EXHIBIT 1.1
1,200,000 SHARES OF COMMON STOCK
ACCESS INTEGRATED TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
New York, New York
October __, 2003
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Access Integrated Technologies, Inc., a Delaware corporation (the
"Company"), hereby confirms its agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC (the
"Underwriter") with respect to the sale by the Company, and the purchase by the
Underwriter, of 1,200,000 shares of the Company's Class A common stock, $.001
par value per share ("Common Stock") (the "Offering"). Such shares are
hereinafter referred to as the "Firm Securities." Upon your request, as provided
in Section 2(b) of this Agreement, the Company shall also issue and sell to the
Underwriter up to an additional 180,000 shares of Common Stock solely for the
purpose of covering over-allotments, if any. Such additional shares of Common
Stock are hereinafter referred to as the "Option Securities." The Firm
Securities and the Option Securities, if purchased, are hereinafter referred to
as the "Underwritten Securities."
The Company also agrees to sell to the Underwriter for nominal
consideration, warrants (the "Warrants") pursuant to a warrant agreement (the
"Warrant Agreement") for the purchase, during the period commencing six months
after the date of the Prospectus (as defined below) and expiring on the second
anniversary of the date of the Prospectus, of 120,000 shares of Common Stock,
subject to adjustment as provided in the Warrant Agreement (the "Warrant
Shares"), at an initial exercise price of $6.25 per share, subject to adjustment
as provided in the Warrant Agreement. The Underwritten Securities and the
Warrant Shares (collectively, the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to the Underwriter as of the date hereof, as follows:
(a) The Company has prepared and filed with the Securities
and Exchange Commission (the "Commission") a registration statement, and
amendments thereto, on Form SB-2 (File No. 333-107711, including the related
preliminary prospectus dated August 6, 2003 and any subsequent preliminary
prospectus subject to completion (a "Preliminary Prospectus"), for the
registration of the Securities, under the Securities Act of 1933, as amended
(the "Securities Act"), which registration statement and amendments have been
prepared by the Company in conformity with the requirements of the Securities
Act, and the rules and regulations (the "Regulations") of the Commission under
the Securities Act. The Company has complied with the conditions for the use of
Form SB-2. The Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the Underwriter and
will not file any other amendment thereto to which the Underwriter shall have
reasonably objected in writing after having been furnished with a copy thereof.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time that the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430(A) of the Regulations), is hereinafter called the "Registration Statement,"
and the form of prospectus, in the form first filed with the Commission pursuant
to Rule 424(b) of the Regulations, is hereinafter called the "Prospectus." The
Company may also file a related registration statement with the Commission
pursuant to Rule 462(b) of the Regulations for the purpose of registering
certain additional securities, which registration shall be effective upon filing
with the Commission. For purposes hereof, the "Rule 462 Registration Statement"
means any registration statement filed with the Commission pursuant to Rule
462(b) of the Regulations, including the Registration Statement and any
prospectus incorporated therein at the time such Registration Statement becomes
effective. For purposes hereof, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under either the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor, to the Company's knowledge,
any state regulatory authority has issued any order preventing or suspending the
use of any Preliminary Prospectus, the Registration Statement or the Prospectus
or any part of any thereof and no proceedings for a stop order suspending the
effectiveness of the Registration Statement has been instituted or are pending
or, to the Company's knowledge, threatened. Each of the Registration Statement
and the Prospectus, as amended, contained all statements required to be stated
therein and complied in all material respects with the requirements of the
Securities Act and the Rules and Regulations, and none of the Registration
Statement or the Prospectus, as amended, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in strict conformity with information furnished to
the Company in writing by or on behalf of the Underwriter expressly for use in
any Preliminary Prospectus, Registration Statement or the Prospectus or any
amendment thereof or supplement thereto (the "Underwriter's Information"). The
Company acknowledges that the Underwriter's Information shall include only such
written information that is contained under the caption "Underwriting" and on
the front cover page.
(c) When the Registration Statement or any amendment thereto
becomes effective and through the last to occur of the Closing Date (as defined
in Section 2(c), the Option Closing Date (as defined in Section 2(b), if any, or
the last date the Prospectus may be required to be delivered in connection with
sales by the Underwriter or a dealer, the Registration Statement and the
Prospectus will contain all statements required to be stated therein, and will
comply in all material respects with the requirements as to form of the
Securities Act and the Rules and Regulations. Neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in strict conformity with the
Underwriter's information.
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(d) If the Company has elected to rely on Rule 462(b) and
the Rule 462(b) Registration Statement has not been declared effective (i) the
Company has filed the Rule 462(b) Registration Statement in compliance with, and
that is effective upon filing pursuant to, Rule 462(b) and has received
confirmation of its receipt and (ii) the Company has given irrevocable
instructions for transmission of the applicable filing fee in connection with
the filing of the Rule 462(b) Registration Statement, in compliance with Rule
111 promulgated under the Securities Act or the Commission has received payment
of such filing fee.
(e) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its ownership or leasing of
any properties or the conduct of its business requires such qualification or
licensing, except where the failure to be so qualified or licensed would not
have a material adverse effect on the condition (financial or otherwise),
operations, business, prospects or results of operations of the Company (a
"Material Adverse Effect").
(f) The Company has all requisite corporate power and
authority, and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits (collectively, the
"Approvals") of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus, except where the failure to have such Approvals
would not have a Material Adverse Effect; the Company is and has been doing
business in compliance with all such Approvals and all federal, state and local
laws, rules and regulations, except where the failure to so comply would not
have a Material Adverse Effect; and the Company has not received any written
notice of proceedings relating to the revocation or modification of any
Approval. The disclosures in the Registration Statement concerning the effects
of federal, state and local laws, rules and regulations on the Company's
business as currently conducted are correct in all material respects and do not
omit to state a material fact necessary to make the statements contained therein
not misleading in light of the circumstances under which they were made.
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(g) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Registration Statement and the
Prospectus and will have the adjusted capitalization set forth therein on the
Closing Date based upon the assumptions set forth therein. The Company is not a
party to or otherwise bound by any instrument, agreement or other arrangement,
including, but not limited to, any voting trust agreement, stockholders'
agreement or other agreement or instrument, materially affecting the securities
or rights or obligations of securityholders of the Company or providing for any
of them to issue, sell, transfer or acquire any capital stock, rights, warrants,
options or other securities of the Company, except as set forth in the
Registration Statement and the Prospectus. The Securities and all other
securities issued or issuable pursuant to existing plans, agreements or
arrangements relating to the issuance of securities or outstanding options,
warrants, rights or other securities of the Company by the Company conform or,
when issued and paid for, will conform, in all material respects to all
statements with respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have been
offered and sold by the Company in compliance with or pursuant to exemptions
from registration under the Securities Act and applicable state securities law,
have been duly authorized and validly issued and are fully paid and
non-assessable and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any securityholders of the Company or similar contractual rights
granted by the Company. The Underwritten Securities have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable. The Warrants have been
duly authorized and, when issued, paid for and delivered in the manner
contemplated by the Warrant Agreement, will be validly issued and outstanding
obligations of the Company entitled to the benefits of the Warrant Agreement.
The Warrant Shares issuable upon exercise of the Warrants will, assuming payment
therefor as set forth in the Warrant Agreement, upon such issuances be duly
authorized, validly issued, fully paid and non-assessable, and the Company has
duly authorized and reserved for issuance of the Warrant Shares. The Securities
are not and will not be subject to any preemptive or other similar rights of any
stockholder of the Company under law or granted by the Company, under the law or
granted by the Company; all corporate action required to be taken for the
authorization, issue and sale of the Securities and, in the case of Warrant
Shares, reservation, has been duly and validly taken; and the certificates
representing the Securities will be in due and legally proper form. Upon the
issuance and delivery pursuant to the terms of this Agreement of the
Underwritten Securities to be sold by the Company hereunder, the Underwriters
will acquire validly issued and non-assessable Underwritten Securities free and
clear of any liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever (collectively,
the "Liens"), except for Liens created by the Underwriter or liens on the assets
of the Underwriter. Upon the issuance and delivery pursuant to the terms of the
Warrant Agreement, of the Warrants to be sold by the Company thereunder, the
Underwriter will acquire good and marketable title to the Warrants free and
clear of any Liens, except for Liens created by the Underwriter.
(h) The financial statements, including the related notes
and schedules of the Company included in the Registration Statement and the
Prospectus, as amended, fairly present in all material respects, the financial
position, income, changes in cash flow, changes in stockholder's equity and the
results of operations of the Company at the respective dates and for the
respective periods to which they apply and the as adjusted financial information
included in the Registration Statement and the Prospectus, as amended, presents
fairly and in all material respects, a basis consistent with that of the audited
financial statements included therein, what the Company's as adjusted
capitalization would have been for the periods and as of the dates to which they
apply after giving effect to the adjustments described therein and any quarterly
adjustments. Except as disclosed in the Prospectus, such financial statements
have been prepared in conformity with United States generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved. Except as disclosed in the Prospectus, there
has been no material adverse change or development involving a material adverse
change, in the condition, financial or otherwise, or in the financial position,
prospects, operation, business or results of operations of the Company taken as
a whole, whether or not arising in the ordinary course of business, since the
date of the financial statements included in the Registration Statement, the
Preliminary Prospectus, as amended, and the Prospectus; the outstanding debt,
the property, both tangible and intangible, and the business of the Company
conform in all material respects to the descriptions thereof contained in the
Registration Statement, the Preliminary Prospectus, as amended and the
Prospectus. Historical financial information set forth in the Preliminary
Prospectus, as amended, and Prospectus under the headings "Summary financial
information," "Selected historical and pro forma financial data,"
"Capitalization," and "Management's discussion and material analysis of
financial condition and results of operations," fairly presents, in all material
respects, on the basis stated in the Preliminary Prospectus, as amended and the
Prospectus, the information set forth therein and has been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Preliminary Prospectus and the Prospectus (except for any
quarterly adjustments).
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(i) The Company (i) has timely filed all federal, state,
local and foreign tax returns that it was required to file through the date
hereof or has timely requested extensions thereof, other than those filings
being contested in good faith, and has timely paid all federal, state, local and
foreign taxes shown to be due on such returns for which it is liable and has
timely furnished all information returns it was required to furnish; (ii) has
established adequate reserves for such taxes that are not due and payable or
that are being contested in good faith; and (iii) does not have any material tax
deficiency or claims outstanding, proposed or assessed against it.
(j) To the knowledge of the Company, the Company maintains
with insurers of recognized financial responsibility insurance policies and
surety bonds, including, but not limited to, general liability and property
insurance, which insures the Company and its employees, against, to the
knowledge of the Company, such losses and risks generally insured against by
comparable businesses in amounts that are prudent and customary for its
business. The Company has not (i) failed to give notice or present any insurance
claim with respect to any matter, including, but not limited to, the Company's
business, property or employees, under the insurance policy or surety bond in a
due and timely manner; (ii) had any disputes or claims against any underwriter
of such insurance policies or surety bonds or has failed to pay any premiums due
and payable thereunder; or (iii) failed to comply with all conditions contained
in such insurance policies and surety bonds wherein such failures or disputes
would have a Material Adverse Effect. To the knowledge of the Company, there are
no facts or circumstances under any such insurance policy or surety bond that
would relieve any insurer of its obligation to satisfy in full any valid claim
of the Company.
(k) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or, to the Company's knowledge,
threatened against (or circumstances that may reasonably be expected to give
rise to the same) or involving the Company, its properties or its business which
(i) questions the validity of the capital stock of the Company, this Agreement,
the Warrant Agreement or of any action taken or to be taken by the Company
pursuant to or in connection with this Agreement or the Warrant Agreement; (ii)
is required under the Securities Act to be disclosed in the Registration
Statement that is not so disclosed (and such proceedings as are summarized in
the Registration Statement are accurately summarized; or (iii) except as
disclosed in the Prospectus, could reasonably be expected to have a Material
Adverse Effect.
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(l) The Company has the corporate power and authority to
authorize, issue, deliver and sell the Securities, enter into this Agreement and
the Warrant Agreement and to consummate the transactions provided for in such
agreements. This Agreement has been duly authorized, executed and delivered by
the Company. This Agreement constitutes, and when the Company has duly executed
and delivered the Warrant Agreement (assuming the due execution and delivery
thereof by the Underwriter), the Warrant Agreement will constitute, a legal,
valid and binding agreement and obligation of the Company enforceable against
the Company in accordance with its respective terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally; (ii) as enforceability of any indemnification or
contribution provisions may be limited under applicable laws or the public
policies underlying such laws; and (iii) that the remedies of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought, clauses (i), (ii) and (iii), collectively,
the "Equitable Exceptions." None of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Warrant Agreement,
its performance hereunder and thereunder, or its consummation of the
transactions contemplated herein and therein conflicts with or will conflict
with or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any Lien upon any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (i) the certificate of
incorporation or by-laws of the Company; (ii) any material license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other material agreement or
instrument to which the Company is a party or is or may be bound or to which its
properties or assets (tangible or intangible) are or may be subject, or any
indebtedness; or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(m) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for performance by the Company of this
Agreement and the Warrant Agreement and the transactions contemplated hereby and
thereby, except such as (i) have been obtained or (ii) may be required under
state securities or blue sky laws or the Rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the Underwriter's
purchase and distribution of the Underwritten Securities and the Underwriter's
purchase of the Warrants or with respect to listing of the Underwritten
Securities or Warrant Shares on the American Stock Exchange.
(n) All agreements or contracts or other documents or copies
of executed agreements or contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which the Company
is currently bound or to which the Company's assets, properties or businesses
may be subject are in full force and effect, have been executed and delivered by
the Company and constitute legal, valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms
subject to the Equitable Exceptions. The descriptions in the Registration
Statement of agreements, contracts and other documents are accurate and fairly
present the information required to be shown with respect thereto by Form SB-2,
and there are no contracts or other documents that are required by the
Securities Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement that are not described or filed as
required, and the exhibits that have been filed are complete and correct copies
of the documents of which they purport to be copies (except for the absence of
certain schedules).
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(o) Subsequent to the applicable dates as of which
information is set forth in the Registration Statement and Prospectus, and
except as may otherwise be indicated or contemplated herein or therein, the
Company has not (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money; (ii) entered into any
transaction other than in the ordinary course of business; or (iii) declared or
paid any dividend or made any other distribution on or with respect to its
capital stock of any class, and there has not been any material adverse change
in or affecting the management, financial operations, prospects, or results of
operations of the Company.
(p) The Company is not in violation of its certificate of
incorporation or its by-laws and, except as disclosed in the Prospectus, to the
Company's knowledge, no default exists, and no event has occurred that with
notice or lapse of time, or both, would constitute a default in the due
performance and observance of any material term, covenant or condition of any
material license, contract, indenture, mortgage, installment sales agreement,
lease, deed of trust, voting trust agreement, stockholders agreement,
partnership agreement, note, loan or credit agreement, purchase order, or any
other material agreement or instrument evidencing an obligation for borrowed
money, or any other material agreement or instrument to which the Company is a
party or by which the Company or any of its properties is or may be otherwise
bound or that otherwise affects the property (tangible or intangible) of the
Company.
(q) The Company is in material compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours.
There are no pending investigations involving the Company by the U.S. Department
of Labor or any other governmental agency responsible for the enforcement of
such federal, state, local or foreign laws and regulations. There is no unfair
labor practice charge or complaint against either the Company pending before the
National Labor Relations Board or any strike, picketing, boycott, slowdown or
stoppage pending or, to the Company's knowledge, threatened against or involving
the Company. To the Company's knowledge, no representation question exists
respecting the employees of the Company, and no collective bargaining agreement
or modification thereof is currently being negotiated by the Company. To the
Company's knowledge, no grievance or arbitration proceeding is pending or
threatened under any expired or existing collective bargaining agreement of the
Company. No material labor dispute with the employees of the Company exists, or,
to the Company's knowledge, is imminent.
(r) Except as described in the Prospectus, the Company does
not maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan" or a
"multiemployer plan", as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute,
now or at any time previously, to a defined benefit plan, as defined in Section
3(35) of ERISA. No "accumulated funding deficiency" (as defined in Section 302
of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than
events with respect to which the 30-day notice under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan which could
reasonably be expected to have a Material Adverse Effect. No ERISA Plan (or any
trust created thereunder) has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code,
which could subject the Company to any tax penalty on prohibited transactions
and which has not adequately been corrected. Each ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), and ERISA as they relate to any
such ERISA Plan. Determination letters (if applicable) have been received from
the Internal Revenue Service with respect to each ERISA Plan that is intended to
comply with Code Section 401(a), stating that such ERISA Plan and the attendant
trust are qualified thereunder. The Company has never completely or partially
withdrawn from a "multiemployer plan."
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(s) Neither the Company nor, to the Company's knowledge, any
of its employees, directors, stockholders, affiliates (within the meaning of the
Rules and Regulations) of any of the foregoing, has taken or will take, directly
or indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(t) The Company owns or has the sufficient right to use,
free and clear of all Liens, all patents, trademarks, service marks, trade
secrets, trade names and copyrights, technology and licenses and rights used in
the conduct of its business as now conducted or proposed to be conducted without
infringement upon or otherwise acting adversely to the right or claimed right of
any person, corporation or other entity under or with respect to any of the
foregoing, other than any infringements or adverse actions that would not have a
Material Adverse Effect and, except as set forth in the Prospectus, as amended,
is not obligated or under any liability to make any material payment by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service ▇▇▇▇, trade name, copyright, know-how, technology
or other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise.
(u) The Company has taken reasonable measures to protect the
secrecy, confidentiality and value of its intellectual property in all material
aspects.
(v) The Company has good title to, or a valid and
enforceable leasehold estate in, all items of real and personal property stated
in the Prospectus, as amended, as owned or leased by it free and clear of all
material Liens, other than those referred to in the Registration Statement, the
Prospectus, as amended, and Liens for taxes not yet due and payable.
(w) Pricewaterhouse Coopers LLP and BDO ▇▇▇▇▇▇▇, LLP, whose
reports are filed with the Commission as a part of the Registration Statement,
are independent certified public accountants of the Company as required by the
Securities Act and the Rules and Regulations.
(x) The Company has caused to be duly executed and delivered
agreements, in such form as the Company and Underwriter have heretofore mutually
agreed (collectively, the "Lock-up Agreements"), pursuant to which the Company's
officers, directors, stockholders and substantially all persons holding options,
warrants, rights or other securities of the Company has agreed not to, directly
or indirectly, offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate or otherwise encumber or dispose of any shares of
Common Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Regulations or otherwise) or dispose of any
beneficial interest therein for a period of 18 months following the date hereof
without the prior written consent of the Underwriter. However, such period will
be 12 months for certain stockholders, as set forth in the Prospectus.
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(y) Except as set forth in the Prospectus, there are no
claims, payments, issuances, arrangements or understandings, whether oral or
written, for services in the nature of a finder's or origination fee payable by
the Company with respect to the sale of the Securities hereunder or any other
arrangements, agreements, understandings, payments or issuance with respect to
the Company, or, to its knowledge, any of its officers, directors, stockholders,
employees or affiliates that will affect the Underwriter's compensation. Except
as contemplated hereby, since the inception of the Company, no compensation has
been paid by the Company to or on behalf of any member of the NASD, or any
affiliate or employee thereof, in connection with any public offering by the
Company of the Company's securities.
(z) Intentionally omitted.
(aa) The Underwritten Securities and Warrant Shares have
been approved for trading, subject to official notice of issuance, on the
American Stock Exchange, and the Company has received no notice of any
de-listing procedures.
(bb) Neither the Company, nor, to its knowledge, any of its
officers, employees, agents or any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who, to its knowledge, was, is, or may be in a position to help or hinder the
business of the Company (or assist the Company in connection with any actual or
proposed transaction) that (i) subjects the Company or any other such person to
any material damage or penalty in any criminal or governmental litigation or
proceeding (domestic or foreign); (ii) if not given in the past, would have had
a Material Adverse Effect; or (iii) if not continued in the future, would
materially adversely affect the assets, business, operations or prospects of the
Company. The Company believes that its internal accounting controls are
sufficient to enable the Company to comply with the Foreign Corrupt Practices
Act of 1977, as amended.
(cc) Except as set forth in the Prospectus, as amended, to
the Company's knowledge, no officer, director or stockholder of the Company, or
any "affiliate" or "associate" (as these terms are defined in Rule 405
promulgated under the Rules and Regulations) of any of the foregoing persons or
entities has or has had, either directly or indirectly, (i) a material interest
in any person or entity that (A) furnishes or sells services or products that
are furnished or sold or are proposed to be furnished or sold by the Company, or
(B) purchases from or sells or furnishes to the Company any goods or services;
or (ii) a material beneficial interest in any contract or agreement to which the
Company is a party or by which it may be bound or affected. Except as set forth
in the Prospectus, as amended, under "Related party transactions," there are no
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director or stockholder of the Company, or any
partner, affiliate or associate of any of the foregoing persons or entities
required to be disclosed therein that have not been thus disclosed.
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(dd) Intentionally omitted.
(ee) The minute books of the Company have been made
available to the Underwriter and its counsel (the "Underwriter's Counsel"),
contain a summary of meetings and material actions of the directors and
stockholders of the Company since the time of its incorporation, and reflect all
transactions referred to in such minutes accurately.
(ff) Except and to the extent described in the Prospectus,
as amended, or unless waived, no holders of any securities of the Company or of
any options, warrants or other convertible or exchangeable securities of the
Company have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
or to require the Company to file a registration statement under the Securities
Act and no person or entity holds any anti-dilution rights with respect to any
securities of the Company.
(gg) Except as described in the Prospectus, the Company is
not aware of any bankruptcy, labor disturbance or other event affecting any of
its trademark licensees, principal suppliers, major clients or customers which
is reasonably likely to have a Material Adverse Effect.
(hh) The Company has not been notified nor is otherwise
aware that it is liable, or is considered liable, under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
any similar law ("Environmental Laws"). To the Company's knowledge, the Company
is in compliance with all applicable existing Environmental Laws, except for
such instances of non-compliance that would not have a Material Adverse Effect.
The term "Hazardous Material" means (i) any "hazardous substance" as defined by
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended; (ii) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act, as amended; (iii) any petroleum or petroleum
product; (iv) any polychlorinated biphenyl; and (v) any pollutant or contaminant
or hazardous, dangerous or toxic chemical, material, waste or substance
regulation under or within the meaning of any other Environmental Laws. Except
as described in the Prospectus, to the Company's knowledge: (i) there has been
no storage, disposal, generation, transportation, handling or treatment of
Hazardous Material by the Company (or to the knowledge of the Company, any of
its predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or that require
remedial action that has not been taken, under any applicable law, ordinance,
rule, regulation, order, judgment, decree or permit, except for such violations
and failures to take remedial action that would not result in, singularly or in
the aggregate, a Material Adverse Effect; and (ii) there has been no material
spill, discharge, leak, emission, injection, escape, dumping or release of any
kind onto such property or into the environment surrounding such property by the
Company of any Hazardous Materials, except for such spills, discharges, leaks,
emissions, injections, escapes, dumping or releases that are in compliance with
Environmental Laws or would not result in, individually or in the aggregate, a
Material Adverse Effect.
(ii) The Company is not an "investment company," a company
controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended.
10
(jj) None of the proceeds of the sale of the Underwritten
Securities or Warrants will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness that was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the
Underwritten Securities or Warrants to be considered a "purpose credit" within
the meanings of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve Board.
2. Purchase by the Underwriters; Delivery and Payment.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, and subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees to purchase from the Company, 1,200,000
shares of Common Stock, at the initial public offering price less discounts and
commissions not in excess of nine (9%) of the public offering price.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, and subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase all or any part of an additional 180,000 shares of
Common Stock at the initial public offering price, less the underwriting
discounts and commissions as set forth on the cover page of the Prospectus. The
option granted hereby will expire 30 days after (i) the date the Registration
Statement becomes effective, if the Company has elected not to rely on Rule 430A
under the Regulations, or (ii) the date of this Agreement if the Company has
elected to rely upon Rule 430A under the Rules and Regulations (or if such 30th
day shall be a Saturday, Sunday or holiday, on the next day thereafter when the
American Stock Exchange is open for trading), and may be exercised in whole or
in part from time to time only for the purpose of covering over-allotments that
may be made in connection with the offering and distribution of the Firm
Securities upon notice in writing or by telephone (confirmed in writing) by the
Underwriter to the Company setting forth the number of Option Securities as to
which the Underwriter is then exercising the option and the time and date of
payment and delivery for any such Option Securities. Upon exercise of the option
as provided herein, the Company shall become obligated to sell to the
Underwriter and subject to the terms and conditions herein set forth, the
Underwriter shall become obligated to purchase from the Company that number of
Option Securities then being purchased. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Underwriter, but shall not be
earlier than two nor later than five full business days after the exercise of
said option, nor in any event prior to the Closing Date, as hereinafter defined,
unless otherwise agreed upon by the Underwriter and the Company. The Underwriter
shall not be under any obligation to purchase any of the Option Securities prior
to the exercise of such option. No Option Securities shall be delivered unless
the Firm Securities shall be simultaneously delivered or shall theretofore have
been delivered as herein provided.
11
(c) Payment of the purchase price for, and delivery of the
certificates for, the Firm Securities shall be made at the offices of the
Underwriter, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, or at such other
place as shall be agreed upon by the Underwriter and the Company. Such delivery
and payment shall be made at 10:00 a.m. (New York City time) on _______________,
2003 or at such other time and date as shall be agreed upon by the Underwriter
and the Company (such time and date of payment and delivery being herein called
the "Closing Date"). In addition, in the event that any or all of the Option
Securities are purchased by the Underwriter, payment of the purchase price for,
and delivery of certificates for, such Option Securities shall be made at the
above mentioned offices of the Underwriter or at such other place as shall be
agreed upon by the Underwriter and the Company on each Option Closing Date as
specified in the notice from the Underwriter to the Company. Delivery of the
certificates for the Firm Securities and Option Securities, if any, shall be
made to the Underwriter against payment by or on behalf of the Underwriter of
the purchase price for the Firm Securities and the Option Securities, if any, by
wire transfer, certified or official bank check or checks drawn upon or by a New
York Clearing House Bank and payable in same-day funds to the order of the
Company, such payment to be net of all amounts owed to the Underwriter under the
terms of this Agreement upon such date of payment including the underwriting
discount net non-accountable expenses and any additional amounts owed under
Section 5 of this Agreement and such other amounts as the Company and
Underwriter may agree. Certificates for the Underwritten Securities shall be in
definitive, registered form, shall bear no restrictive legends and shall be in
such denominations and registered in such names as the Underwriter may request
in writing at least two business days prior to the Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the Underwritten
Securities shall be made available to the Underwriter at such office or such
other place as the Underwriter may designate for inspection, checking and
packaging at least one business day prior to the Closing Date or the relevant
Option Closing Date, as the case may be. Notwithstanding the foregoing, the
Underwritten Securities may be delivered via electronic transfer by the
Depository Trust Company or an affiliate thereof.
(d) On the Closing Date, the Company shall issue and sell to
the Underwriter and/or to bona fide officers of the Underwriter Warrants to
purchase an aggregate of 120,000 shares of Common Stock at a purchase price of
$.001 per warrant. The Warrants shall be exercisable for a period of four years
and shall not become exercisable until twelve (12) months from the date of the
Prospectus at a price equal to 125% of the initial public offering price of the
Underwritten Securities. The Warrant Agreement and form of Warrant shall be
substantially in the form filed as Exhibit 4.1 to the Registration Statement.
Payment for the Warrants shall be made by the Underwriter to or upon the order
of the Company on the Closing Date.
3. Public Offering of the Underwritten Securities. As soon
after the effective time of the Registration Statement as the Underwriter deems
advisable, the Underwriter shall make a public offering of the Underwritten
Securities (other than to residents of any jurisdiction in which the
qualification of the Underwritten Securities is required and has not become
effective) at the price and upon the other terms set forth in the Prospectus.
The Underwriter may from time to time increase or decrease the public offering
price after the distribution of the Underwritten Securities has been completed
to such extent as the Underwriter in its sole discretion deems advisable. The
Underwriter may enter into one or more agreements as the Underwriter, in its
sole discretion, deem advisable with one or more broker-dealers who shall act as
selected dealers in connection with such public offering.
12
4. Covenants and Agreements of the Company. The Company
covenants and agrees with the Underwriter as follows:
(a) The Company shall use its reasonable best efforts to
cause the Registration Statement and any amendments thereto, if not effective at
the time of execution of this Agreement, to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Securities Act or
Exchange Act during any time that a prospectus relating to the securities is
required to be delivered under the Securities Act of which the Underwriter and
Underwriter's Counsel shall not previously have been advised and furnished with
a copy a reasonable period of time prior to its proposed filing, or to which the
Underwriter shall have reasonably objected or which is not in compliance with
the Securities Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective and,
if the provisions of Rule 430A promulgated under the Securities Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the Registration Statement becomes
effective; (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding, suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose; (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose; (iv) of the receipt of any comments from the
Commission; and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. The Company will use its reasonable best efforts to
prevent the issuance of any stop or suspension order and if the Commission or
any state securities commission authority shall enter a stop order or suspend
such qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting or withdrawal of such order or suspension.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable, pursuant to Rule 424(b)(4)) on or before the date
it is required to be filed under the Securities Act and the Regulations.
(d) The Company shall, in cooperation with the Underwriter,
at or prior to the time the Registration Statement becomes effective, arrange
for the qualification of the Securities for offering and sale under the
securities or Blue Sky laws of such jurisdictions as the Underwriter may
designate to permit the continuance of sales and dealings therein for as long as
may be reasonably necessary to complete the distribution contemplated hereby and
shall make such applications, file such documents and furnish such information
as may reasonably be required for such purpose; provided, however, the Company
shall not be required to qualify as a foreign corporation, subject itself to
taxation or file a general consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Underwriter agrees that such action is not at the
time necessary or advisable, use all reasonable efforts to file and make such
statements or reports at such times as are or may reasonably be required by the
laws of such jurisdiction to continue such qualification.
13
(e) During the time when a Prospectus is required to be
delivered under the Securities Act, the Company shall comply with all
requirements imposed upon it by the Securities Act and the Exchange Act, as now
and hereafter amended, and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Securities Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or Underwriter's Counsel, the Prospectus, as then amended or
supplemented, would include an untrue statement of a material fact or omit to
state any 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, or if it is necessary at any time to amend the Prospectus
to comply with the Securities Act or the Rules and Regulations, the Company will
notify the Underwriter promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the
Securities Act that corrects such statement or omission or effects such
compliance, each such amendment or supplement to be satisfactory to
Underwriter's Counsel, and the Company will furnish to, or at the direction of,
the Underwriter copies of such amendment or supplement as soon as available and
in such quantities as the Underwriter may request.
(f) As soon as practicable, but in any event not later than
45 days after the end of the 12-month period beginning on the first day after
the end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (90 days in the event that the end of such
fiscal quarter is also the end of the Company's fiscal year) the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Regulations, and to the Underwriter, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Securities Act and Rule 158(a) of the
Regulations, which statement need not be audited unless required by the
Securities Act.
(g) During the three-year period commencing on the date
hereof, the Company will furnish to its stockholders (i) as soon as practicable,
but in any event not later than 120 days after the last day of each annual
fiscal period, its audited statements of operations, stockholders' equity and
cash flows for such period and its audited balance sheet as of the end of such
period as to which the Company's independent accountants have rendered an
opinion; and (ii) as soon as practicable, but in any event not later than 60
days after each of the first three quarterly fiscal periods, its unaudited
statements of operations, stockholders' equity and cash flows, for such period
and its unaudited balance sheet as of the end of such period. In addition,
during the three-year period commencing on the date hereof, the Company will
deliver to the Underwriter:
(1) concurrently with furnishing such quarterly reports to
its stockholders, summary financial information of the Company, together with a
letter from the Company's President or Chief Executive Officer, for each quarter
in the form furnished to the Company's stockholders and certified by the
Company's principal financial or accounting officer;
(2) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company at the end of the preceding fiscal
year, together with statements of operations, stockholders' equity and cash
flows of the Company for such fiscal year, accompanied by a copy of the report
thereon of the Company's independent certified public accountants;
14
(3) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(4) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD or any
securities exchange;
(5) within a reasonable amount of time prior to its release,
every press release and every material news item or article of interest to the
financial community with respect to the Company or its affairs which was
released or prepared by or on behalf of the Company; provided, however, that the
Underwriter will not use or disclose any such information prior to its release
and will comply with all applicable securities law requirements in respect
thereto, including Regulation F-D; and
(6) any additional information of a public nature concerning
the Company (and any future subsidiaries) or its businesses which the
Underwriter may reasonably request.
During such three-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries are required
to be consolidated under GAAP, and will be accompanied by similar financial
statements for any significant subsidiary that is not so consolidated.
(h) The Company will maintain a transfer agent for the
Common Stock.
(i) The Company will furnish to the Underwriter or on the
Underwriter's order, without charge, at such place as the Underwriter may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriter may reasonably
request.
(j) On or before the effective date of the Registration
Statement, the Company shall provide the Underwriter with true copies of the
Lock-up Agreements duly executed and delivered by the Company's officers,
directors, stockholders and persons holding warrants, options, rights or other
securities of the Company.
(k) Neither the Company, nor any of its officers, directors,
nor any of their respective affiliates (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or which
might reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale
of the Shares in substantially the manner, and subject to the conditions, set
forth under "Use of proceeds" in the Prospectus. No portion of the net proceeds
will be used, directly or indirectly, to acquire any securities issued by the
Company.
15
(m) The Company shall, until December 31, 2006, timely file
all such reports, forms or other documents as may be required from time to time,
under the Securities Act, the Exchange Act and the Rules and Regulations, and
all such reports, forms and documents filed will comply as to form and substance
with the applicable requirements under the Securities Act, the Exchange Act and
the Rules and Regulations.
(n) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two full business days prior thereto, a
copy of the latest available unaudited interim financial statements of the
Company (which in no event shall be as of a date more than 30 days prior to the
date of the Registration Statement) that have been read by the Company's
independent public accountants, as stated in their letters to be furnished
pursuant to Section 6(j) hereof. The foregoing shall be kept confidential by the
Underwriter.
(o) The Company shall use its reasonable best efforts to
maintain the American Stock Exchange listing of the Common Stock to the extent
outstanding.
(p) For a period of two years from the Closing Date, the
Company shall cause to be furnished to the Underwriter directly from the
Company's transfer agent, at the Company's sole expense, consolidated transfer
sheets relating to the Common Stock. Such consolidated transfer sheets shall be
furnished to the Underwriter daily for 60 days following the Closing Date, and
weekly beginning on the 61st day following the Closing Date.
(q) Within 30 days from the effective date of the
Registration Statement, take all necessary and appropriate actions to be
included in Standard and Poor's Corporation descriptions and endeavor to
continue such inclusion for a period of not less than five years from the
effective date of the Registration Statement.
(r) Except as contemplated by the Warrant Agreement, without
the consent of the Underwriter, the Company hereby agrees that it will not for a
period of six (6) months from the effective date of the Registration Statement,
adopt or propose to adopt any employee, officer, director, consultant or
compensation plan or arrangement permitting (i) the grant, issue, sale or entry
into any agreement to grant, issue or sell any option, warrant or other contract
right at an exercise price that is less than the fair market value on the date
of grant or sale except for up to 600,000 shares of Common Stock issuable upon
exercise of stock options granted pursuant to the Company's 2000 Stock Option
Plan as of the effective date of the Registration Statement which have an
exercise price below the initial public offering price (provided, that the
holders of such options shall be subject to the terms of the Lock-up
Agreements); (ii) the maximum number of shares of Common Stock or other
securities of the Company purchasable at any time pursuant to options or
warrants issued by the Company to exceed 1,718,243 shares; (iii) the payment for
such securities with any form of consideration other than cash; or (iv) the
existence of stock appreciation rights, phantom options or similar arrangements.
(s) Until the completion of the distribution of the
Underwritten Securities, if any, the Company shall not without the prior written
consent of the Underwriter and Underwriter's Counsel, issue, directly or
indirectly, any press release or other communication or hold any press
conference with respect to the Company or its activities or the Offering, other
than releases issued in the ordinary course of the Company's business consistent
with past practices with respect to the Company's operations that have been
approved by Underwriter's Counsel.
16
(t) For a period equal to the lesser of (i) seven years from
the date hereof and (ii) the resale to the public of the Warrant Shares, the
Company will not take any action or actions that would prevent or disqualify the
use by the Company of Form S-1, Form SB-2 or Form S-3 (or other appropriate
forms) for the registration under the Securities Act of the Warrant Shares.
(u) For a period of two years following the Closing Date,
the Company will permit a designee of the Underwriter to observe meetings of the
Company's board of directors and shall provide to such designee, at the same
time provided to the members of the Company's board of directors, all notices,
minutes, documents, information and other materials generally provided to the
members of the Company's board of directors; provided, however, that such
designee of the Underwriter will agree in writing to be bound by such duties of
confidentiality, care and loyalty as if he were a member of the Company's board
of directors. The Company will reimburse the designee directly for reasonable
out-of-pocket expenses incurred in attending board meetings, including, but not
limited to, expenses for food, transportation and lodging, and shall pay that
designee the same cash attendance fee (if any) that the Company pays to its
outside directors. During such two-year period, the Company will hold no less
than two formal, in person meetings of its board of directors each year.
(v) Prior to the 90th day after the Closing Date, the
Company will provide the Underwriter and its designees with five sets of bound
volumes of the transaction documents relating to the Offering, in form and
substance reasonably satisfactory to the Underwriter.
(w) For the period of 12 months subsequent to the Closing
Date, the Company will retain the Underwriter in an investment banking advisory
capacity and the Company will pay the Underwriter as consideration for such
advisory services a fee of $4167 per month.
(x) Prior to the Closing Date, the Company will deliver to
the Underwriter a reasonably detailed budget covering the period from the
Closing Date to the end of the Company's first fiscal year following the Closing
Date. In addition, during each of the next two succeeding fiscal years, the
Company will provide to the Underwriter, not less than 45 days prior to the
beginning of such fiscal year, a reasonably detailed budget covering such fiscal
year approved by the Board of Directors. For each budget period, the Company
will also provide to the Underwriter financial statements prepared in sufficient
detail so as to allow comparison to the budgets.
17
5. Payment of Expenses and Other Fees.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not payable by the Closing Date)
all expenses and fees (other than fees of Underwriter's Counsel, except as
provided in clause (v) below) incident to the performance of the obligations of
the Company under this Agreement and the Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company; (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement, each Preliminary Prospectus, the
Prospectus and any amendments and supplements thereto, and the printing, mailing
(including the payment of postage with respect thereto) and delivery of this
Agreement, the Selected Dealer Agreements, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriter and such
dealers as the Underwriter may reasonably request; (iii) the printing,
engraving, issuance and delivery of the Securities, including, but not limited
to, (A) the purchase from the Company of the Underwritten Securities by the
Underwriters, (B) the purchase from the Company of the Warrants by the
Underwriter, (C) the consummation by the Company of any of its obligations under
this Agreement and the Warrant Agreement and (D) the resale of the Underwritten
Securities by the Underwriters in connection with the distribution contemplated
hereby; (iv) any qualification of the Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such securities
under legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum" and the "Supplemental Blue Sky Memorandum,"
and the reasonable fees and disbursements of counsel incurred in connection
therewith; (v) the reasonable expenses of underwriter's counsel up to $25,000
(excluding reasonable expenses of such counsel in connection with state
securities law filings) all of which have already been paid; (vi) reasonable
advertising costs and expenses, including, but not limited to, costs and
expenses in connection with the "road show," information the reasonable meetings
and presentations (including reasonable travel and hotel expenses of the
Underwriter), up to five copies of bound volumes, prospectus memorabilia and
expenses relating to "tomb-stone" advertisements, which expenses shall not
exceed $5,000; (vii) reasonable costs and expenses in connection with due
diligence investigations by the Company, including, but not limited to, the
reasonable fees of any independent counsel or consultant retained by the
Company; (viii) reasonable fees and expenses of the transfer agent and
registrar; (ix) the fees payable to the Commission and the NASD; and (x) the
fees and expenses incurred in connection with the inclusion of the Underwritten
Securities and Warrant Shares on the American Stock Exchange, or any other
exchange.
(b) The Company agrees that, in addition to the expenses
payable pursuant to Section 5(a), it will pay to the Underwriter on the Closing
Date by certified or bank cashier's check or, at the Underwriter's election, by
deduction from the proceeds of the Offering, a non-accountable expense allowance
equal to 2% of the gross proceeds received by the Company from the sale of the
Firm Securities, net of $50,000 that has already been paid by the Company. In
the event the Underwriter elects to exercise the over-allotment option described
in Section 2 hereof, the Company further agrees to pay to the Underwriter, on
each Option Closing Date, by certified or bank cashier's check or, at the
Underwriter's election, by deduction from the proceeds of the Offering, a
non-accountable expense allowance equal to 2% of the gross proceeds received by
the Company from the sale of the Option Securities on such Option Closing Date.
(d) The Company agrees that all payments and reimbursements
due pursuant to this Section 5 will be promptly and fully made. If the Company
shall fail to promptly and fully pay all amounts due pursuant to this Section 5,
the Company shall be liable to the Underwriter for all attorneys' fees and costs
incurred in connection with the collection of such amounts.
18
(e) As set forth in the Prospectus, the Company agrees to
grant the Underwriter, for two years after the effective date of the
Registration Statement, the right of first refusal to act as lead manager with
respect to any proposed underwritten public distribution of the Company's equity
securities involving gross proceeds of $25 million or less (unless such
distribution is to be lead managed by a major-bracket underwriting firm, in
which event, the Underwriter shall have the right to participate subject to the
terms set forth below, as a co-manager), and to be a syndicate member with
respect to such distributions involving gross proceeds in excess of $25 million.
If (and only if) the Company engages the Underwriter for transactions described
in the Prospectus, it agrees to pay a success-based fee, as, to the extent and
in an amount set forth in such Prospectus.
In the event, during the two (2) year period after the
effective date of the Registration Statement, the Company receives an offer (the
"Offer") from a broker/dealer to act as lead manager or syndicate member of any
proposed underwritten public offering of the Company's equity securities (the
"Proposed Public Offering"), the Company shall notify (the "Notification") the
Underwriter in writing of the terms of the Offer within three (3) business days
of its receipt of the Offer. In the event the Underwriter does not agree in
writing, within twenty (20) days of its receipt of the Notification, to serve as
lead manager or syndicate manager (as the case may be) of the Proposed Public
Offering on substantially the same terms as set forth in the Notification (the
"Acceptance"), the Underwriter's right of first refusal shall terminate and the
Company shall be free to accept the Offer. In the event the Underwriter notifies
the Company of the Acceptance within the time period set forth above, the
Underwriter shall serve as lead manager, co-manager or syndicate member (as the
case may be) of the Proposed Public Offering.
6. Conditions to the Underwriter's Obligations. The
obligations of the Underwriter hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they had been made on and as of the Closing Date or each Option Closing Date,
as the case may be (it being understood that any failure of the Company's
representations and warranties to be accurate on an Option Closing Date shall
not affect the Closing that occurred on the Closing Date if such representations
and warranties were then accurate); the accuracy on and as of the Closing Date
or Option Closing Date, if any, of the statements of the officers of the Company
made on certificates delivered pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option Closing
Date, if any, of its covenants and obligations hereunder and to the following
further conditions:
(a) The Registration Statement shall have become effective
not later than 5:00 p.m., New York time, on the date hereof or such later date
and time as shall be approved in writing by the Underwriter, and, at the Closing
Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriter's Counsel. If the Company has elected to rely upon
Rule 430A of the Regulations, the price of the Securities and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission for
filing pursuant to Rule 424(b) of the Regulations within the prescribed time
period, and prior to the Closing Date the Company shall have provided evidence
satisfactory to the Underwriter of such timely filing, or a post-effective
amendment providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A of the Regulations.
19
(b) No order suspending the sale of the Securities in any
jurisdiction shall have been issued on either the Closing Date or the relevant
Option Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall, to the knowledge of the Underwriter, be threatened.
(c) At Closing Date, the Underwriter shall have received the
opinion of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to the Company (the "Company's
Counsel"), dated the Closing Date, addressed to the Underwriter and in form and
substance reasonably satisfactory to Underwriter's Counsel, substantially to the
effect that:
(1) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware; and (B) has the corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus; without
investigation, at the date of this opinion letter, there is no action or
proceeding pending before any court, governmental agency or arbitrator, or
overtly threatened in writing against the Company that seeks to enjoin the
performance or affect the enforceability of this Agreement or the issuance and
sale of shares of Common Stock hereunder;
(2) the Company's authorized capitalization is as set forth
in the Prospectus or any amendment or supplement thereto, under the caption
"Capitalization," (except for subsequent issuances, if any, pursuant to this
Agreement or employee benefit plans, or the exercise of convertible securities
or options referred to in the Prospectus). The Securities and all other
securities issued or issuable by the Company conform, or when issued and paid
for, will conform in all material respects to the descriptions thereof with
respect thereto contained in the Registration Statement and the Prospectus. All
issued and outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable. To such counsel's
knowledge, none of such securities was issued in violation of preemptive rights
of any holders of any security of the Company. The Securities to be sold by the
Company hereunder and under the Warrant Agreement, to such Counsel's knowledge,
are not and will not be subject to any preemptive rights of any stockholder,
have been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof and thereof, will be validly issued, fully paid and
non-assessable; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been taken; the form of certificate used by
the Company to represent the Securities complies in all material respects with
any applicable requirement of the General Corporation Law of the State of
Delaware, the Company's Certificate of Incorporation and By-Laws;
(3) the Registration Statement shall have become effective
under the Securities Act, and, if applicable, filing of any pricing information
has been timely made in the appropriate form under Rule 430A, and, to the
knowledge of the Company's Counsel's, no stop order suspending the use of the
Registration Statement or the Prospectus, as amended, or any part of any thereof
or suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are pending or, to
such Counsel's knowledge, threatened or contemplated under the Securities Act;
(4) each of any Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements thereto (other
than the financial statements and other financial and statistical data included
therein, as to which no opinion need be rendered) complies as to form in all
material respects with the requirements of the Securities Act and the
Regulations;
20
(5) to the knowledge of Company's Counsel, (A) there are no
agreements, contracts or other documents required by the Securities Act to be
described in the Registration Statement and the Prospectus and filed as exhibits
to the Registration Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits thereto; (B) the descriptions
in the Registration Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company is a party or by
which it is otherwise bound, including any document to which the Company is a
party or by which it is otherwise bound, incorporated by reference into the
Prospectus and any supplement or amendment thereto, are correct in all material
respects; and (C) without investigation, at the date of this opinion letter,
there is no action or proceeding pending before any court, governmental agency
or arbitrator, or overtly threatened in writing against the Company that seeks
to enjoin the performance or affect the enforceability of this Agreement or the
issuance and sale of shares of Common Stock hereunder;
(6) the Company has the corporate power and authority to
enter into each of this Agreement and the Warrant Agreement and to consummate
the transactions provided for herein and therein; and each of this Agreement and
the Warrant Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement and the Warrant Agreement, constitutes a legal,
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by general
equitable principles, bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting creditors' rights
generally, except that the remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought and
except as to those provisions relating to indemnity or contribution for
liabilities arising under the Act, as to which no opinion need be expressed; and
none of the Company's execution or delivery of this Agreement and the Warrant
Agreement, its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, conflicts with or will conflict
with or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company, except as
disclosed in the Prospectus, pursuant to the terms of, (A) the certificate of
incorporation or by-laws of the Company; (B) to our knowledge, the express terms
of any agreement or instrument filed as an exhibit to the Registration
Statement; or (C) a New York or federal statute, judgment, decree, order, rule
or regulation applicable to the Company of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any of
its respective activities or properties;
(7) no consent, approval, authorization or order of, and no
filing with, any court, regulatory body, governmental agency or other body
(other than such as may be required under Blue Sky laws or Rules of the NASD, as
to which no opinion need be rendered) is required to be made or obtained by the
Company in connection with the issuance of the Underwritten Securities, the
issuance of the Warrants and the Warrant Shares, the execution and delivery of
the Registration Statement, the performance of this Agreement and the Warrant
Agreement, and the transactions contemplated hereby and thereby (except
consents, approvals, authorizations or orders and filings that have been
properly made or obtained);
21
(8) the statements in the Prospectus under "Description of
Securities," have been reviewed by the Company's Counsel, and insofar as they
refer to statements of law, descriptions of statutes, rules or regulations or
legal conclusions, fairly present the information called for with respect to
those legal matters, and fairly summarize the matters referred to in those
statements;
(9) the Underwritten Securities and Warrant Shares have been
accepted for quotation, subject to official notice of issuance, on the American
Stock Exchange;
(10) neither the execution and delivery by the Company of,
nor the performance of its obligations under this Agreement and the Warrant
Agreement nor the sale, issuance, execution or delivery by the Company of the
Underwritten Securities or Warrants will violate Regulation G, T, U or X of the
Federal Reserve Board; and
(11) the Company is not an "investment company," a company
controlled by, under common control with, or controlling an "investment company"
or a "promoter" or "principal underwriter" for an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended. In
rendering such opinion, the Company's Counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted and to the extent such Counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriter's Counsel) of
other counsel acceptable to Underwriter's Counsel, familiar with the applicable
laws; and (B) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company; provided, that copies of any such statements or
certificates shall be delivered to Underwriter's Counsel. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and it believes that the Underwriter and
it are justified in relying thereon. Such counsel shall state that such counsel
has participated in conferences with officers and other representatives of the
Company, and representatives of the independent public accountants for the
Company, at which conferences the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus and related matters were discussed and,
although such counsel is not passing upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of any of the
statements contained in the Registration Statement, on the basis of the
foregoing, no facts have come to the attention of such counsel that has led such
counsel to believe that either the Registration Statement or any amendment
thereto, at the time such Registration Statement or amendment became effective
or the Prospectus or amendment or supplement thereto as of the date of such
opinion contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading (it being understood that such counsel need express no
opinion with respect to the financial statements and schedules and other
financial, statistical and accounting data included in the Registration
Statement or the Prospectus or excluded therefrom).
22
At each Option Closing Date, if any, the Underwriter shall
have received the favorable opinion of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to
the Company, dated the Option Closing Date, addressed to the Underwriter and in
form and substance reasonably satisfactory to Underwriter's Counsel confirming
as of the Option Closing Date the opinions made by ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
in its opinion delivered on the Closing Date.
(d) On and as of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change in the
condition, financial or otherwise, prospects, or the business of the Company,
whether or not in the ordinary course of business, from the latest dates as of
which such condition was set forth in the Registration Statement and Prospectus;
(ii) there shall not have been any transaction, not in the ordinary course of
business, entered into by the Company, from the latest date as of which the
financial condition of the Company is set forth in the Registration Statement
and Prospectus that is materially adverse to the Company; (iii) the Company
shall not be in default under any provision of any instrument relating to any
material outstanding indebtedness of the Company; (iv) since the latest date set
forth in the Registration Statement, the Company shall not have issued any
securities (other than the Underwritten Securities and Warrants) or declared or
paid any dividend or made any distribution with respect to its capital stock of
any class and there has not been any change in the capital stock or any change
in the debt (long or short term), or liabilities or obligations of the Company
(contingent or otherwise), except in the ordinary course of business; (v) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus;
(vi) no action, suit or proceeding, at law or in equity, shall have been pending
or overtly threatened against the Company, or affecting any of its properties or
business before or by any court or federal, state or foreign commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding could reasonably be expected to materially adversely affect the
condition, financial or otherwise, results of operations, business or prospects
of the Company, except as set forth in the Registration Statement and
Prospectus; and (vii) no stop order shall have been issued under the Securities
Act and no proceedings therefor shall have been initiated or overtly threatened
by the Commission or any state regulatory authority.
(e) At each of the Closing Date and each Option Closing
Date, if any, the Underwriter shall have received a certificate of the Company
signed by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that such person has reviewed the
Registration Statement, the Prospectus and this Agreement, and that:
(1) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the Closing Date or
the Option Closing Date, as the case may be, and the Company has complied with
all agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to such Closing
Date or Option Closing Date, as the case may be;
(2) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no proceedings
for that purpose have been instituted or are pending or, to each such person's
knowledge, are contemplated or threatened under the Securities Act;
23
(3) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, nor any amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and neither
the Prospectus nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(4) Subsequent to the latest dates as of which information
is given in the Registration Statement and the Prospectus through the Closing
Date or the Option Closing Date, as the case may be:
(e) the Company has not incurred, other than in the ordinary
course of its business, any material liabilities or obligations, direct or
contingent, except as disclosed in the Prospectus; (b) the Company has not paid
or declared any dividends or other distributions on its capital stock, except as
disclosed in the Prospectus; (c) the Company has not entered into any
transactions not in the ordinary course of business, except as disclosed in the
Prospectus; (d) there has not been any change in the capital stock or long-term
debt or any increase in the short-term borrowings (other than any increase in
the short-term borrowings in the ordinary course of business) of the Company,
except as disclosed in the Prospectus; (e) the Company has not sustained any
material loss or damage to its property or assets, whether or not insured; (f)
there is no litigation that is pending or, to the Company's knowledge,
threatened (or circumstances giving rise to same) against the Company or any
affiliated party of any of the foregoing that is required to be set forth in an
amended or supplemented Prospectus that has not been set forth; and (g) there
has occurred no other event required to be set forth in an amended or
supplemented Prospectus. References to the Registration Statement and the
Prospectus in this subsection (e) are to such documents as amended and
supplemented at the date of such certificate.
(f) On or prior to the date hereof, the Underwriter shall
have received clearance from the NASD as to the amount of compensation allowable
or payable to the Underwriter, as described in the Registration Statement
(g) At the time this Agreement is executed, and on the
Option Closing Date, the Underwriter shall have received a letter, dated such
date, addressed to the Underwriter in form and substance satisfactory (including
the nature of the changes or decreases, if any, referred to in clauses (3) (B)
and (C) below, in all respects to the Underwriter and Underwriter's Counsel,
from Pricewaterhouse Coopers LLP:
(1) confirming that they are independent certified
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable Regulations;
(2) stating that it is their opinion that the
financial statements of the Company audited by them and included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the Rules and
Regulations thereunder;
24
(3) stating that, on the basis of procedures, but not
an audit in accordance with G.A.A.S., which included a reading of the latest
available unaudited interim financial statements of the Company (with an
indication of the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of meetings and actions
of the stockholders, the board of directors and the Audit Committee of the board
of directors of the Company, inquiries of officers and other employees of the
Company responsible for financial and accounting matters, nothing has come to
their attention which would lead them to believe that (A) the unaudited
financial statements contained in the Registration Statement and Prospectus do
not comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the Rules and Regulations or any material
modifications should be made to the unaudited interim financial statements for
them to be in conformity with generally accepted accounting principles; or (B)
at a specified date not more than five days prior to the date of delivery of
such letter, there has been any change in the capital stock or long-term debt of
the Company, or any decrease in the shareholders' equity or net current assets
or net assets of the Company as compared with amounts shown in the June 30, 2003
balance sheet included in the Registration Statement, other than as set forth in
the Registration Statement, or, if there was any change or decrease, setting
forth the amount of such change or decrease; and (C) during the period from July
1, 2003 to a specified date not more than five days prior to the date of
delivery of such letter, there was any decrease in gross revenue, gross profit,
operating income, or increase in net loss or net loss per share of the Company,
in each case as compared with the corresponding period beginning July 1, 2003
other than as set forth in the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(4) stating that they have compared specific dollar
amounts, percentages of revenues and losses, and other financial information
pertaining to the Company set forth (in the Prospectus in each case to the
extent that such amounts, numbers, percentages, statements and information may
be derived from the general accounting records, of the Company and excluding any
questions requiring an interpretation by legal counsel), with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement;
(5) statements as to such other procedures as the
Underwriter may reasonably request and PwC LLP are willing to perform and report
upon.
At the time this Agreement is executed, the Underwriter
shall have also received a letter, dated such date, from BDO ▇▇▇▇▇▇▇ LLP, with
respect to Hollywood Software, Inc., including all of the confirmations,
statements and assurances set forth in clauses (1) through (5) of this Section
6(g).
(h) At the Closing Date and each Option Closing Date, if
any, the Underwriter shall have received from Pricewaterhouse Coopers LLP and
BDO ▇▇▇▇▇▇▇, LLP, letters, dated as of the Closing Date or the Option Closing
Date, as the case may be, to the effect that they reaffirm that statements made
in the letters furnished pursuant to Section 6(h) hereof, except that the
specified date referred to therein shall be a date not more than five days prior
to the Closing Date or the Option Closing Date, as the case may be, and, if the
Company has elected to rely on Rule 430A of the Regulations, to the further
effect that they have carried out procedures as specified in clause (5) of
Section 6(g) with respect to certain amounts, percentages and financial
information as specified by the Underwriter and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (5).
25
(i) On each of the Closing Date and the Option Closing Date,
if any, there shall have been duly tendered to, or at the direction of, the
Underwriter the appropriate number of Underwritten Securities.
(j) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter shall have been issued on the Closing
Date or the Option Closing Date, if any, and no proceedings for that purpose
shall have been instituted.
(k) On or before the Closing Date, the Company shall have
executed and delivered to the Underwriter, (i) the Warrant Agreement
substantially in the form filed as Exhibit 4.1 to the Registration Statement and
(ii) the Warrants in such denominations and to such designee as shall have been
provided by the Underwriter to the Company.
(l) On or before the Closing Date, the Underwritten
Securities and Warrant Shares shall have been duly approved for quotation on the
American Stock Exchange, subject to official notice of issuance.
(m) On or before the Closing Date, there shall have been
delivered to the Underwriter, Lock-up Agreements from the Company's directors,
officers, stockholders, and persons holding warrants, options, rights or other
securities of the Company, in the form previously provided to Underwriter's
Counsel.
(n) Trading in the Common Stock shall not have been
suspended by the American Stock Exchange at any time after the date hereof.
(o) Prior to the Closing Date, the Underwriter shall have
received from the Company a reasonably detailed budget covering the period from
the Closing Date to the end of the Company's first fiscal year following the
Closing Date together with financial statements of the Company prepared in
sufficient detail so as to allow comparison to the budget.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to the Underwriter.
If any condition to the Underwriter's obligations hereunder
to be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Underwriter may terminate
this Agreement or, if the Underwriter so elects, it may waive any such
condition(s) that have not been fulfilled or extend the time for their
fulfillment.
26
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter (for purposes of this Section 7, "Underwriter" shall include the
officers, directors, members and employees of the Underwriter), and each person,
if any, who controls the Underwriter ("controlling person") within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, from
and against any and all losses, claims, damages, expenses or liabilities, joint
or several (and actions, proceedings, suits and litigation with respect
thereto), whatsoever (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any action, suit, proceeding or litigation, commenced or threatened, or any
claim whatsoever), as such are incurred, to which any Underwriter or any such
controlling person may become subject under the Securities Act, the Exchange Act
or any other statute or at common law or otherwise, insofar as such losses,
claims, damages, expenses or liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained (i) in
any Preliminary Prospectus, the Registration Statement or the Prospectus (as
from time to time amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included securities of the Company issued or issuable upon exercise of
the Securities; or (iii) in any application or other document or written
communication (in this Section 7 collectively called an "application") executed
by the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the American Stock Exchange, Nasdaq or any other securities exchange; or arise
out of or are based upon the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of the Preliminary Prospectus and
Prospectus, in the light of the circumstances under which they were made),
unless such statement or omission was made in reliance upon and in conformity
with the Underwriter's Information and; provided, further, that with respect to
any untrue statement or omission or alleged untrue statement or omission made in
any Preliminary Prospectus or the Prospectus, the indemnification provided for
herein shall not apply to any loss, liability, claim, damage or expense to the
extent the same results from the sale of Securities to a person to whom there
was not sent or given, at or prior to the written confirmation of such sale, a
copy of the Prospectus, or in the case of an untrue statement or omission or
alleged untrue statement or omission in the Prospectus, a copy of the amended
Prospectus or supplement thereto, if the Company has previously furnished
sufficient copies thereof, based upon the number of copies requested by the
Underwriter, to the Underwriter a reasonable time in advance and the claim,
damage or expense of such person results from an untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
a Preliminary Prospectus or Prospectus that was corrected in the Prospectus or
amendment or supplement thereto.
The indemnity agreements in this Section 7(a) and in Section
7(b) shall be in addition to any liability that the Company or the Underwriter
may have at common law or otherwise.
(b) The Underwriter agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who has signed the
Registration Statement and each other person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act, to the same extent
as the foregoing indemnity from the Company to the Underwriter but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with the Underwriter's Information and is covered by the last proviso of Section
7(a).
27
(c) Promptly after receipt by an indemnified party under
this Section 7 of notice of the commencement of any action, suit or proceeding,
such indemnified party shall, if a claim with respect thereto is to be made
against one or more indemnifying parties under this Section 7, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve it
from: any liability that it may have under this Section 7(a) or (b) hereof
unless and to the extent that it has been prejudiced in any material respect by
such failure or from the forfeiture of substantial rights and defenses. In case
any such action, suit or proceeding is brought against any indemnified party,
and it notifies an indemnifying party or parties of the commencement thereof,
the indemnifying party or parties will be entitled to participate therein, and
to the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them that are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent unless a complete
release is obtained; provided, however, that such consent shall not be
unreasonably withheld or delayed.
28
(d) In order to provide for just and equitable contribution
in any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case; or (ii) contribution under the Securities Act may be required on the part
of any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or liabilities
(or actions, suits, proceedings or litigation with respect thereto) (A) in such
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified on
the other hand, from the offering of the Securities; or (B) if the allocation
provided by clause (A) 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 each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by of the 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 of the Securities
(before deducting expenses other than the Underwriter's expenses) bear to the
total underwriting discounts received by the Underwriter hereunder, in each case
as set forth in the table on the cover page of the Prospectus. 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 by
the Underwriter, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses or liabilities (or actions, suits, proceedings
or litigation with respect thereto) referred to above in this Section 7(d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action,
claim, suit, proceeding or litigation. Notwithstanding the provisions of this
Section 7(d), the Underwriter shall not be required to contribute any amount in
excess of the underwriting discounts applicable to the Securities purchased by
the Underwriter hereunder. 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. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Securities Act, each officer of
the Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this Section 7(d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party with respect to which a claim for contribution may
be made against another party or parties under this Section 7(d), notify such
party or parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this Section 7(d) to the extent that such party or parties
were not adversely affected by such omission. The contribution agreement set
forth above shall be in addition to any liabilities which any indemnifying party
may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company delivered pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company, as the case may be, and the respective
indemnity agreements contained in Section 7 hereof, shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
the Underwriter, the Company, any controlling person of the Underwriter or the
Company, and shall survive termination of this Agreement or the issuance and
delivery of the Underwritten Securities and Warrants to the Underwriter;
provided, however, that the representations and warranties contained in this
Agreement or in any certificates of the Company's officers shall survive only
until the third (3rd) anniversary of the Closing Date.
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9. Effective Date. This Agreement shall become effective at
10:00 a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter, in its discretion, shall release the Underwritten
Securities for the sale to the public; provided, however, that the provisions of
this Section 9 and Sections 5, 7 and 10 of this Agreement shall, subject to the
terms thereof, at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Underwriter of electronic communications
(facsimile or e-mail) to securities dealers releasing such shares for offering
or the release by the Underwriter for publication of the first newspaper
advertisement that is subsequently published relating to the Underwritten
Securities.
10. Termination.
(a) This agreement may be terminated with respect to the
Firm Securities or Option Securities, if any, by the Underwriter by notice to
the Company given prior to the Closing Date or the relevant Option Closing Date,
respectively, in the event that all conditions set forth in Section 6 have not
been satisfied or the Company shall have failed, refused or been unable to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder (after a reasonable opportunity to cure) at or prior
thereto or if at or prior to the Closing Date or such Option Closing Date,
respectively:
(1) the Company sustains a loss by reason of explosion,
fire, flood, accident or other calamity, which, in the reasonable opinion of the
Underwriter, substantially affects the value of the properties of the Company or
which materially interferes with the operation of the business of the Company
regardless of whether such loss shall have been insured; there shall have been a
Material Adverse Effect (including, without limitation, a change in management
or control of the Company), in the business, operations, condition, financial or
otherwise, prospects, stockholders' equity, properties, business or results of
operations of the Company, except in each case as described in or contemplated
by the Prospectus (exclusive of any amendment or supplement thereto); or Mr. A.
▇▇▇▇ ▇▇▇▇ shall have suffered any injury or disability of a nature that could
materially adversely affect his ability to function as the President and Chief
Executive Officer of the Company;
(2) any material action, suit or proceeding shall be overtly
threatened, instituted or pending, at law or in equity, against the Company or
any of its directors or executive officers, by any person or by any federal,
state or other governmental or regulatory commission, board or agency that could
reasonably be expected to have a Material Adverse Effect;
(3) trading in the Common Stock shall have been suspended by
the Commission, the NASD or the American Stock Exchange or trading in securities
generally on the New York Stock Exchange, American Stock Exchange or the
over-the-counter market shall have been suspended or minimum or maximum prices
shall have been established on either such exchange or quotation system;
(4) a moratorium on banking activities shall have been
declared by New York State or United States authorities; or
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(5) following the date hereof, there shall have been (A) an
outbreak of hostilities between the United States and any foreign power (or, in
the case of any ongoing hostilities, a material escalation thereof); (B) an
outbreak of any other insurrection or armed conflict involving the United
States, or a major terrorist attack in the United States; or (C) any other
calamity or crisis or material change in financial, political or economic
conditions, having an effect on the financial markets that, in the reasonable
judgment of the Underwriter, makes it impracticable or inadvisable to proceed
with the Offering or the delivery of the Securities as contemplated by the
Registration Statement, as amended.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 10(a) or Section 12 hereof, or if this
Agreement shall not be carried out by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied after a reasonable cure period (including,
without limitation, pursuant to Section 6, Section 10(a) or Section 12 hereof),
the Company shall promptly reimburse and indemnify the Underwriter for all of
its reasonable actual out-of-pocket expenses, including the fees and
disbursements of Underwriter's Counsel (less amounts previously paid pursuant to
Section 5(c) above). Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 10(a) and 12 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
(c) If this Agreement is terminated by the Company for any
reason other than the Underwriter's failure to proceed in good faith, the
Company shall, in addition to the fees and expenses set forth in Section 5, pay
the Underwriter a break-up fee of $250,000; provided, however, that no such
break-up fee shall be payable in the event the Company has processed the
Registration Statement in good faith and the initial public offering of the
Company has not been completed prior to December 31, 2003.
11. [Intentionally Omitted]
12. Default by the Company. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the Underwriter
may at its option, by notice from the Underwriter to the Company, terminate the
Underwriter's obligation to purchase Option Securities from the Company on such
date) without any liability on the part of the non-defaulting party other than
pursuant to Section 5, Section 7 and Section 10 hereof. No action taken pursuant
to this Section 12 shall relieve the Company from liability, if any, with
respect to such default.
13. Notices. All notices and communications hereunder,
except as herein otherwise specifically provided, shall be in writing and shall
be deemed to have been duly given when delivered in person, by facsimile or
recognized courier. Notices to the Underwriter shall be directed to it at ▇▇▇▇▇▇
▇▇▇▇▇▇ & Co., LLC, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, with a copy (that shall not constitute notice) to
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to
the Company at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Chief Executive Officer, with a copy (that shall not constitute
notice) to ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
31
14. Parties. This Agreement shall inure solely to the
benefit of and shall be binding upon, the Underwriter, the Company and the
controlling persons, directors and officers referred to in Section 7 hereof, and
their respective successors, legal representatives and permitted assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or with respect to or by virtue of this Agreement or any
provisions herein contained. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase. Neither
this Agreement nor any rights or obligations hereunder may be assigned or
delegated by a party without the prior written consent of the other party.
15. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
16. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Warrant Agreement constitute the entire agreement of the parties hereto and
supersede all prior and/or contemporaneous written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed on behalf of the
Underwriter and the Company.
If the foregoing correctly sets forth the understanding
between the Underwriter and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall, subject to Section
9 hereof, constitute a binding agreement between us.
Very truly yours,
ACCESS INTEGRATED TECHNOLOGIES, INC.
By:
-----------------------------
Name:
Title:
Confirmed and accepted as of the date first above written:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., LLC
By:
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: A Member
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