These provisions will apply regardless of
whether the Offering is consummated.
8. Governing
Law; Venue. This Agreement
shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts executed and to be
wholly performed therein without giving effect to its conflicts of
laws principles or rules. The Company and Digital Offering agree
that any dispute concerning this Agreement shall be resolved
exclusively through binding arbitration before FINRA pursuant to
its arbitration rules. Arbitration will be venued in Los Angeles
County or Orange County, California USA (the
“Agreed Forum”). Each of the Company and Digital Offering
agree that the Agreed Forum is not an “inconvenient
forum” for proceedings hereunder, and each hereby agree to
the personal jurisdiction of the Agreed Forum and that service of
process by mail to the address for such party as set forth in this
letter (or such other address as a party hereto shall notify the
other in writing) constitute full and valid service for such
proceedings.
9. Limitation
on Liability. Notwithstanding
any provision of this Agreement to the contrary, the Company agrees
that neither Digital Offering nor its affiliates, and the
respective officers, directors, employees, agents, and
representatives of Digital Offering, its affiliates and each other
person, if any, controlling Digital Offering or any of its
affiliates, shall have any liability (whether direct or indirect,
in contract or tort or otherwise) to the Company for or in
connection with the engagement and transaction described herein in
an amount excess of the actual fees paid to Digital Offering
hereunder.
10. Announcement
of Offering. If the Offering is
consummated, Digital Offering may, at its own expense, place a
customary announcement in such newspapers and periodicals as
Digital Offering may desire announcing the closing of the Offering,
the name of the Company, the securities issued and the gross
proceeds of the Offering. The parties agree that any such
announcement will be subject to approval by the Company prior to
dissemination by Digital Offering and that such approval will not
be unreasonably withheld.
11. Advice
to the Board. The Company
acknowledges that any advice given by us to you is solely for
benefit and use of the Board of Directors of the Company and may
not be used, reproduced, disseminated, quoted or referred to,
without our prior written consent.
12. Other
Engagements. Nothing in this engagement letter shall be
construed to limit the ability of Digital Offering or its
respective affiliates to pursue, investigate, analyze, invest in,
or engage in investment banking, financial advisory, or any other
business relationship with entities other than the Company,
notwithstanding that such entities may be engaged in a business
which is similar to or competitive with the business of the
Company, and notwithstanding that such entities may have actual or
potential operations, products, services, plans, ideas, customers
or supplies similar or identical to the Company’s, or may
have been identified by the Company as potential merger or
acquisition targets or potential candidates for some other business
combination, cooperation or relationship. The Company acknowledges
and agrees that it does not claim any proprietary interest in the
identity of any other entity in its industry or otherwise, and that
the identity of any such entity is not confidential information
under Appendix II of this engagement letter.
13. Entire
Agreement. This Agreement
constitutes the entire Agreement between the parties and supersedes
and cancels any and all prior or contemporaneous arrangements,
understandings and agreements, written or oral, between them
relating to the subject matter hereof.
14. Successors
and Assigns. The benefits of
this Agreement shall inure to the parities hereto, their respective
successors and assigns and to the indemnified parties hereunder and
their respective successors and assigns, and the obligations and
liabilities assumed in this Agreement shall be binding upon the
parties hereto and their respective successors and assigns.
Notwithstanding anything contained herein to the contrary, neither
Digital Offering nor the Company shall assign to an unaffiliated
third party any of its obligations hereunder.
15. Counterparts.
For the convenience of the parties,
this Agreement may be executed in any number of counterparts, each
of which shall be, and shall be deemed to be, an original
instrument, but all of which taken together shall constitute one
and the same Agreement. Such counterparts may be delivered by one
party to the other by facsimile, portable document format
(“PDF”) or other electronic transmission, and such
counterparts shall be valid for all purposes.
We look
forward to working with you toward the successful conclusion of
this engagement and developing a long-term relationship with the
Company.
Very
truly yours,
DIGITAL OFFERING LLC
By: /s/ Gordon
McBean
Name:
Gordon
McBean
Title:
CEO
Agreed
to and accepted as of
the
date first above written
MANUFACTURED HOUSING PROPERTIES INC.
By: /s/ Michael Z.
Anise
Name:
Michael
Z. Anise
Title:
CFO
APPENDIX I
INDEMNIFICATION AND CONTRIBUTION
Capitalized terms
used in this Appendix shall have the meanings ascribed to such
terms in the Agreement to which this Appendix is
attached.
The
Company agrees to indemnify and hold harmless Digital Offering and
its respective affiliates (as defined in Rule 405 under the
Securities Act of 1933, as amended) and their respective directors,
officers, employees, agents, including any and all Soliciting
Dealers, and controlling persons (Digital Offering and each such
person being an “Indemnified
Party”) from and against all losses, claims, damages
and liabilities (or actions, including shareholder actions, in
respect thereof), joint or several, to which such Indemnified Party
may become subject under any applicable federal or state law, or
otherwise, which are related to or result from the performance by
Digital Offering of the services contemplated by, or the engagement
of Digital Offering pursuant to, this Agreement, the breach by the
Company of any covenant, agreement or representation or warranty
contained in this Agreement, in the transaction documents for the
offering contemplated by this Agreement, or in the Representation
Letter and will promptly reimburse any Indemnified Party on demand
for all reasonable expenses (including reasonable counsel fees and
expenses) as they are incurred in connection with the investigation
of, preparation for or defense arising from any threatened or
pending claim, whether or not such Indemnified Party is a party and
whether or not such claim, action or proceeding is initiated or
brought by the Company. The Company will not be liable to any
Indemnified Party under the foregoing indemnification and
reimbursement provisions, (i) for any settlement by an Indemnified
Party effected without the Company’s prior written consent
(not to be unreasonably withheld); or (ii) to the extent that any
loss, claim, damage or liability is found in a final,
non-appealable judgment by a court of competent jurisdiction to
have resulted primarily from Digital Offering’s willful
misconduct or gross negligence. The Company also agrees that no
Indemnified Party shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Company or its
security holders or creditors related to or arising out of the
engagement of Digital Offering pursuant to, or the performance by
Digital Offering of the services contemplated by, this Agreement
except to the extent that any loss, claim, damage or liability is
found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted primarily from Digital
Offering’s willful misconduct or gross
negligence.
Promptly after
receipt by an Indemnified Party of notice of any intention or
threat to commence an action, suit or proceeding or notice of the
commencement of any action, suit or proceeding, such Indemnified
Party will, if a claim in respect thereof is to be made against the
Indemnified Party pursuant hereto, promptly notify the Company in
writing of the same. In case any such action is brought against any
Indemnified Party and such Indemnified Party notifies the Company
of the commencement thereof, the Company may elect to assume the
defense thereof, with counsel reasonably satisfactory to such
Indemnified Party, and an Indemnified Party may employ counsel to
participate in the defense of any such action provided, that the
employment of such counsel shall be at the Indemnified
Party’s own expense, unless (i) the employment of such
counsel has been authorized in writing by the Company, (ii) the
Indemnified Party has reasonably concluded (based upon advice of
counsel to the Indemnified Party) 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 Company, or that a
conflict or potential conflict exists (based upon advice of counsel
to the Indemnified Party) between the Indemnified Party and the
Company that makes it impossible or inadvisable for counsel to the
Indemnifying Party to conduct the defense of both the Company and
the Indemnified Party (in which case the Company will not have the
right to direct the defense of such action on behalf of the
Indemnified Party), or (iii) the Company 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 action, suit or proceeding, in each of which cases
the reasonable fees, disbursements and other charges of such
counsel will be at the expense of the Company; provided, further,
that in no event shall the Company be required to pay fees and
expenses for more than one firm of attorneys representing
Indemnified Parties unless the defense of one Indemnified Party is
unique from that of another Indemnified Party subject to the same
claim or action. Any failure or delay by an Indemnified Party to
give the notice referred to in this paragraph shall not affect such
Indemnified Party’s right to be indemnified hereunder, except
to the extent that such failure or delay causes actual harm to the
Company, or prejudices its ability to defend such action, suit or
proceeding on behalf of such Indemnified Party.
If the
indemnification provided for in this Agreement is for any reason
held unenforceable by an Indemnified Party, the Company agrees to
contribute to the losses, claims, damages and liabilities for which
such indemnification is held unenforceable (i) in such proportion
as is appropriate to reflect the relative benefits to the Company,
on the one hand, and Digital Offering on the other hand, of the
Offering as contemplated whether or not the Offering is consummated
or, (ii) if (but only if) the allocation provided for in clause (i)
is for any reason unenforceable, in such proportion as is
appropriate to reflect not only the relative benefits referred to
in clause (i) but also the relative fault of the Company, on the
one hand and Digital Offering, on the other hand, as well as any
other relevant equitable considerations. The Company agrees that
for the purposes of this paragraph the relative benefits to the
Company and Digital Offering of the Offering as contemplated shall
be deemed to be in the same proportion that the total value
received or contemplated to be received by the Company or its
shareholders, as the case may be, as a result of or in connection
with the Offering bear to the fees paid or to be paid to Digital
Offering under this Agreement. Notwithstanding the foregoing, the
Company expressly agrees that Digital Offering shall not be
required to contribute any amount in excess of the amount by which
fees paid to Digital Offering hereunder (excluding reimbursable
expenses), exceeds the amount of any damages which Digital Offering
has otherwise been required to pay.
The
Company agrees that without the prior written consent of Digital
Offering, which shall not be unreasonably withheld, it will not
settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding in respect of
which indemnification could be sought under the indemnification
provisions of this Agreement (in which Digital Offering or any
other Indemnified Party is an actual or potential party to such
claim, action or proceeding), unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Party
from all liability arising out of such claim, action or
proceeding.
In the
event that an Indemnified Party is requested or required to appear
as a witness in any action brought by or on behalf of or against
the Company in which such Indemnified Party is not named as a
defendant, the Company agrees to promptly reimburse Digital
Offering on a monthly basis for all expenses incurred by it in
connection with such Indemnified Party’s appearing and
preparing to appear as such a witness, including, without
limitation, the reasonable fees and disbursements of its legal
counsel.
If
multiple claims are brought with respect to at least one of which
indemnification is permitted under applicable law and provided for
under this Agreement, the Company agrees that any judgment or
arbitration award shall be conclusively deemed to be based on
claims as to which indemnification is permitted and provided for,
except to the extent the judgment or arbitrate award expressly
states that it, or any portion thereof, is based solely on a claim
as to which indemnification is not available.
APPENDIX II
INFORMATION TO BE SUPPLIED; CONFIDENTIALITY
Capitalized terms
used in this Appendix shall have the meanings ascribed to such
terms in the Agreement to which this Appendix is
attached.
In
connection with the activities of Digital Offering on behalf of the
Company as set forth in the engagement agreement to which this
Appendix is attached (the “Agreement”), the Company
will furnish Digital Offering with all financial and other
information regarding the Company that Digital Offering reasonably
believes appropriate to its engagement (all such information so
furnished by the Company, whether furnished before or after the
date of this Agreement, being referred to, collectively with the
Placement Materials, as the “Confidential
Information”). The Company will provide Digital Offering with
access to the officers, directors, employees, independent
accountants, legal counsel, and other advisors and consultants of
the Company. The Company recognizes and agrees that Digital
Offering (i) will use and rely primarily on the Confidential
Information and information available from generally recognized
public sources in performing the services contemplated by this
Agreement without independently verifying the Confidential
Information or such other information, (ii) does not assume
responsibility for the accuracy or completeness of the Confidential
Information or such other information, and (iii) will not make an
appraisal of any assets or liabilities owned or controlled by the
Company or its market competitors.
Digital
Offering will maintain the confidentiality of the Confidential
Information during the Term of this Agreement and following the
termination or expiration of the Term and, unless and until such
information shall have been made publicly available by the Company
or by others without breach of a confidentiality agreement, shall
disclose the Information only to its officers, employees, legal
counsel, and authorized representatives, as authorized by the
Company or as required by law or by order of a governmental
authority or court of competent jurisdiction. In the event that
Digital Offering is legally required to make disclosure of any of
the Confidential Information, Digital Offering will: (i) give
prompt notice to the Company prior to such disclosure, to the
extent that Digital Offering can practically do so, (ii) reasonably
assist the Company at the Company’s cost in seeking a
protective order or other relief from the disclosure of the
Confidential Information and (iii) if compelled to disclose
Confidential Information, limit such disclosure to only those
matters which it is compelled to disclose.
The
term “Confidential
Information” does not include information which (i) is
or becomes generally available to the public other than as a result
of an unauthorized disclosure thereof by Digital Offering or any
Investor; (ii) was available on a non-confidential basis prior to
its disclosure; or (iii) becomes available on a non-confidential
basis from a third party source who is not known to be under a
confidentiality obligation.
Notwithstanding the foregoing, Digital Offering, as a FINRA
Member Firm, shall be permitted to retain one copy of any
Confidential Information provided hereunder to the extent required
by its compliance procedures and may disclose such Confidential
Information to representatives of FINRA or the SEC, to the extent
required by applicable rules and regulations of such regulatory
bodies, without prior notice to the Company.
Nothing
in this Agreement shall be construed to limit the ability of
Digital Offering or its respective affiliates to pursue,
investigate, analyze, invest in, or engage in investment banking,
financial advisory or any other business relationship with entities
other than the Company, notwithstanding that such entities may be
engaged in a business which is similar to or competitive with the
business of the Company, and notwithstanding that such entities may
have actual or potential operations, products, services, plans,
ideas, customers or supplies similar or identical to the
Company’s, or may have been identified by the Company as
potential merger or acquisition targets or potential candidates for
some other business combination, cooperation or relationship. The
Company expressly acknowledges and agrees that it does not claim
any proprietary interest in the identity of any other entity in its
industry or otherwise, and that the identity of any such entity is
not Confidential Information for purposes hereof.
Dates Referenced Herein and Documents Incorporated by Reference
