11,000,000 UNITS SMG INDIUM RESOURCES LTD. UNDERWRITING AGREEMENT
EXHIBIT
1.1
11,000,000
UNITS
_____________,
2008
MAXIM
GROUP LLC
CANACCORD
▇▇▇▇▇ INC.
c/o
Maxim
Group LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
As
Representatives of the Underwriters
named
on Schedule
A
hereto
Ladies
and Gentlemen:
SMG
Indium Resources Ltd., a corporation organized and existing under the laws
of
Delaware (the “Company”),
confirms its agreement, subject to the terms and conditions set forth herein,
with each of the underwriters listed on Exhibit A hereto (collectively, the
“Underwriters”),
for
whom Maxim Group LLC and Canaccord ▇▇▇▇▇ Inc. are acting as representatives
(in
such capacity, the “Representatives”),
to
sell and issue to the Underwriters an aggregate of 11,000,000 units (the
“Firm
Units”)
of its
securities. Each Firm Unit consists of one share of the Company’s common stock,
par value $0.001 per share (the “Common
Stock”),
and
one warrant to purchase one share of Common Stock at a price of $6.00 (the
“Warrants”).
In
addition, the Company shall grant to the Underwriters, upon the terms and
conditions set forth in Section 2 hereof, an option to purchase up to an
additional 1,650,000 Units, representing up to 15% of the Firm Units (the
“Additional
Units”).
The
Firm Units and any Additional Units purchased by the Underwriters are referred
to herein as the “Units”,
and
the Units, the shares of Common Stock and the Warrants included in the Units
and
the shares of Common Stock issuable upon exercise of the Warrants are herein
referred to collectively as the “Public Securities.”
In
addition, the Company hereby agrees to issue and sell to the Representatives
on
the effective date of the Registration Statement (as defined below) an option
(the “Representatives’
Purchase Option”)
for
the purchase of an aggregate of 550,000 units, 5% of the number of Firm Units
sold in the Offering (the “Representatives’
Units”).
The
Representatives’ Purchase Option, the Representatives’ Units, the shares of
Common Stock and the Warrants included in the Representatives’ Units (the
“Representative’s
Warrants”)
and
the shares of Common Stock issuable upon exercise of the Representative’s
Warrants are hereinafter referred to collectively as the “Representatives’
Securities.”
The
Public Securities and the Representatives’ Securities are hereinafter referred
to collectively as the “Securities.”
The
Securities and the Representatives’ Purchase Option are more fully described in
the Registration Statement and Prospectus referred to below. The offering and
sale of the Units contemplated by this underwriting agreement (this
“Agreement”)
is
referred to herein as the “Offering.”
The
Representatives' Purchase Option shall be issued to each Representative in
the
amounts set forth in the amendment dated August __, 2008 to the Engagement
Letter dated December 14, 2007 between the Company and Maxim Group LLC (as
amended, the "Engagement
Letter").
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
2 of
42
1. Representations
and Warranties of the Company.
The
Company represents, warrants and covenants to, and agrees with, each of the
Underwriters that, as of the date hereof and as of the Closing Date and each
Additional Closing Date:
(a) (i)The
Company has filed with the Securities and Exchange Commission (the “Commission”)
a
registration statement on Form S-1 (Registration No. 333-149413), and amendments
thereto, and related preliminary prospectuses for the registration under the
Securities Act of 1933, as amended (the “Securities
Act”),
of
the Securities, which registration statement, as so amended prior to the Time
of
Sale (including post-effective amendments, if any), has been declared effective
by the Commission and copies of which have heretofore been delivered to the
Underwriters. Promptly after execution and delivery of this Agreement, the
Company will prepare and file a prospectus in accordance with the provisions
of
Rule 430A (“Rule
430A”)
of the
rules and regulations of the Commission (the “Rules
and Regulations”)
and
paragraph (b) of Rule 424 (“Rule
424(b)”)
of the
Regulations. The information included in such prospectus that was omitted from
such registration statement at the time it became effective but that is deemed
to be part of such registration statement at the time it became effective
pursuant to paragraph (b) of Rule 430A is referred to as “Rule
430A Information.”
Each
prospectus used before such registration statement became effective, and any
prospectus that omitted the Rule 430A Information that was used after such
effectiveness and prior to the execution and delivery of this Agreement, is
referred to herein as a “Preliminary
Prospectus.”
Such
registration statement, including the amendments thereto, the exhibits and
any
schedules thereto, at the time it became effective, and including the Rule
430A
Information, is herein called the “Registration
Statement.”
The
Preliminary Prospectus dated ______________, 2008, that was included in the
Registration Statement at the Time of Sale is referred to herein as the
“Sale
Preliminary Prospectus.”
For
purposes of this Agreement and the Securities Act, (A) “Time
of Sale”,
means
4:30 p.m., New York City time, on the date of this Agreement; (B) the final
prospectus in the form first furnished to the Underwriters for use in connection
with the offering of the Securities is referred to herein as the “Prospectus”;
(C)
“Disclosure
Package”
shall
mean (i) the Sale Preliminary, (ii) the Issuer Free Writing
Prospectuses, if any, identified in Annex II hereto, and (iii) any
other Free Writing Prospectus that the parties hereto shall hereafter expressly
agree in writing to treat as part of the Disclosure Package; (D) “Free
Writing Prospectus”
shall
mean a free writing prospectus, as defined in Rule 405; (E) “Issuer
Free Writing Prospectus”
shall
mean an issuer free writing prospectus, as defined in
Rule 433.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 3
of 42
(ii) If
the
Company has filed or is required pursuant to the terms hereof to file a
registration statement pursuant to Rule 462(b) under the Securities Act
registering additional securities (a “Rule
462(b) Registration Statement”),
then,
unless otherwise specified, any reference herein to the term “Registration
Statement” shall be deemed to include such Rule 462(b) Registration Statement.
All of the Public Securities have been registered under the Securities Act
pursuant to the Registration Statement or, if any Rule 462(b) Registration
Statement is filed, will be duly registered under the Securities Act with the
filing of such Rule 462(b) Registration Statement.
(iii) Based
on
communications from the Commission, no stop order suspending the effectiveness
of either the Registration Statement or the Rule 462(b) Registration Statement,
if any, has been issued and, to the Company’s knowledge, no proceeding for that
purpose has been initiated or threatened by the Commission. Any reference herein
to the Registration Statement, any Preliminary Prospectus, the Sale Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
exhibits incorporated by reference therein pursuant to the Rules and Regulations
on or before the effective date of the Registration Statement, the date of
such
Preliminary Prospectus, the Sale Preliminary Prospectus or the date of the
Prospectus, as the case may be. Any reference herein to the terms “amend”,
“amendment” or “supplement” with respect to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include: (i) the filing of any document under the Securities Exchange Act of
1934, as amended, and together with the Rules and Regulations promulgated
thereunder (the “Exchange
Act”)
after
the effective date of the Registration Statement, the date of such Preliminary
Prospectus, the Sale Preliminary Prospectus or the date of the Prospectus,
as
the case may be, which is incorporated therein by reference, and (ii) any such
document so filed.
(iv) All
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a Preliminary Prospectus, the Sale Preliminary
Prospectus and the Prospectus, or any amendments or supplements to any of the
foregoing shall be deemed to include any copy thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System
(“▇▇▇▇▇”).
The
Sale Preliminary Prospectus and the Prospectus delivered to the Underwriters
for
use in connection with the Offering were or will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant
to
▇▇▇▇▇, except to the extent permitted by Regulation S-T promulgated by the
Commission.
(v) If,
subsequent to the date of this Agreement, the Company or the Representatives
determine that, at the Time of Sale, the Sale Preliminary Prospectus included an
untrue statement of a material fact or omitted a statement of material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading and have agreed to provide an
opportunity to purchasers of the Firm Units to terminate their old purchase
contracts and enter into new purchase contracts, then the Sale Preliminary
Prospectus will be deemed to include any additional information available to
purchasers at the time of entry into the first such new purchase
contract.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 4
of 42
(b) On
the
Effective Date, the Registration Statement did, and when the Prospectus is
first
filed in accordance with Rule 424(b) and on the Closing Date (as defined herein)
and on any date on which Additional Units are purchased, if such date is not
the
Closing Date (a “settlement date”), the Prospectus (and any supplement thereto)
will, comply in all material respects with the applicable requirements of the
Securities Act and the rules thereunder; on the Effective Date and at the Time
of Sale, the Registration Statement did not contain any untrue statement of
a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, not misleading; and on
the
date of any filing pursuant to Rule 424(b) and on the Closing Date and any
settlement date, the Prospectus (together with any supplement thereto) will
not
include any untrue statement of a material fact or omit to state a material
fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided,
however,
that
the Company makes no representations or warranties as to the information
contained in or omitted from the Registration Statement, or the Prospectus
(or
any supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter through
the Representatives specifically for inclusion in the Registration Statement
or
the Prospectus (or any supplement thereto).
(c) (i)
The
Disclosure Package and the price to the public, the number of Firm Units and
the
number of Additional Units to be included on the cover page of the Prospectus,
when taken together as a whole and (ii) each electronic road show when
taken together as a whole with the Disclosure Package and the price to the
public, the number of Firm Units and the number of Additional Units to be
included on the cover page of the Prospectus, does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The foregoing sentence does not apply to
statements in or omissions from any Issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein, it being
understood and agreed that the only such information furnished by or on behalf
of any Underwriter consists of the Underwriters' Information.
(d) (i)
At
the time of filing the Registration Statement and (ii) as of the Time of
Sale (with such date being used as the determination date for purposes of this
clause (ii)), the Company was not and is not an Ineligible Issuer (as defined
in
Rule 405 of the Securities Act), without taking account of any
determination by the Commission pursuant to Rule 405 that it is not
necessary that the Company be considered an Ineligible Issuer.
(e) Each
Issuer Free Writing Prospectus does not include any information that conflicts
with the information contained in the Registration Statement, including any
document incorporated by reference therein that has not been superseded or
modified. The foregoing sentence does not apply to statements in or omissions
from any Issuer Free Writing Prospectus based upon and in conformity with
written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by or on behalf of any Underwriter
consists of the Underwriters' Information. The parties acknowledge and agree
that such information provided by or on behalf of any Underwriter consists
solely of the names of the Underwriters appearing in the “Underwriting” section
of the Prospectus and the following additional disclosure contained in the
“Underwriting” section of the Prospectus: (i) the _____ paragraph under the
heading “Underwriting”, (ii) the _____ paragraph under the heading “Pricing of
this Offering” (collectively, the “Underwriters’
Information”).
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 5
of 42
(f) The
Company has filed with the Commission a Form 8-A (File Number 001-_____)
providing for the registration under the Exchange Act of the Common Stock.
The
registration of the Common Stock under the Exchange Act has been declared
effective by the Commission on the date hereof.
(g) The
documents, exhibits or other materials incorporated or deemed to be incorporated
by reference in the Sale Preliminary Prospectus, Disclosure Package or the
Prospectus, at the time they were or hereafter are filed with the Commission,
complied and will comply in all material respects with the requirements of
the
Securities Act, the Exchange Act and the Rules and Regulations, and, when read
together with the other information in the Sale Preliminary Prospectus,
Disclosure Package or the Prospectus, do not contain an untrue statement of
a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. There are no contracts or other
documents (including, without limitation, any voting agreement), which are
required to be described in the Registration Statement, the Sale Preliminary
Prospectus, Disclosure Package and the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act, the Exchange Act or the Rules
and
Regulations and which have not been so described, filed or incorporated by
reference.
(h) ▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP (“MK”),
whose
reports relating to the Company are included in the Registration Statement,
are
independent public accountants as required by the Securities Act, the Exchange
Act, the Rules and Regulations and the rules and regulations promulgated by
the
Public Company Accounting Oversight Board (the “PCAOB”).
MK is
duly registered and in good standing with the PCAOB. MK has not, during the
periods covered by the financial statements included in the Registration
Statement, the Preliminary Prospectus and the Prospectus, provided to the
Company any non-audit services, as such term is used in Section 10A(g) of the
Exchange Act.
(i) The
Securities have been authorized for listing on the American Stock Exchange
(“AMEX”)
and,
to the Company’s knowledge, no proceedings have been instituted or threatened
which would effect, and no event or circumstance has occurred which is
reasonably likely to effect, the listing of the Securities on the
AMEX.
(j) The
Company has no direct or indirect subsidiaries and owns no equity interest
in
any other foreign or domestic individual, corporation, trust, general or limited
partnership, joint venture, limited liability company or other entity (each,
a
“Person”).
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 6
of 42
(k) Subsequent
to the respective dates as of which information is presented in the Registration
Statement, the Disclosure Package and the Prospectus, and except as disclosed
in
the Registration Statement, the Disclosure Package and the Prospectus: (i)
the
Company has not declared, paid or made any dividends or other distributions
of
any kind on or in respect of its capital stock, and (ii) there has been no
material adverse change (or, to the knowledge of the Company, any development
which has a high probability of involving a material adverse change in the
future), whether or not arising from transactions in the ordinary course of
business, in or affecting: (A) the business, condition (financial or otherwise),
results of operations, shareholders’ equity, properties or prospects (as such
prospects are disclosed or described in the Disclosure Package and the
Prospectus) of the Company; (B) the long-term debt or capital stock of the
Company; or (C) the Offering or consummation of any of the other transactions
contemplated by this Agreement, the Registration Statement or the Prospectus
(a
“Material
Adverse Change”).
Since
the date of the latest balance sheet presented in the Registration Statement,
the Disclosure Package and the Prospectus, the Company has not incurred or
undertaken any liabilities or obligations, whether direct or indirect,
liquidated or contingent, matured or unmatured, or entered into any
transactions, including any acquisition or disposition of any business or asset,
which are material to the Company, except for liabilities, obligations and
transactions which are disclosed in the Registration Statement, the Disclosure
Package and the Prospectus.
(l) As
of the
dates indicated in the Disclosure Package and the Prospectus, the authorized,
issued and outstanding shares of capital stock of the Company were as set forth
therein in the column headed “Actual” under the section thereof captioned
“Capitalization” and, after giving effect to the Offering and the other
transactions contemplated by this Agreement and the Registration Statement,
will
be as set forth in the column headed “As Adjusted ” in such section.
(m) All
of
the issued and outstanding shares of capital stock of the Company are fully
paid
and non-assessable and have been duly and validly authorized and issued, in
compliance with all applicable state, federal and foreign securities laws,
rules
and regulations and not in violation of or subject to any preemptive or similar
right that does or will entitle any Person (as defined below), upon the issuance
or sale of any security, to acquire any Relevant Security from the Company.
As
used herein, the term “Relevant
Security”
means
any Common Stock or other security of the Company that is convertible into,
or
exercisable or exchangeable for Common Stock or equity securities, or that
holds
the right to acquire any Common Stock or equity securities of the Company or
any
other such Relevant Security, except for such rights as may have been fully
satisfied or waived prior to the effectiveness of the Registration Statement.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 7
of 42
(n) The
Securities have been duly and validly authorized and, when issued, delivered
and
paid for in accordance with this Agreement and as described in the Disclosure
Package and the Prospectus on each of the Closing Date and the Additional
Closing Date, as applicable, will be duly and validly issued, fully paid
and non-assessable, will have been issued in compliance with all applicable
state and federal and foreign laws, rules and regulations and will not have
been
issued in violation of or subject to any preemptive or similar right that does
or will entitle any Person to acquire any Relevant Security from the Company
upon issuance or sale of Securities in the Offering. The Public Securities
conform to the descriptions thereof contained in the Registration Statement
and
the Disclosure Package and the Prospectus. The holders of the Securities are
not
and will not be subject to personal liability by reason of being such holders;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. When issued, the
Warrants will constitute valid and binding obligations of the Company to issue
and sell, upon exercise thereof and payment of the respective exercise prices
therefore, the number and type of securities of the Company called for thereby
in accordance with the terms thereof and such Warrants; enforceable against
the
Company in accordance with their respective terms, except: (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally; (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws; and (iii) that the remedy of specific performance
and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought. The shares of Common Stock issuable upon exercise
of
the Warrants have been reserved for issuance upon the exercise of the Warrants
and when issued in accordance with the terms thereof, will be duly and validly
authorized, validly issued, fully paid and non-assessable; the holders thereof
are not and will not be subject to personal liability by reason of being such
holders. Except as disclosed in the Registration Statement, the Disclosure
Package and the Prospectus, the Company has no outstanding warrants, options
to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, or any contracts or commitments to issue or sell, any Relevant
Security.
(o) Except
as
disclosed in the Registration Statement, the Disclosure Package and the
Prospectus, no director or officer of the Company named in the Sale Preliminary
Prospectus and the Prospectus and/or who will be acting as such following the
Closing as described in the Sale Preliminary Prospectus or the Prospectus holds
any direct equity, debt or other pecuniary interest in any Person with whom
the
Company does business or is in privity of contract with, other than, in each
case, indirectly through the ownership by such individuals of shares of Common
Stock.
(p) The
Company has been duly incorporated, and validly exists as a corporation in
good
standing under the laws of the State of Delaware. The Company has all requisite
power and authority to carry on its business as currently being conducted and
as
described in the Disclosure Package and the Prospectus, and to own, lease and
operate its properties. The Company is duly qualified to do business and is
in
good standing as a foreign corporation in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business makes such qualification necessary, except,
in
each case, for those failures to be so qualified or in good standing which
(individually and in the aggregate) could not reasonably be expected to have
a
material adverse effect on: (i) the business, condition (financial or
otherwise), results of operations, shareholders’ equity, properties or prospects
(as such prospects are disclosed or described in the Sale Preliminary Prospectus
and the Prospectus) of the Company; (ii) the long-term debt or capital stock
of
the Company; or (iii) the Offering or consummation of any of the other
transactions contemplated by this Agreement, the Registration Statement or
the
Prospectus (any such effect being a “Material
Adverse Effect”).
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 8
of 42
(q) The
Company is not: (i) in violation of its certificate of incorporation, by-laws
or
other organizational documents (including shareholders’, voting or similar
agreements), (ii) in default under, and no event has occurred which, with notice
or lapse of time or both, would constitute a default under or result in the
creation or imposition of any lien, charge, mortgage, pledge, security interest,
claim, equity, trust or other encumbrance, preferential arrangement, defect
or
restriction of any kind whatsoever (“Lien”)
upon
any of its property or assets pursuant to, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which it is a party
or
by which it is bound or to which any of its property or assets is subject or
(iii) is in violation in any respect of any law, rule, regulation, ordinance,
directive, judgment, decree or order of any judicial, regulatory or other legal
or governmental agency or body, foreign or domestic, except (in the case of
clause (ii) above) for any Lien disclosed in the Registration Statement, the
Sale Preliminary Prospectus and the Prospectus and except, in the case of each
of clauses (ii) and (iii), for any default, violation or event that would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.
(r) The
Company has full right, power and authority to execute and deliver this
Agreement, the Representatives’ Purchase Option, the Management Services
Agreement between the Company and Specialty Metals Group Advisors, LLC (the
“Management Services Agreement”) and all other agreements, documents,
certificates and instruments required to be delivered pursuant to this Agreement
(collectively, the “Transaction
Documents”)
and to
perform its obligations hereunder and thereunder and to consummate each of
the
transactions contemplated by each of the Transaction Documents. The Company
has
duly and validly authorized each of the Transaction Documents and each of the
transactions contemplated by the Transaction Documents. Each of the Transaction
Documents have been or will be duly and validly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company
and is enforceable against the Company in accordance with its terms, except
as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(s) The
execution, delivery, and performance of the Transaction Documents and the
consummation of the transactions contemplated thereby do not and will not:
(i)
conflict with, require consent under or result in a breach of any of the terms
and provisions of, or constitute a default (or an event which with notice or
lapse of time, or both, would constitute a default) under, or result in the
creation or imposition of any Lien upon any property or assets of the Company
pursuant to any indenture, mortgage, deed of trust, loan agreement or other
agreement, instrument, franchise, license or permit to which the Company or
its
“affiliates” (as such term is defined in Rule 144 under the Securities Act,
“Affiliates”)
is a
party or by which the Company or its properties, operations or assets may be
bound or (ii) violate or conflict with any provision of the certificate of
incorporation, by-laws or other organizational documents of the Company, or
(iii) violate or conflict with any law, rule, regulation, ordinance, directive,
judgment, decree or order of any judicial, regulatory or other legal or
governmental agency or body, domestic or foreign, except, in the case of each
of
clauses (i) and (iii), for any default, violation or event that would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 9
of 42
(t) The
Company has all material consents, approvals, authorizations, orders,
registrations, qualifications, licenses, filings and permits of, with and from
all judicial, regulatory and other legal or governmental agencies and bodies
and
all third parties, foreign and domestic (collectively, the “Consents”),
to
own, lease and operate its properties and conduct its business as it is now
being conducted and as disclosed in the Registration Statement, the Disclosure
Package and the Prospectus, and each such Consent is valid and in full force
and
effect. The Company has not received notice of any investigation or proceedings
which results in or, if decided adversely to the Company, could reasonably
be
expected to result in, the revocation of any Consent or reasonably be expected
to have a Material Adverse Effect. No Consent contains a materially burdensome
restriction not adequately disclosed in the Registration Statement, the
Disclosure Package and the Prospectus.
(u) The
Company is in compliance with all applicable laws, rules, regulations,
ordinances, directives, judgments, decrees and orders, foreign and domestic,
including those relating to transactions with Affiliates, the non-compliance
with which would not have a Material Adverse Effect.
(v) The
Representatives’ Purchase Option will conform to the description thereof in the
Registration Statement and in the Prospectus and, when sold to and paid for
by
the Representatives in accordance with the Representatives’ Purchase Option,
will have been duly authorized and validly issued and will constitute a valid
and binding obligation of the Company. The shares of Common Stock included
in
the Representatives’ Purchase Option and the shares of Common Stock issuable
upon exercise of the Representatives’ Warrants (the “Representatives’
Warrant Shares”),
have
been duly authorized and reserved for issuance upon exercise of the
Representative’s Purchase Option and the Representatives’ Warrants by all
necessary corporate action on the part of the Company and, when issued and
delivered and paid for upon such exercise in accordance with the terms of such
securities, will be validly issued, fully paid, nonassessable and free of
preemptive rights and will conform to the description thereof in the Prospectus.
The holders thereof are not and will not be subject to personal liability by
reason of being such holders.
(w) No
Consent of, with or from any judicial, regulatory or other legal or governmental
agency or body or any third party, foreign or domestic, is required for the
execution, delivery and performance of this Agreement and the Representatives’
Purchase Option or consummation of each of the transactions contemplated by
this
Agreement and the Representatives’ Purchase Option, including the issuance, sale
and delivery of the Securities and the Representatives’ Securities to be issued,
sold and delivered hereunder and thereunder, except: (i) the registration under
the Securities Act of the Securities and the Representatives’ Securities and the
approval for listing of the Securities on the AMEX, each of which has become
effective and (ii) such Consents as may be required under state securities
or
blue sky laws or Financial Industry Regulatory Authority, Inc. (“FINRA”)
in
connection with the purchase and distribution of the Securities by the
Underwriters.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 10
of 42
(x) Except
as
disclosed in the Registration Statement, the Disclosure Package and the
Prospectus, there is no judicial, regulatory, arbitral or other legal or
governmental proceeding or other litigation or arbitration, domestic or foreign,
pending to which the Company is a party or of which any property, operations
or
assets of the Company is the subject which, either individually or in the
aggregate, if determined adversely to the Company, could reasonably be expected
to have a Material Adverse Effect. To the Company’s knowledge, no such
proceeding, litigation or arbitration is threatened or contemplated. The defense
of all actual or pending proceedings, litigation and arbitration against or
involving the Company is not reasonably expected by the Company to have a
Material Adverse Effect.
(y) The
financial statements, including the notes thereto, and any supporting schedules
included in the Registration Statement, the Disclosure Package and the
Prospectus present fairly the financial position as of the dates indicated
and
the cash flows and results of operations for the periods specified of the
Company. Except as otherwise stated in the Registration Statement, the
Disclosure Package and the Prospectus, said financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis throughout the periods involved. Any
supporting schedules included in the Registration Statement, the Disclosure
Package and the Prospectus present fairly the information required to be stated
therein. No other financial statements or supporting schedules are required
to
be included or incorporated by reference in the Registration Statement. The
other financial and statistical information included in the Registration
Statement, the Disclosure Package and the Prospectus present fairly the
information included therein and have been prepared on a basis consistent with
that of the financial statements that are included in the Registration
Statement, the Disclosure Package and the Prospectus and the books and records
of the respective entities presented therein.
(z) There
are
no pro forma or as adjusted financial statements which are required to be
included in the Registration Statement, the Disclosure Package and the
Prospectus in accordance with Regulation S-X under the Securities Act which
have
not been included as so required. The pro forma and/or as adjusted financial
information included in the Registration Statement, the Disclosure Package
and
the Prospectus has been properly compiled and prepared in accordance with the
applicable requirements of the Securities Act and the Rules and Regulations
and
include all adjustments necessary to present fairly in accordance with generally
accepted accounting principles the pro forma and as adjusted financial position
of the respective entity or entities presented therein at the respective dates
indicated and their cash flows and the results of operations for the respective
periods specified. The assumptions used in preparing the pro forma and as
adjusted financial information included in the Registration Statement, the
Disclosure Package and the Prospectus provide a reasonable basis for presenting
the significant effects directly attributable to the transactions or events
described therein. The related pro forma and pro forma as adjusted adjustments
give appropriate effect to those assumptions; and the pro forma and pro forma
as
adjusted financial information reflect the proper application of those
adjustments to the corresponding historical financial statement
amounts.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 11
of 42
(aa) The
statistical, industry-related and market-related data included in the
Registration Statement, the Disclosure Package and the Prospectus are based
on
or derived from sources which the Company reasonably and in good faith believes
are reliable and accurate, and such data agree with the sources from which
they
are derived.
(bb) Except
as
disclosed in the Registration Statement, the Disclosure Package and the
Prospectus, the Company maintains a system of internal accounting and other
controls sufficient to provide reasonable assurances that: (i) transactions
are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with United States generally accepted accounting
principles and to maintain accountability for assets, (iii) access to assets
is
permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accounting for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(cc) The
Company’s Board of Directors has validly appointed an audit committee, a
compensation committee and a nominating and governance committee each of whose
composition satisfies the requirements of the rules and regulations of the
AMEX
and the Company’s Board of Directors and/or the audit committee, the
compensation committee and the nominating committee has each adopted a charter
that satisfies the requirements of AMEX. Neither the Company’s Board of
Directors nor the audit committee thereof has been informed, nor is any director
of the Company aware, of: (i) except as disclosed in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus, any significant deficiencies
and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
Company’s ability to record, process, summarize and report financial
information; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s
internal control over financial reporting.
(dd) The
Company is in material compliance with the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act
of 2002, as amended (“Sarb-Ox”)
applicable to the Company, and the rules and regulations promulgated thereunder
and related or similar rules and regulations promulgated by AMEX or any other
governmental or self regulatory entity or agency.
(ee) Except
as
disclosed in the Registration Statement, no relationship, direct or indirect,
exists between or among any of the Company or any Affiliate of the Company,
on
the one hand, and any director, officer, shareholder, customer or supplier
of
the Company or any Affiliate of the Company, on the other hand, which is
required by the Securities Act, the Exchange Act or the Rules and Regulations
to
be described in the Registration Statement, the Disclosure Package or the
Prospectus which is not so described as required. Except as disclosed in the
Registration Statement, the Disclosure Package and the Prospectus, there are
no
outstanding loans, advances (except normal advances for business expenses in
the
ordinary course of business) or guarantees of indebtedness by the Company to
or
for the benefit of any of the officers or directors of the Company or any of
their respective family members, except as disclosed in the Registration
Statement, the Disclosure Package and the Prospectus. The Company has not,
in
violation of Sarb-Ox, directly or indirectly, including through any Affiliate
of
the Company (other than as permitted under the Sarb-Ox for depositary
institutions), extended or maintained credit, arranged for the extension of
credit, or renewed an extension of credit, in the form of a personal loan to
or
for any director or executive officer of the Company.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
12
of 42
(ff) Transactions
Affecting Disclosure to FINRA.
(i) Except
as
described in the Registration Statement, the Disclosure Package and the
Prospectus, there are no claims, payments, arrangements, agreements or
understandings relating to the payment of a finder’s, consulting or origination
fee by the Company with respect to the sale of the Securities hereunder or
any
other arrangements, agreements or understandings of the Company or, to the
Company’s knowledge, the Company’s officers, directors and employees that may
affect the Underwriters’ compensation, as determined by FINRA.
(ii) Except
as
previously disclosed by the Company to the Representatives in writing, no
officer, director, or beneficial owner of 5% or more of any class of the
Company’s securities (whether debt or equity, registered or unregistered,
regardless of the time acquired or the source from which derived) or any other
Affiliate is a member or a person associated, or affiliated with a member of
FINRA.
(iii) No
proceeds from the sale of the Securities (excluding underwriting compensation)
will be paid to any FINRA member, or any persons associated or affiliated with
a
member of FINRA, except as specifically contemplated herein.
(iv) Except
as
previously disclosed by the Company to the Representatives, no person to whom
securities of the Company have been privately issued within the 180-day period
prior to the initial filing date of the Registration Statement has any
relationship or affiliation or association with any member of
FINRA.
(gg) Intellectual
Property.
(i) The
Company owns, licenses or possess the right to use sufficient trademarks, trade
names, patents, patent rights, copyrights, domain names, licenses, approvals,
trade secrets, inventions, technology, know-how and other similar rights
(collectively, “Intellectual
Property Rights”)
as are
reasonably necessary or material to conduct its business as now conducted and
contemplated to be conducted, each as described in the Registration Statement,
the Disclosure Package and Prospectus.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 13
of 42
(ii) Except
as
set forth in the Registration Statement, the Disclosure Package and Prospectus:
(A) there is no actual, pending or, to the Company’s knowledge, threatened
action, suit, proceeding, or claim by others challenging the Company’s rights in
or to any Intellectual Property Rights, and the Company is unaware of any facts
which would form a reasonable basis for any such claim; (B) there is no actual,
pending or, to the Company’s knowledge, threatened action, suit, proceeding, or
claim by others that the Company infringes, misappropriates, or otherwise
violates any Intellectual Property Rights of others, and the Company is unaware
of any facts which would form a reasonable basis for any such claim; (C) there
is no actual, pending or, to the Company’s knowledge, threatened action, suit,
proceeding, or claim by others challenging the validity or scope of any such
Intellectual Property Rights owned by the Company and the Company is unaware
of
any facts which would form a reasonable basis for any such claim; (D) the
operation of Company’s business as now conducted and in connection with the
development and commercialization of its technology described in the
Registration Statement, the Disclosure Package and Prospectus does not infringe
any claim of any patent or published patent application; (E) there is no prior
art of which the Company is aware that may render any patent owned or licensed
by the Company invalid or any patent application owned or licensed by the
Company unpatentable which has not been disclosed to the applicable government
patent office; and (F) the patents, trademarks, and copyrights granted or issued
to the Company have been duly maintained and are in full force and in effect,
and none of such patents, trademarks and copyrights have been adjudged invalid
or unenforceable in whole or in part. The Company is not a party to or bound
by
any options, licenses or agreements with respect to the Intellectual Property
Rights of any other person or entity that are required to be set forth in the
Registration Statement, the Disclosure Package and Prospectus and are not
described therein in all material respects.
(iii) The
Company has obtained legally binding written agreements from all employees
and
third parties with whom the Company has shared confidential proprietary
information: (A) of the Company, or (B) received from others which the Company
is obligated to treat as confidential, which agreements require such employees
and third parties to keep such information confidential.
(iv) Except
as
would not have a Material Adverse Effect, the Company is and its operations
have
been conducted at all times in compliance with foreign, federal, state and
municipal laws, rules and regulations as required by such laws for each activity
and in each jurisdiction where the Company is doing business. The Company
possesses valid and current licenses, registrations, certificates, permits
and
other authorizations issued by the appropriate foreign, federal, state or local
regulatory authorities as necessary to conduct its respective businesses
(collectively, the “Licensing
Requirements”),
except where the failure of a Licensing Requirement would not have a Material
Adverse Effect. The Company has not received any notice of proceedings relating
to the revocation or modification of, or noncompliance with, any such license,
certificate, permit or authorization, which could result in a Material Adverse
Effect. Further, no action, suit or proceeding, other than routine audits,
by or
before any court or governmental agency, authority or body or any arbitrator
involving the Company with respect to the removal, revocation, suspension or
other termination of the authority to operate under the Licensing Requirements
is pending or, to the Company’s knowledge, threatened. The Company does not
believe that any pending audit is reasonably likely to result in the removal,
revocation, suspension or other termination of the Company’s authority to
operate under the Licensing Requirements.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 14
of 42
(hh) Neither
the Company nor, to the Company’s knowledge, any of the Company’s directors,
officers or employees has violated: (i) the Bank Secrecy Act, as amended, (ii)
the Money Laundering Control Act of 1986, as amended, (iii) the Foreign Corrupt
Practices Act, or (iv) the Uniting and Strengthening of America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT
ACT)
Act of 2001, and/or the rules and regulations promulgated under any such law,
or
any successor law, except for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect.
(ii) Neither
the Company nor any of its Affiliates has, prior to the date hereof, made any
offer or sale of any securities which are required to be “integrated” pursuant
to the Securities Act or the Rules and Regulations with the offer and sale
of
the Securities pursuant to the Registration Statement.
(jj) Except
as
disclosed in the Registration Statement, the Disclosure Package and the
Prospectus, no holder of any Relevant Security has any rights to require
registration of any Relevant Security as part or on account of, or otherwise
in
connection with, the offer and sale of the Securities contemplated hereby,
and
any such rights so disclosed have either been fully complied with by the Company
or effectively waived by the holders thereof, and any such waivers remain in
full force and effect.
(kk) Except
as
disclosed in the Registration Statement, the Disclosure Package and the
Prospectus, no holder of any Relevant Security has any rights of rescission
of
similar rights with respect to the Relevant Securities held by them.
(ll) The
Company is not and, at all times up to and including consummation of the
transactions contemplated by this Agreement, and after giving effect to
application of the net proceeds of the Offering, will not be, subject to
registration as an “investment company” under the Investment Company Act of
1940, as amended, and is not and will not be an entity “controlled” by an
“investment company” within the meaning of such act.
(mm) The
Company is not and, at all times up to and including consummation of the
transactions contemplated by this Agreement, and after giving effect to the
application of the net proceeds of the Offering as described in the Registration
Statement, the Disclosure Package and the Prospectus, will not be, subject
to
the requirements of, or regulated by, the Commodity Exchange Act (the "CEA").
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 15
of 42
(nn) Except
as
disclosed in the Registration Statement, the Disclosure Package and the
Prospectus, there are no contracts, agreements or understandings between the
Company and any Person that would give rise to a valid claim against the Company
or any Underwriter for a brokerage commission, finder’s fee or other like
payment in connection with the transactions contemplated by this Agreement
or
any arrangements, agreements, understandings, payments or issuance with respect
to the Company or any of its officers, directors, shareholders, partners,
employees or Affiliates that may affect the Underwriters’ compensation as
determined by FINRA.
(oo) The
Company owns or leases all such properties as are necessary to the conduct
of
its business as presently operated and as proposed to be operated as described
in the Registration, the Disclosure Package and the Prospectus. The Company
has
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by it, in each case free and
clear of all Liens except such as are described in the Registration Statement,
the Disclosure Package and the Prospectus or such as do not (individually or
in
the aggregate) materially affect the business or prospects of the Company.
Any
real property and buildings held under lease or sublease by the Company is
held
by under valid, subsisting and enforceable leases with such exceptions as are
not material to, and do not interfere with, the use made and proposed to be
made
of such property and buildings by the Company. The Company has not received
any
notice of any claim adverse to its ownership of any real or personal property
or
of any claim against the continued possession of any real property, whether
owned or held under lease or sublease by the Company.
(pp) The
Company maintains insurance of the types and in the amounts which are customary
for companies engaged in similar businesses, including, but not limited to:
(i)
directors’ and officers’ insurance (including insurance covering the Company,
its directors and officers for liabilities or losses arising in connection
with
this Offering, including, without limitation, liabilities or losses arising
under the Securities Act, the Exchange Act, the Rules and Regulations and
applicable foreign securities laws), (ii) insurance covering real and personal
property owned or leased by the Company against theft, damage, destruction,
acts
of vandalism and all other risks customarily insured against, (iii) business
interruption insurance and (iv) product liability insurance. There are no claims
by the Company under any policy or instrument described in this paragraph as
to
which any insurance company is denying liability or defending under a
reservation of rights clause. All of the insurance policies described in this
paragraph are in full force and effect. The Company has not been refused any
insurance coverage sought or applied for, and the Company has no reason to
believe that it will not be able to renew its existing insurance coverage as
and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have
a
Material Adverse Effect.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 16
of 42
(qq) The
Company has accurately prepared and timely filed all federal, state, foreign and
other tax returns that are required to be filed by it and has paid or made
provision for the payment of all taxes, assessments, governmental or other
similar charges, including without limitation, all sales and use taxes and
all
taxes which the Company is obligated to withhold from amounts owing to
employees, creditors and third parties, with respect to the periods covered
by
such tax returns (whether or not such amounts are shown as due on any tax
return). No deficiency assessment with respect to a proposed adjustment of
the
Company’s federal, state, local or foreign taxes is presently in effect or is
pending or, to the Company’s knowledge, threatened. The accruals and reserves on
the books and records of the Company in respect of tax liabilities for any
taxable period not finally determined are adequate to meet any assessments
and
related liabilities for any such period and, since the date of the Company’s
most recent audited financial statements, the Company has not incurred any
material liability for taxes other than in the ordinary course of its business.
There is no tax lien, whether imposed by any federal, state, foreign or other
taxing authority, outstanding against the assets, properties or business of
the
Company.
(rr) No
labor
disturbance by the employees of the Company currently exists or is likely to
occur.
(ss) The
Company has at all times operated its business in material compliance with
all
Environmental Laws, and no material expenditures are or will be required in
order to comply therewith. The Company has not received any notice or
communication that relates to or alleges any actual or potential violation
or
failure to comply with any Environmental Laws that will result in a Material
Adverse Effect. As used herein, the term “Environmental
Laws”
means
all applicable laws and regulations, including any licensing, permits or
reporting requirements, and any action by a Federal state or local government
entity pertaining to the protection of the environment, protection of public
health, protection of worker health and safety, or the handling of hazardous
materials, including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et
seq., the Comprehensive Environmental Response, Compensation and Liability
Act
of 1980, 42 U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33
U.S.C. § 1321, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1, et
seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et
seq.
(tt) Except
as
set forth in the Registration Statement, the Disclosure Package or the
Prospectus, the Company is not a party to an “employee benefit plan,” as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974
(“ERISA”)
which:
(i) is subject to any provision of ERISA and (ii) is or was at any time
maintained, administered or contributed to by the Company and covers any
employee or former employee of the Company or any ERISA Affiliate (as defined
hereafter). These plans are referred to collectively herein as the “Employee
Plans.”
For
purposes of this paragraph, “ERISA
Affiliate”
of
any
person or entity means any other person or entity which, together with that
person or entity, could be treated as a single employer under Section 414(m)
of
the Internal Revenue Code of 1986, as amended (the “Code”),
or is
an “affiliate,” whether or not incorporated, as defined in Section 407(d)(7) of
ERISA, of the person or entity.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 17
of 42
(uu) The
Representatives have been provided with written evidence of each employment,
severance or other similar arrangement or policy and each material plan or
arrangement providing for insurance coverage (including any self-insured
arrangements), workers’ compensation, disability benefits, severance benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits
or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation, or post-retirement
insurance, compensation or benefits which: (i) is not an Employee Plan, (ii)
is
entered into, maintained or contributed to, as the case may be, by the Company
or any of their respective ERISA Affiliates, and (iii) covers any employee
or
former employee of the Company or any of their respective ERISA Affiliates.
These contracts, plans and arrangements are referred to collectively in this
Agreement as the “Benefit
Arrangements.”
Each
Benefit Arrangement has been maintained in substantial compliance with its
terms
and with requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to that Benefit Arrangement.
(vv) Except
as
set forth in the Registration Statement, the Disclosure Package or the
Prospectus, there is no liability in respect of post-retirement health and
medical benefits for retired employees of the Company or any of their respective
ERISA Affiliates other than medical benefits required to be continued under
applicable law, determined using assumptions that are reasonable in the
aggregate, over the fair market value of any fund, reserve or other assets
segregated for the purpose of satisfying such liability (including for such
purposes any fund established pursuant to Section 401(h) of the Code). With
respect to any of the Company’s Employee Plans which are “group health plans”
under Section 4980B of the Code and Section 607(1) of ERISA, there has been
material compliance with all requirements imposed there under such that the
Company or their respective ERISA Affiliates have no (and will not incur any)
loss, assessment, tax penalty, or other sanction with respect to any such
plan.
(ww) Except
as
set forth in the Registration Statement, the Disclosure Package or the
Prospectus, and except with respect to the Company’s written agreements or
arrangements with certain Company employees (whose names and remuneration
arrangements with the Company have been previously disclosed in writing by
the
Company to the Representatives), the Company is not a party to or subject to
any
employment contract or arrangement providing for annual future compensation,
or
the opportunity to earn annual future compensation (whether through fixed
salary, bonus, commission, options or otherwise) to any officer, consultant,
director or employee.
(xx) The
execution of this Agreement, the Representatives’ Purchase Option or any other
Transaction Document and consummation of the transactions contemplated hereby
and thereby does not constitute a triggering event under any Employee Plan
or
any other employment contract, whether or not legally enforceable, which (either
alone or upon the occurrence of any additional or subsequent event) will or
may
result in any payment (of severance pay or otherwise), acceleration, increase
in
vesting, or increase in benefits to any current or former participant, employee
or director of the Company.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 18
of 42
(yy) No
“prohibited transaction” (as defined in either Section 406 of the ERISA or
Section 4975 of Code), “accumulated funding deficiency” (as defined in Section
302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement under
Section 4043 of ERISA has been waived) has occurred with respect to any employee
benefit plan for which the Company would have any liability; each employee
benefit plan of the Company is in compliance in all material respects with
applicable law, including (without limitation) ERISA and the Code; the Company
has not incurred and does not expect to incur liability under Title IV of ERISA
with respect to the termination of, or withdrawal from any “pension plan”; and
each employee benefit plan of the Company that is intended to be qualified
under
Section 401(a) of the Code is so qualified and nothing has occurred, whether
by
action or by failure to act, which could cause the loss of such qualification.
(zz) Neither
the Company nor, to the Company’s knowledge, any of the Company’s officers,
directors, employees or agents has at any time during the last five (5) years:
(i) made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or (ii) made
any
payment to any federal or state governmental officer or official, or other
Person charged with similar public or quasi-public duties, other than payments
that are not prohibited by the laws of the United States of any jurisdiction
thereof.
(aaa) The
Company has not offered, or caused the Underwriters to offer, the Firm Units
to
any Person or entity with the intention of unlawfully influencing: (i) a
customer or supplier of the Company or its Affiliates to alter the customer’s or
supplier’s level or type of business with the Company or any of its Affiliates
or (ii) a journalist or publication to write or publish favorable information
about the Company, any Affiliate or their respective products or
services.
(bbb) Except
as
described in the Disclosure Package, the Prospectus and the Registration
Statement, the Company: (i) is and at all times has been in full compliance
with
all statutes, rules, regulations or guidance applicable to the ownership,
testing, development, manufacture, packaging, processing, use, distribution,
marketing, labeling, promotion, sale, offer for sale, storage, import, export
or
disposal of any product manufactured, distributed or sold by the Company or
any
component thereof (such statutes, rules, regulations or guidance, collectively,
“Applicable
Laws”);
(ii)
has not received any notice of adverse finding, warning letter, untitled letter
or other correspondence or notice from any federal, state, local or foreign
governmental authority having authority over the Company (“Governmental
Authority”)
alleging or asserting noncompliance with any Applicable Laws or any licenses,
certificates, approvals, clearances, authorizations, permits and supplements
or
amendments thereto required by any such Applicable Laws (“Authorizations”);
(iii)
possesses all Authorizations and such Authorizations are valid and in full
force
and effect and are not in violation of any term of any such Authorizations;
(iv)
has not received notice of any claim, suit, proceeding, hearing, enforcement,
audit, investigation, arbitration or other action from any Governmental
Authority or third party alleging that any product operation or activity is
in
violation of any Applicable Laws or Authorizations and has no knowledge that
any
such Governmental Authority or third party is considering any such claim, suit,
proceeding, hearing, enforcement, audit, investigation, arbitration or other
action; (v) has not received notice that any Governmental Authority has taken,
is taking or intends to take action to limit, suspend, modify or revoke any
Authorizations and has no knowledge that any such Governmental Authority is
considering such action; (vi) has filed, obtained, maintained or submitted
all
material reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any Applicable Laws
or
Authorizations and that all such material reports, documents, forms, notices,
applications, records, claims, submissions and supplements or amendments were
complete and correct in all material respects on the date filed (or were
corrected or supplemented by a subsequent submission), except, in the case
of
each of clauses (i), (ii) and (iii), for any default, violation or event that
would not, individually or in the aggregate, have or reasonably be expected
to
have a Material Adverse Effect.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 19
of 42
(ccc) As
used
in this Agreement, references to matters being “material”
with
respect to the Company shall mean a material event, change, condition, status
or
effect related to the condition (financial or otherwise), properties, assets
(including intangible assets), liabilities, business, prospects (as such
prospects are disclosed or described in the Disclosure Package or the
Prospectus), operations or results of operations of the Company and the
Subsidiary, taken as a whole.
(ddd) As
used
in this Agreement, the term “knowledge
of the Company”
(or
similar language) shall mean the knowledge of the officers and directors of
the
Company who are named in the Disclosure Package and the Prospectus, with the
assumption that such officers and directors shall have made reasonable and
diligent inquiry of the matters presented (with reference to what is customary
and prudent for the applicable individuals in connection with the discharge
by
the applicable individuals of their duties as officers or directors of the
Company).
(eee) Any
certificate signed by or on behalf of the Company and delivered to the
Representatives or to ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PC, counsel for the Representatives
(“Underwriters’
Counsel”),
shall
be deemed to be a representation and warranty by the Company to each Underwriter
listed on Schedule
A
hereto
as to the matters covered thereby.
2. Purchase,
Sale and Delivery of the Securities and the Representatives’ Purchase
Option.
(a) On
the
basis of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to each Underwriter and each Underwriter, severally and not
jointly, agrees to purchase from the Company, at a purchase price per share
of
$4.75, the number of Firm Units set forth opposite their respective names on
Schedule
A
hereto
together with any additional number of Units which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 9 hereof.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
20
of 42
(b) Payment
of the purchase price for, and delivery of certificates representing, the Firm
Units shall be made at the offices of the Underwriters’ Counsel, ▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be agreed
upon by the Representatives and the Company, at 10:00 A.M., New York City time,
on the third (3rd) or, as permitted under Rule 15c6-1 under the Exchange Act,
fourth (4th) business day (unless postponed in accordance with the provisions
of
Section 9 hereof) following the date of the effectiveness of the Registration
Statement, or such other time not later than ten (10) business days after such
date as shall be agreed upon by the Representatives and the Company as permitted
under Rule 15c6-1 under the Exchange Act (such time and date of payment and
delivery being herein called the “Closing
Date”).
The
closing of the payment of the purchase price for, and delivery of certificates
representing, the Firm Units is referred to herein as the “Closing.”
(c) Payment
of the purchase price for the Firm Units shall be made by wire transfer in
immediately available funds to or as directed by the Company upon delivery
of
certificates for the Firm Units to the Representatives through the facilities
of
The Depository Trust Company (the “DTC”)
for
the respective accounts of the several Underwriters. Certificates representing
the Firm Units shall be registered in such name or names and shall be in such
denominations as the Representatives may request at least two (2) business
days
before the Closing Date.
(d) In
addition, on the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set
forth, the Company hereby grants to the Underwriters an option to purchase
up to
an aggregate of 1,650,000 Additional Units at the same purchase price per share
to be paid by the Underwriters for the Firm Units as set forth in Section 2(a)
above, for the sole purpose of covering over-allotments in the sale of Firm
Units by the Underwriters. This option may be exercised at any time and from
time to time on or before the forty-fifth (45th)
day
following the final date of the Prospectus, by written notice from the
Representatives to the Company. Such notice shall set forth the aggregate number
of Additional Units as to which the option is being exercised and the date
and
time, as reasonably determined by the Representatives, when the Additional
Units
are to be delivered (any such date and time being herein sometimes referred
to
as the “Additional
Closing Date”);
provided,
however,
that no
Additional Closing Date shall occur earlier than the Closing Date or earlier
than the third (3rd) full business day after the date on which the option shall
have been exercised nor later than the eighth (8th) full business day after
the
date on which the option shall have been exercised (unless such time and date
are postponed in accordance with the provisions of Section 9 hereof). Upon
any
exercise of the option as to all or any portion of the Additional Units, each
Underwriter, acting severally and not jointly, agrees to purchase from the
Company the number of Additional Units that bears the same proportion of the
total number of Additional Units then being purchased as the number of Firm
Units set forth opposite the name of such Underwriter on Schedule
A
hereto
(or such number increased as set forth in Section 9 hereof) bears to the total
number of Firm Units that the Underwriters have agreed to purchase hereunder,
subject, however, to such adjustments to eliminate fractional shares in the
sole
discretion of the Representatives.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
21
of 42
(e) Payment
of the purchase price for, and delivery of certificates representing, the
Additional Units shall be made at the office of Underwriters’ Counsel, or at
such other place as shall be agreed upon by the Representatives and the Company,
at 10:00 A.M., New York City time, on the Additional Closing Date (unless
postponed in accordance with the provisions of Section 9 hereof), or such other
time as shall be agreed upon by the Representatives and the Company.
(f) Payment
of the purchase price for the Additional Units shall be made by wire transfer
in
immediately available funds to or as directed by the Company upon delivery
of
certificates for the Additional Units to the Representatives through the
facilities of The Depository Trust Company for the respective accounts of the
several Underwriters. Certificates representing the Additional Units shall
be
registered in such name or names and shall be in such denominations as the
Representatives may request at least two (2) business days before the Additional
Closing Date. The Company will permit the Representatives to examine and package
such certificates for delivery at least one full business day prior to the
Additional Closing Date.
(g) On
the
Closing, the Company will further issue and sell to the Representatives or,
at
the direction of the Representatives, to other Underwriters or selling group
members or bona fide officers of the Underwriters or selling group members,
for
an aggregate purchase price of $100, the Representatives’ Purchase Option, which
shall entitle the holders thereof to purchase an aggregate of 550,000 units.
The
Representatives’ Units are identical to the Firm Units except that the warrants
included in the Representatives’ Purchase Option have an exercise price of $6.60
per share (110% of the exercise price of the Warrants). The Representatives’
Purchase Option is exercisable at $5.50 per unit, commencing one year from
the
effective date of the Registration Statement and expiring five years from the
effective date of the Registration Statement.
3. Offering.
Upon
authorization of the release of the Firm Units or, as the case may be, the
Additional Units, by the Representatives, the Underwriters propose to offer
the
Units for sale to the public upon the terms and conditions set forth in the
Prospectus.
4. Covenants
of the Company.
The
Company acknowledges, covenants and agrees with the Underwriters
that:
(a) The
Registration Statement and any amendments thereto have been declared effective,
and if Rule 430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b), the Company will file the Prospectus (properly completed
if
Rule 430A has been used) pursuant to Rule 424(b) within the prescribed time
period and will provide evidence satisfactory to the Representatives of such
timely filing.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
22
of 42
(b) The
Company will notify the Representatives immediately (and, if requested by the
Representatives, will confirm such notice in writing): (i) when the Registration
Statement and any amendments thereto become effective, (ii) of any request
by
the Commission for any amendment of or supplement to the Registration Statement,
the Sale Preliminary Prospectus or the Prospectus or for any additional
information, (iii) of the Company’s intention to file or prepare any supplement
or amendment to the Registration Statement or the Prospectus, (iv) of the
mailing or the delivery to the Commission for filing of any amendment of or
supplement to the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, including but not limited to Rule 462(b) under the Securities Act,
(v) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereto or of the initiation, or the threatening, of any proceedings therefor,
it being understood that the Company shall make every effort to avoid the
issuance of any such stop order, (vi) of the receipt of any comments from the
Commission, and (vii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Units for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose to enter a stop order at any time,
the
Company will make every reasonable effort to prevent the issuance of any such
stop order and, if issued, to obtain the lifting of such order as soon as
possible. The Company will not file any amendment to the Registration Statement
or any amendment of or supplement to the Sale Preliminary Prospectus or the
Prospectus (including the prospectus required to be filed pursuant to Rule
424(b)) that differs from the prospectus on file at the time of the
effectiveness of the Registration Statement or file any document under the
Exchange Act if such document would be deemed to be incorporated by reference
into the Prospectus to which the Representatives shall object in writing after
being timely furnished in advance a copy thereof. The Company will provide
the
Representatives with copies of all such amendments, filings and other documents
prior to any filing or other publication thereof and also afford the
Representatives a reasonable opportunity and time to review and comment thereon.
(c) The
Company shall comply with the Securities Act, the Exchange Act and all
applicable Rules and Regulations to permit completion of the distribution as
contemplated in this Agreement, the Registration Statement and the Prospectus.
If, at any time when a prospectus relating to the Public Securities is required
to be delivered under the Securities Act, the Exchange Act and all applicable
Rules and Regulations in connection with the sales of the Public Securities,
any
event shall have occurred as a result of which the Prospectus as then amended
or
supplemented would, in the judgment of the Underwriters or the Company, 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 existing at the time of delivery to the
purchaser, not misleading, or if, to comply with the Securities Act, the
Exchange Act or the Rules and Regulations, it shall be necessary at any time
to
amend or supplement the Prospectus or Registration Statement, or to file any
document which is an exhibit to the Registration Statement or the Prospectus
or
in any amendment thereof or supplement thereto, the Company will notify the
Representatives promptly and prepare and file with the Commission, subject
to
Section 4(a) hereof, an appropriate amendment or supplement (in form and
substance reasonably satisfactory to the Representatives) which will correct
such statement or omission or which will effect such compliance and will use
its
reasonable best efforts to have any amendment to the Registration Statement
declared effective as soon as possible.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
23
of 42
(d) The
Company will promptly deliver to the Underwriters and Underwriters’ Counsel a
signed copy of the Registration Statement, as initially filed and all amendments
thereto, including all consents and exhibits filed therewith, and will maintain
in the Company’s files manually signed copies of such documents for at least
five (5) years after the date of filing thereof. The Company will promptly
deliver to each of the Underwriters such number of copies of any Preliminary
Prospectus, the Sale Preliminary Prospectus, the Prospectus, the Registration
Statement, any Permitted Free Writing Prospectus (as defined below, if approved
in writing by the Representatives as provided for in Section 4(cc) hereto)
and
all amendments of and supplements to such documents, if any, and all documents
which are exhibits to the Registration Statement and Prospectus or any amendment
thereof or supplement thereto, as the Underwriters may reasonably request.
Prior
to 10:00 A.M., New York time, on the business day next succeeding the date
of
this Agreement and from time to time thereafter, the Company will furnish the
Underwriters with copies of the Prospectus in New York City in such quantities
as the Underwriters may reasonably request.
(e) The
Company consents to the use and delivery of the Sale Preliminary Prospectus
by
the Underwriters in accordance with Rule 430 and Section 4(b) of the Securities
Act.
(f) If
the
Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall both file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with
Rule
111 of the Securities Act by the earlier of: (i) 10:00 p.m., New York City
time,
on the date of this Agreement, and (ii) the time that confirmations are given
or
sent, as specified by Rule 462(b)(2).
(g) During
the period of 180 days after the effective date of the Registration Statement,
neither the Company nor any of its Affiliates will directly or indirectly,
take
any action which constitutes or is designed to cause or result in, or which
could reasonably be expected to constitute, cause or result in, the
stabilization or manipulation of the price of any security to facilitate the
sale or resale of the Units.
(h) The
Company will use its reasonable best efforts, in cooperation with the
Representatives, at or prior to the time of effectiveness of the Registration
Statement, to qualify the Units for offering and sale under the securities
laws
relating to the offering or sale of the Units of such jurisdictions, domestic
or
foreign, as the Representatives may designate and to maintain such qualification
in effect for so long as required for the distribution thereof; except that
in
no event shall the Company be obligated in connection therewith to qualify
as a
foreign corporation or to execute a general consent to service of process under
the laws of any such state where it is not presently qualified or where it
would
be subject to taxation as a foreign corporation.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
24
of 42
(i) The
Company will make generally available to its security holders and to the
Underwriters as soon as practicable, but in any event not later than twelve
(12)
months after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Securities Act), an audited earnings statement of the
Company complying with Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule 158).
(j) During
the twelve (12) months following the Closing Date, without the consent of the
Representatives which shall not be unreasonably withheld, the Company will
not
file any registration statement relating to the offer or sale of any of the
Company’s securities, except a Form S-8 filed with the Commission in connection
with any of the Company’s stock option plans.
(k) Each
of
the Company’s officers, directors and shareholders (collectively, the
“Lock-Up
Parties”)
shall,
prior to the Closing, enter into a written “lock-up” agreement with the
Representatives in the form in the form attached hereto as Annex I.
(l) The
Company will not, without the prior written consent of the Representatives,
offer, sell, contract to sell, pledge, or otherwise dispose of, (or enter into
any transaction which is designed to, or might reasonably be expected to, result
in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or any affiliate
of the Company or any person in privity with the Company or any affiliate of
the
Company) directly or indirectly, including the filing (or participation in
the
filing) of a registration statement with the Commission in respect of, or
establish or increase a put equivalent position or liquidate or decrease a
call
equivalent position within the meaning of Section 16 of the Exchange Act,
any other shares of Common Stock or any securities convertible into, or
exercisable, or exchangeable for, shares of Common Stock; or publicly announce
an intention to effect any such transaction, for a period of twelve (12) months
after the date of this Agreement, provided, however, that the Company may issue
and sell Common Stock pursuant to any employee stock option plan, stock
ownership plan or dividend reinvestment plan of the Company in effect at the
Time of Sale and the Company may issue Common Stock issuable upon the exercise
of the Warrants. Notwithstanding the foregoing, if (x) during the last
17 days of the twelve (12) month restricted period the Company issues an
earnings release or material news or a material event relating to the Company
occurs, or (y) prior to the expiration of the twelve (12) month restricted
period, the Company announces that it will release earnings results during
the
16-day period beginning on the last day of the twelve (12) month period, the
restrictions imposed in this clause shall continue to apply until the expiration
of the 18-day period beginning on the issuance of the earnings release or the
occurrence of the material news or material event. The Company will provide
the
Representatives and each Lock-Up Party with prior notice of any such
announcement that gives rise to an extension of the restricted
period.
(m) During
the twelve (12) months following the Closing, offer, sell or distribute any
convertible securities convertible at a price that may, at the time of
conversion, be less than the Fair Market Value of the Common Stock on the date
of the original sale, without the consent of the Representatives, which consent
shall not be unreasonably withheld. For purposes of this Section 4, the term
“Fair
Market Value”
shall
mean the greater of: (i) the average of the volume weighted average price of
the
Company’s common stock for each of the 10 trading days prior to the date of the
original sale; and (ii) the last sale price of the Common Stock, during normal
operating hours, as reported on the AMEX or NASDAQ Capital Market or NASDAQ
Global Market or any other exchange or electronic quotation system on which
the
Public Securities are then listed.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
25
of 42
(n) The
Company agrees that it will, upon completion of the proposed public offering
contemplated herein, for a period of no less than three (3) years, maintain
a
liability insurance policy affording coverage for the acts of its officers
and
directors.
(o) For
a
period of two (2) years from the Closing, the Company, at its expense, shall
provide the Representatives a subscription to the Company’s weekly Depository
Transfer Company Security Position Reports.
(p) During
the period of three (3) years from the effective date of the Registration
Statement, the Company will furnish or make available via ▇▇▇▇▇ to the
Underwriters copies of all reports or other communications (financial or other)
furnished to security holders or from time to time published or publicly
disseminated by the Company, and will deliver to the Underwriters: (i) as soon
as they are available, copies of any reports, financial statements and proxy
or
information statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is listed;
and (ii) such additional information concerning the business and financial
condition of the Company as the Representatives may from time to time reasonably
request.
(q) For
a
period ending at 5:00 p.m. Eastern time on the first business day following
the
fortieth (40th)
day
following the Closing Date, the Company will not issue press releases without
the Representatives’ prior written consent (which consent shall not unreasonably
be withheld, conditioned or delayed).
(r) The
Company will use its good faith best efforts to maintain its key person life
insurance with a insurer rated at least AA or better in the most recent addition
of “Best’s Life Reports” in the amount of $1,000,000 on the life of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ in full force and effect for a period of three (3) years from the
Closing Date. The Company shall be the sole beneficiary of such
policy.
(s) Upon
conclusion of the Offering, the Company will engage (for no less than two (2)
years from the Closing Date) a financial public relations firm mutually
acceptable to the Company and the Representatives.
(t) The
Company has or will retain a transfer and warrant agent reasonably acceptable
to
the Representatives and shall continue to retain such transfer agent (or another
transfer agent reasonably acceptable to the Representatives) for a period of
three (3) years following the Closing Date. During such three (3) year period,
the Company will furnish to the Underwriters at the Company’s sole cost and
expense such transfer sheets of the Company’s securities as the Representatives
may request, including subscriptions to the daily, weekly and monthly
consolidated transfer sheets of the Transfer Agent and DTC. Continental Stock
Transfer and Trust Company is acceptable to the Underwriters.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
26
of 42
(u) The
Company will apply the net proceeds from the sale of the Securities as set
forth
under the caption “Use of Proceeds” in the Prospectus. Without the written
consent of the Representatives, no proceeds of the Offering will be used to
pay
outstanding loans from officers, directors or shareholders or to pay any accrued
salaries or bonuses to any employees or former employees, except as disclosed
in
the Prospectus.
(v) The
Company will use its reasonable best efforts to effect and maintain the listing
of the Public Securities on the AMEX or other national securities exchange
acceptable to the Representatives for a period of at least five (5) years from
the date of this Agreement.
(w) The
Company, during the period when the Prospectus is required to be delivered
under
the Securities Act or the Exchange Act, will use its best efforts to file all
documents required to be filed with the Commission pursuant to the Securities
Act, the Exchange Act and the Rules and Regulations within the time periods
required thereby.
(x) The
Company will do and perform all things required to be done or performed under
this Agreement by the Company prior to the Closing Date or the Additional
Closing Date, as the case may be, and satisfy all conditions precedent to the
delivery of the Firm Units and the Additional Units.
(y) The
Company shall cause to be prepared and delivered to the Representatives, at
its
expense, within one (1) business day from the effective date of this Agreement,
an Electronic Prospectus to be used by the Underwriters in connection with
the
Offering. As used herein, the term “Electronic
Prospectus”
means
a
form of prospectus, and any amendment or supplement thereto, that meets each
of
the following conditions: (i) it shall be encoded in an electronic format,
reasonably satisfactory to the Representatives, that may be transmitted
electronically by the other Underwriters to offerees and purchasers of the
Units
for at least the period during which a Prospectus relating to the Units is
required to be delivered under the Securities Act; (ii) it shall disclose the
same information as the paper prospectus and prospectus filed pursuant to ▇▇▇▇▇,
except to the extent that graphic and image material cannot be disseminated
electronically, in which case such graphic and image material shall be replaced
in the electronic prospectus with a fair and accurate narrative description
or
tabular representation of such material, as appropriate; and (iii) it shall
be
in or convertible into a paper format or an electronic format, reasonably
satisfactory to the Representatives, that will allow recipients thereof to
store
and have continuously ready access to the prospectus at any future time, without
charge to such recipients (other than any fee charged for subscription to the
Internet as a whole and for on-line time). The Company hereby confirms that
it
has included or will include in the Prospectus filed pursuant to ▇▇▇▇▇ or
otherwise with the Commission and in the Registration Statement at the time
it
was declared effective an undertaking that, upon receipt of a request by an
investor or his or her representative within the period when a prospectus
relating to the Units is required to be delivered under the Securities Act,
the
Company shall transmit or cause to be transmitted promptly, without charge,
a
paper copy of the Prospectus.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
27
of 42
(z) The
Company represents and agrees that it has not made and will not, unless it
obtains the prior written consent of the Representatives, make any offer
relating to the Units that would constitute an “issuer free writing prospectus,”
as defined in Rule 433 promulgated under the Securities Act, or that would
otherwise constitute a “free writing prospectus,” as defined in Rule 405
promulgated under the Securities Act, required to be filed with the Commission.
Any such free writing prospectus consented to by the Representatives is
hereinafter referred to as a “Permitted
Free Writing Prospectus.”
The
Company represents that it has treated or agrees that it will treat each
Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as
defined in Rule 433 promulgated under the Securities Act, and has complied
and will comply with the requirements said Rule 433 applicable to any
Permitted Free Writing Prospectus, including timely filing with the Commission
where required, legending and record keeping.
(aa) The
Company agrees that it shall file with the Commission a post-effective amendment
to the Registration Statement, or a new registration statement, for the
registration under the Securities Act of, and it shall take such action as
is
necessary to qualify for sale in those states in which the Warrants and the
Representatives' Warrants were initially offered by the Company, the Common
Stock issuable upon exercise of the Warrants and the Representatives' Warrants.
In either case, the Company will use its best efforts to maintain the
effectiveness of such registration statement and to ensure that a current
prospectus is on file with the Commission until the expiration or redemption
of
the Warrants in accordance with the provisions of the Warrant Agreement;
provided, however, that the Company shall not be obligated to deliver shares
of
Common Stock issuable upon exercise of the Warrants, and shall not have
penalties nor be liable to the Warrant holder for failure to deliver shares,
if
a registration statement is not effective or a current prospectus is not on
file
with the Commission at the time of exercise of the Warrant by a holder. In
addition, the Company agrees to use its reasonable efforts to register such
securities under the blue sky laws of the states of residence of the exercising
warrant holders to the extent an exemption is not available. The Company shall
not call for redemption any of the Warrants unless a registration statement
covering the shares of Common Stock underlying the Warrants has been declared
effective by the Commission and remains current at least until the date fixed
for redemption. The provisions of this Section 4(aa) may not be modified,
amended or deleted without the prior written consent of the
Representatives.
5. Consideration;
Payment of Expenses.
(a) In
addition to selling the Units to the Underwriters at the price per Share set
forth in Section 2(a) hereof, in consideration of the services to be provided
for hereunder, the Company shall pay to the Representatives or its respective
designees a corporate finance fee equal to one percent (1.0%) of the gross
proceeds of the Offering (exclusive of proceeds from the sale of Additional
Units), less $25,000 previously paid. The corporate finance fee shall be
distributed as set forth in the Engagement Letter.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
28
of 42
(b) The
Representatives reserves the right to reduce any item of its compensation or
adjust the terms thereof as specified herein in the event that a determination
shall be made by FINRA to the effect that the Underwriters’ aggregate
compensation is in excess of FINRA rules or that the terms thereof require
adjustment.
(c) Whether
or not the transactions contemplated by this Agreement, the Registration
Statement and the Prospectus are consummated or this Agreement is terminated,
the Company hereby agrees to pay all costs and expenses incident to the
performance of its obligations hereunder, including the following:
(i) all
expenses in connection with the preparation, printing, “edgarization” and filing
of the Registration Statement, any Preliminary Prospectus and the Prospectus
and
any and all amendments and supplements thereto and the mailing and delivering
of
copies thereof to the Underwriters and dealers;
(ii) the
fees,
disbursements and expenses of the Company’s counsel and accountants in
connection with the registration of the Public Securities and the Representative
Securities under the Securities Act and the Offering;
(iii) the
cost
of producing this Agreement and any agreement among Underwriters, blue sky
survey, closing documents and other instruments, agreements or documents
(including any compilations thereof) in connection with the Offering, and,
upon
Closing, the cost of five (5) bound volumes of such documents for the
Representatives and the cost of eight (8) lucite deal cubes;
(iv) upon
Closing, the cost of two (2) “tombstone” advertisements to be placed in
appropriate daily or weekly periodicals of the Representatives’ choice (i.e.,
The Wall Street Journal and The New York Times) up to $35,000;
(v) all
expenses in connection with the qualification of the Public Securities and
the
Representatives’ Securities for offering and sale under state or foreign
securities or blue sky laws, including the fees and disbursements of the
Underwriters’ counsel in connection with such qualification and in connection
with any blue sky survey undertaken by such counsel;
(vi) the
filing fees incident to securing any required review by FINRA of the terms
of
the Offering;
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
29
of 42
(vii) all
fees
and expenses in connection with listing the Public Securities on the
AMEX;
(viii) all
expenses incurred by the Company in connection with attending or hosting
meetings with prospective purchasers of the Units (“Road
Show Expenses”);
(ix) any
stock
transfer taxes incurred in connection with the transfer of securities from
the
Company to the Underwriters pursuant to this Agreement or the
Offering;
(x) the
cost
of preparing stock certificates and warrant certificates representing the
Securities;
(xi) the
cost
and charges of any transfer agent or registrar for the Securities;
and
(xii) all
other
costs and expenses incident to the performance of the Company obligations
hereunder which are not otherwise specifically provided for in this
Section 5.
(d) At
the
Closing, the Company shall issue a payment of $20,000 to Underwriters’ Counsel
in consideration of “Blue Sky” services rendered. The Company shall also pay, as
due, state registration, qualification and filing fees, FINRA filing fees and
accountable out-of-pocket disbursements in connection with such registration,
qualification or filing.
(e) The
Company shall also reimburse the Underwriter for all fees, expenses and
disbursements relating to background checks of the Company’s officers and
directors.
(f) It
is
understood, however, that except as provided in this Section 5, and Sections
6,
7 and 10 hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel. Notwithstanding anything to the contrary
in
this Section 5, in the event that this Agreement is terminated pursuant to
Section 5 or 10(b) hereof, or subsequent to a Material Adverse Change, the
Company will pay all out of pocket accountable expenses of the Underwriters
(including but not limited to the reasonable fees and disbursements of counsel
to the Underwriters, up to $100,000) incurred in connection herewith, less
any
amounts previously advanced to the Representatives.
(i) Upon
completion of offering in excess of $35 million, and for a period of twenty-four
(24) months from the Closing, if the Company, or any successor to or any
subsidiary of the Company, proposes to consummate any public and private equity
and debt offerings during such 24 month period, the Company shall grant the
Representatives the right of first participation to act as lead underwriter
or
minimally as a co-manager with at least 30% of the economics; or, in the case
of
a three-handed deal 20% of the economics.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 30
of 42
6. Conditions
of Underwriters’ Obligations.
The
obligations of the Underwriters to purchase and pay for the Firm Units and
the
Additional Units as provided herein shall be subject to: (i) the accuracy of
the
representations and warranties of the Company herein contained in all material
respects, as of the date hereof and as of the Closing Date, (ii) the absence
from any certificates, opinions, written statements or letters furnished to
the
Representatives or to Underwriters’ Counsel pursuant to this Section 6 of any
material misstatement or omission, (iii) the performance in all material
respects by the Company of its obligations hereunder, and (iv) each of the
following additional conditions. For purposes of this Section 6, the terms
“Closing Date” and “Closing” shall refer to the Closing Date for the Firm Units
and any Additional Closing Date, if different, for the Additional Units, and
each of the foregoing and following conditions must be satisfied as of each
Closing.
(a) The
Registration Statement shall have become effective and all necessary regulatory
or listing approvals shall have been received not later than 5:30 P.M., New
York
time, on the date of this Agreement, or at such later time and date as shall
have been consented to in writing by the Representatives. If the Company shall
have elected to rely upon Rule 430A under the Securities Act, the Prospectus
shall have been filed with the Commission in a timely fashion in accordance
with
the terms hereof and a form of the Prospectus containing information relating
to
the description of the Units and the method of distribution and similar matters
shall have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period; and, at or prior to the Closing Date or the actual
time
of the Closing, no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued and
no
proceedings therefor shall have been initiated or threatened by the Commission.
(b) The
Representatives shall have received the favorable written opinion of Ellenoff
▇▇▇▇▇▇▇▇ & Schole LLP, legal counsel for the Company, dated as of the
Closing Date addressed to the Underwriters in form and substance reasonably
acceptable to the Representatives.
(c) The
Representatives shall have received the favorable written opinion of ▇▇▇▇▇▇▇▇▇▇
Helpern Syracuse & Hirschtritt LLP, special CEA counsel to the Company,
dated as of the Closing Date addressed to the Underwriters in form and substance
reasonably acceptable to the Representatives.
(d) All
proceedings taken in connection with the sale of the Firm Units and the
Additional Units as herein contemplated shall be satisfactory in form and
substance to the Representatives and to Underwriters’ Counsel.
(e) The
Representatives shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company, dated as of the Closing Date to
the
effect that: (i) the condition set forth in subsection (a) of this Section
6 has
been satisfied, (ii) as of the date hereof and as of the applicable Closing
Date, the representations and warranties of the Company set forth in Section
1
hereof are accurate in all material respects, (iii) as of the applicable Closing
Date, all agreements, conditions and obligations of the Company to be performed
or complied with hereunder on or prior thereto have been duly performed or
complied with in all material respects, (iv) the Company has not sustained
any
material loss or interference with their respective businesses, whether or
not
covered by insurance, or from any labor dispute or any legal or governmental
proceeding, (v) no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof has been issued and no
proceedings therefor have been initiated or threatened by the Commission, (vi)
there are no pro forma or as adjusted financial statements that are required
to
be included or incorporated by reference in the Registration Statement and
the
Prospectus pursuant to the Rules and Regulations which are not so included
or
incorporated by reference and (vii) subsequent to the respective dates as of
which information is given in the Registration Statement and the Prospectus
there has not been any material adverse change or any development involving
a
prospective material adverse change, whether or not arising from transactions
in
the ordinary course of business, in or affecting: (x) the business, condition
(financial or otherwise), results of operations, shareholders’ equity,
properties or prospects (as such prospects are disclosed or described in the
Disclosure Package or the Prospectus) of the Company; (y) the long-term debt
or
capital stock of the Company; or (z) the Offering or consummation of any of
the
other transactions contemplated by this Agreement, the Registration Statement,
the Disclosure Package and the Prospectus.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 31
of 42
(f) On
the
date of this Agreement, on the Closing Date and, as the case may be, on each
Additional Closing Date, the Representatives shall have received a “cold
comfort” letter from MK dated, respectively, as of the date of the date of
delivery and addressed to the Underwriters and in form and substance
satisfactory to the Representatives and Underwriters’ Counsel, confirming that
they are independent certified public accountants with respect to the Company
within the meaning of the Securities Act and the Rules and Regulations, and
stating, as of the date of delivery (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not more than
five (5) days prior to the date of such letter), the conclusions and findings
of
such firm with respect to the financial information and other matters relating
to the Registration Statement covered by such letter and, with respect to
letters issued as of Additional Closing Dates, confirming the conclusions and
findings set forth in such prior letter.
(g) Subsequent
to the execution and delivery of this Agreement or, if earlier, the dates as
of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been any material change in the capital stock or long-term
debt of the Company or any change or development involving a change, whether
or
not arising from transactions in the ordinary course of business, in the
business, condition (financial or otherwise), results of operations,
shareholders’ equity, properties or prospects (as such prospects are disclosed
or described in any Preliminary Prospectus or the Prospectus) of the Company,
including but not limited to the occurrence of any fire, flood, storm,
explosion, accident, act of war or terrorism or other calamity, the effect
of
which, in any such case described above, is, in the sole judgment of the
Representatives, so material and adverse as to make it impracticable or
inadvisable to proceed with the Offering on the terms and in the manner
contemplated in the Prospectus (exclusive of any supplement).
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page
32
of 42
(h) The
Representatives shall have received lock-up agreements from each Lock-Up Party,
duly executed by the applicable Lock-Up Party, in the form attached hereto
as
Annex
I.
(i) The
Public Securities shall have been approved for listing on the AMEX.
(j) FINRA
shall have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(k) No
action
shall have been taken and no statute, rule, regulation or order shall have
been
enacted, adopted or issued by any federal, state or foreign governmental or
regulatory authority that would, as of the Closing Date, prevent the issuance
or
sale of the Securities; and no injunction or order of any federal, state or
foreign court shall have been issued that would, as of the Closing Date, prevent
the issuance or sale of the Securities.
(l) The
Company shall have obtained a key person life insurance policy with an insurer
rated at least AA or better in the most recent edition of “Best Life Reports” in
the amount of at least $1,500,000 on the life of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and the
Company shall have provided written evidence of such assignment to the
Representatives.
(m) The
Company shall have furnished the Underwriters and Underwriters’ Counsel with
such other certificates, opinions or other documents as they may have reasonably
requested.
If
any of
the conditions specified in this Section 6 shall not have been fulfilled when
and as required by this Agreement, or if any of the certificates, opinions,
written statements or letters furnished to the Representatives or to
Underwriters’ Counsel pursuant to this Section 6 shall not be reasonably
satisfactory in form and substance to the Representatives and to Underwriters’
Counsel, all obligations of the Underwriters hereunder may be cancelled by
the
Representatives at, or at any time prior to, the consummation of the Closing,
and the obligations of the Underwriters to purchase the Additional Units may
be
cancelled by the Representatives at, or at any time prior to, the Additional
Closing Date. Notice of such cancellation shall be given to the Company in
writing, or by telephone. Any such telephone notice shall be confirmed promptly
thereafter in writing.
7. Indemnification.
(a) The
Company shall indemnify and hold harmless each Underwriter and each Person,
if
any, who controls each Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including,
but
not limited to, reasonable attorneys’ fees and any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they
or
any of them may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses
(or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, as originally filed or any amendment thereof, or any related
Preliminary Prospectus (including the Sale Preliminary Prospectus), the
Disclosure Package or the Prospectus (in light of the circumstances in which
such statement was made), or in any supplement thereto or amendment thereof,
or
in any materials or information provided to investors by, or with the approval
of, the Company in connection with the marketing of the offering and sale of
the
Firm Units, including any road show or investor presentations made to investors
by the Company (whether in person or electronically), or arise out of or are
based upon the omission or alleged omission made to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided,
however,
that the
Company will not be liable in any such case to the extent but only to the extent
that (i) any such loss, liability, claim, damage or expense arises out of or
is
based upon any such untrue statement or alleged untrue statement or omission
or
alleged omission made therein in reliance upon and in conformity with the
Underwriters’ Information or (ii) such statement or omission was corrected in
the Prospectus in conformity with the requirements of the Securities Act. This
indemnity agreement will be in addition to any liability, which the Company
may
otherwise have, including but not limited to other liability under this
Agreement. Notwithstanding the foregoing, the foregoing indemnity shall not
inure to the benefit of any Underwriter (or any person controlling such
Underwriter) from whom the person asserting any such losses, claims, damages
or
liabilities purchased Firm Units, if either a copy of a Permitted Free Writing
Prospectus (previously approved in writing by the Representatives as provided
for in Section 4(cc) hereof) intended for general distribution to prospective
investors or the Prospectus (in each case, as then amended or supplemented
if
the Company shall have furnished any amendments or supplements thereto) was
not
sent or given by or on behalf of such Underwriter to such person, if required
by
law to have been delivered, at or prior to the written confirmation of the
sale
of the Firm Units to such person, and if such Permitted Free Writing Prospectus
intended for general distribution to prospective investors or Prospectus, as
applicable, would have cured the defect giving rise to such losses, claims,
damages or liabilities, unless such failure is the result of noncompliance
by
the Company with Section 4(d) hereof.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 33
of 42
(b) Each
Underwriter, severally and not jointly, shall indemnify and hold harmless the
Company, each of the directors of the Company, each of the officers of the
Company who shall have signed the Registration Statement, and each other Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including
but
not limited to attorneys’ fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them
may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, as
originally filed or any amendment thereof, or any related Preliminary Prospectus
(including the Sale Preliminary Prospectus), the Disclosure Package or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out
of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with the Underwriters’
Information; provided,
however,
that in
no case shall any Underwriter be liable or responsible for any amount in excess
of the underwriting discount applicable to the Units to be purchased by such
Underwriter hereunder.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 34
of 42
(c) Promptly
after receipt by an indemnified party under subsection (a) or (b) above of
notice of any claims or the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification
is
to be sought in writing of the claim or the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve the indemnifying
party from any liability which it may have under this Section 7 to the extent
that it is not materially prejudiced as a result thereof and in any event shall
not relieve it from any liability that such indemnifying party may have
otherwise than on account of the indemnity agreement hereunder). In case any
such claim or action is brought against any indemnified party, and it notifies
an indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate, at its own expense in the defense of such action,
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 satisfactory to such indemnified
party; provided however, that counsel to the indemnifying party shall not
(except with the written consent of the indemnified party) also be counsel
to
the 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 one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, (iii) the
indemnifying party does not diligently defend the action after assumption of
the
defense, or (iv) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which 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 shall be borne by the indemnifying parties.
No indemnifying party shall, without the prior written consent of the
indemnified parties, effect any settlement or compromise of, or consent to
the
entry of judgment with respect to, any pending or threatened claim,
investigation, action or proceeding in respect of which indemnity or
contribution may be or could have been sought by an indemnified party under
this
Section 7 or Section 8 hereof (whether or not the indemnified party is an actual
or potential party thereto), unless (x) such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such claim, investigation, action or proceeding and
(ii) does not include a statement as to or an admission of fault, culpability
or
any failure to act, by or on behalf of the indemnified party, and (y) the
indemnifying party confirms in writing its indemnification obligations hereunder
with respect to such settlement, compromise or judgment.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 35
of 42
8. Contribution.
In
order to provide for contribution in circumstances in which the indemnification
provided for in Section 7 hereof is for any reason held to be unavailable from
any indemnifying party or is insufficient to hold harmless a party indemnified
thereunder, the Company and the Underwriters shall contribute to the aggregate
losses, claims, damages, liabilities and expenses of the nature contemplated
by
such indemnification provision (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of,
any
action, suit or proceeding or any claims asserted, but after deducting in the
case of losses, claims, damages, liabilities and expenses suffered by the
Company, any contribution received by the Company from Persons, other than
the
Underwriters, who may also be liable for contribution, including Persons who
control the Company within the meaning of Section 15 of the Securities Act
or
Section 20 of the Exchange Act, officers of the Company who signed the
Registration Statement and directors of the Company) as incurred to which the
Company and one or more of the Underwriters may be subject, in such proportions
as is appropriate to reflect the relative benefits received by the Company
and
the Underwriters from the Offering or, if such allocation is not permitted
by
applicable law, in such proportions as are appropriate to reflect not only
the
relative benefits referred to above but also the relative fault of the
Company and the Underwriters in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as
well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same proportion
as: (x) the total proceeds from the Offering (net of underwriting discounts
and
commissions but before deducting expenses) received by the Company bears to
(y) the underwriting discount or commissions received by the Underwriters,
in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault of each of the Company and of the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state
a material fact relates to information supplied by the Company or the
Underwriters and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by
any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 8. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 8 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any judicial, regulatory or other legal or
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission. Notwithstanding the provisions of this Section 8: (i) no Underwriter
shall be required to contribute any amount in excess of the amount by which
the
discounts and commissions applicable to the Units underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and (ii) 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
8,
each Person, if any, who controls an Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as such Underwriter, and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
or
Section 20 of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) of the immediately preceding sentence. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties, notify each party
or
parties from whom contribution may be sought, but the omission to so 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 under this Section 8
or
otherwise. The obligations of the Underwriters to contribute pursuant to this
Section 8 are several in proportion to the respective number of Units to be
purchased by each of the Underwriters hereunder and not joint.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 36
of 42
9. Underwriter
Default.
(a) If
any
Underwriter or Underwriters shall default in its or their obligation to purchase
Firm Units or Additional Units hereunder, and if the Firm Units or Additional
Units with respect to which such default relates (the “Default
Units”)
do not
(after giving effect to arrangements, if any, made by the Representatives
pursuant to subsection (b) below) exceed in the aggregate 10% of the number
of
Firm Units or Additional Units, each non-defaulting Underwriter, acting
severally and not jointly, agrees to purchase from the Company that number
of
Default Units that bears the same proportion of the total number of Default
Units then being purchased as the number of Firm Units set forth opposite the
name of such Underwriter on Schedule
A
hereto
bears to the aggregate number of Firm Units set forth opposite the names of
the
non-defaulting Underwriters, subject, however, to such adjustments to eliminate
fractional units as in the sole discretion of the Representatives.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 37
of 42
(b) In
the
event that the aggregate number of Default Units exceeds 10% of the number
of
Firm Units or Additional Units, as the case may be, the Representatives may
in
their discretion arrange for itself or for another party or parties (including
any non-defaulting Underwriter or Underwriters who so agree) to purchase the
Default Units on the terms contained herein. In the event that within five
calendar days after such a default the Representatives do not arrange for the
purchase of the Default Units as provided in this Section 9, this Agreement
or, in the case of a default with respect to the Additional Units, the
obligations of the Underwriters to purchase and of the Company to sell the
Additional Units shall thereupon terminate, without liability on the part of
the
Company with respect thereto or the Underwriters (except in each case as
provided in Sections 5, 7, 8, 10 and 11(d)), but nothing in this Agreement
shall
relieve a defaulting Underwriter or Underwriters of its or their liability,
if
any, to the other Underwriters and the Company for damages occasioned by its
or
their default hereunder.
(c) In
the
event that any Default Units are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
the Representatives or the Company shall have the right to postpone the Closing
Date or Additional Closing Date, as the case may be for a period, not exceeding
five (5) business days, in order to effect whatever changes may thereby be
made
necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment or supplement to the Registration Statement or the Prospectus which,
in the reasonable opinion of Underwriters’ Counsel, may thereby be made
necessary or advisable. The term “Underwriter” as used in this Agreement shall
include any party substituted under this Section 9 with like effect as if
it had originally been a party to this Agreement with respect to such Firm
Units
and Additional Units.
10. Survival
of Representations and Agreements.
All
representations and warranties, covenants and agreements of the Company and
the
Underwriters contained in this Agreement or in certificates of officers of
the
Company submitted pursuant hereto, including the agreements contained in Section
5, the indemnity agreements contained in Section 7 and the contribution
agreements contained in Section 8 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling Person thereof or by or on behalf of the Company,
any of its officers and directors or any controlling Person thereof, and shall
survive delivery of and payment for the Units to and by the Underwriters. The
covenants and agreements contained in Sections 5, 7, 8, this Section 10 and
Sections 14 and 15 hereof shall survive any termination of this Agreement,
including termination pursuant to Section 9 or 11 hereof.
11. Effective
Date of Agreement; Termination.
(a) This
Agreement shall become effective upon the later of: (i) receipt by the
Representatives and the Company of notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 38
of 42
(b) The
Representatives shall have the right to terminate this Agreement at any time
prior to the consummation of the Closing or to terminate the obligations of
the
Underwriters to purchase the Additional Units at any time prior to the
consummation of any closing to occur on an Additional Closing Date, as the
case
may be, if:
(i) any
domestic or international event or act or occurrence has materially disrupted,
or in the opinion of the Representatives will in the immediate future materially
disrupt, the market for the Company’s securities or securities in general; or
(ii) trading
on the AMEX, New York Stock Exchange, NASDAQ Capital Market or NASDAQ Global
Market shall have been suspended or been made subject to material limitations,
or minimum or maximum prices for trading shall have been fixed, or maximum
ranges for prices for securities shall have been required, on the AMEX, New
York
Stock Exchange, NASDAQ Capital Market or NASDAQ Global Market or by order of
the
Commission or any other governmental authority having jurisdiction; or
(iii) a
banking
moratorium has been declared by any state or federal authority or if any
material disruption in commercial banking or securities settlement or clearance
services shall have occurred; or
(iv) (A)
there
shall have occurred any outbreak or escalation of hostilities or acts of
terrorism involving the United States or there is a declaration of a national
emergency or war by the United States or (B) there shall have been any other
calamity or crisis or any change in political, financial or economic conditions,
or (C) since the respective dates as of which information is given in Sale
Preliminary Prospectus and the Prospectus (or any Permitted Free Writing
Prospectus, if any), the Representatives become aware of: (1) any change or
previously undisclosed matter effecting a material change in the capital stock
or debt of the Company or (2) any material change, any development involving
a
prospective material change, or any previously undisclosed matter effecting
a
material or prospective material change in or affecting the general affairs,
management, financial position, stockholders’ equity or results of operations of
the Company, other than as set forth or contemplated in Sale Preliminary
Prospectus and the Prospectus, if the effect of any such event set forth in
this
Section 11(b)(iv)(A), (B) or (C), in the sole judgment of the Representatives,
makes it impracticable or inadvisable to proceed with the offering, sale and
delivery of the Firm Units or the Additional Units, as the case may be, on
the
terms and in the manner contemplated by this Agreement and the
Prospectus.
(c) Any
notice of termination pursuant to this Section 11 shall be in
writing.
(d) If
this
Agreement shall be terminated pursuant to any of the provisions hereof (other
than pursuant to Section 9(b) hereof), or if the sale of the Units provided
for
herein is not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, the Company will, subject to demand by
the
Representatives, reimburse the Underwriters for all out-of-pocket expenses
(including the reasonable fees and expenses of their counsel), incurred by
the
Underwriters in connection herewith.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 39
of 42
12. Notices.
All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing, and:
(a) if
sent
to the Representatives or any Underwriter, shall be mailed, delivered, or faxed
and confirmed in writing, to Maxim Group LLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Director of Investment Banking, in each
case, with a copy to Underwriters’ Counsel at ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PC, ▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Esq.; and
(b) if
sent
to the Company shall be mailed, delivered, or faxed and confirmed in writing
to
the Company and its counsel at the addresses set forth in the Registration
Statement, with a copy to Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.;
provided,
however,
that any
notice to an Underwriter pursuant to Section 7 shall be delivered or sent by
mail or facsimile transmission to such Underwriter at its address set forth
in
its acceptance facsimile to the Representatives, which address will be supplied
to any other party hereto by the Representatives upon request. Any such notices
and other communications shall take effect at the time of receipt thereof.
13. Parties.
This
Agreement shall inure solely to the benefit of, and shall be binding upon,
the
Underwriters, the Company and the controlling Persons, directors, officers,
employees and agents referred to in Sections 6 and 7 hereof, and their
respective successors and assigns, and no other Person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be
for
the sole and exclusive benefit of the parties hereto and said controlling
Persons and their respective successors, officers, directors, heirs and legal
representatives, and it is not for the benefit of any other Person. The term
“successors and assigns” shall not include a purchaser, in its capacity as such,
of Units from any of the Underwriters.
14. Governing
Law.
This
Agreement shall be deemed to have been executed and delivered in New York and
both this Agreement and the transactions contemplated hereby shall be governed
as to validity, interpretation, construction, effect, and in all other respects
by the laws of the State of New York, without regard to the conflicts of laws
principals thereof (other than Section 5-1401 of The New York General
Obligations Law). Each of the Underwriters and the Company: (a) agrees that
any
legal suit, action or proceeding arising out of or relating to this Agreement
and/or the transactions contemplated hereby shall be instituted exclusively
in
the Supreme Court of the State of New York, New York County, or in the United
States District Court for the Southern District of New York, (b) waives any
objection which it may have or hereafter to the venue of any such suit, action
or proceeding, and (c) irrevocably consents to the jurisdiction of Supreme
Court
of the State of New York, New York County, or in the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. Each of the Underwriters and the Company further agrees to accept
and acknowledge service of any and all process which may be served in any such
suit, action or proceeding in the Supreme Court of the State of New York, New
York County, or in the United States District Court for the Southern District
of
New York and agrees that service of process upon the Company mailed by certified
mail to the Company’s address or delivered by Federal Express via overnight
delivery shall be deemed in every respect effective service of process upon
the
Company, in any such suit, action or proceeding, and service of process upon
the
Underwriters mailed by certified mail to the Underwriters’ address or delivered
by Federal Express via overnight delivery shall be deemed in every respect
effective service process upon the Underwriter, in any such suit, action or
proceeding. THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT
PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS)
HEREBY WAIVES ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
CLAIM
BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION STATEMENT, THE
SALE PRELIMINARY PROSPECTUS AND THE PROSPECTUS.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 40
of 42
15. Entire
Agreement.
This
Agreement, together with the schedule and exhibits attached hereto and as the
same may be amended from time to time in accordance with the terms hereof,
contains the entire agreement among the parties hereto relating to the subject
matter hereof and there are no other or further agreements outstanding not
specifically mentioned herein.
16. Severability.
If any
term or provision of this Agreement or the performance thereof shall be invalid
or unenforceable to any extent, such invalidity or unenforceability shall not
affect or render invalid or unenforceable any other provision of this Agreement
and this Agreement shall be valid and enforced to the fullest extent permitted
by law.
17. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument. Delivery of a signed counterpart of this Agreement
by facsimile transmission shall constitute valid and sufficient delivery
thereof.
18. Headings.
The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
19. Time
is of the Essence.
Time
shall be of the essence of this Agreement. As used herein, the term “business
day” shall mean any day when the Commission’s office in Washington, D.C. is open
for business.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 41
of 42
20. No
Fiduciary Relationship.
The
Company hereby acknowledges that the Underwriters are acting solely as
underwriters in connection with the offering of the Company’s securities. The
Company further acknowledges that the Underwriters are acting pursuant to a
contractual relationship created solely by this Agreement entered into on an
arm’s length basis and in no event do the parties intend that the Underwriters
act or be responsible as a fiduciary to the Company, its management,
stockholders, creditors or any other person in connection with any activity
that
the Underwriters may undertake or have undertaken in furtherance of the offering
of the Company’s securities, either before or after the date hereof. The
Underwriters hereby expressly disclaim any fiduciary or similar obligations
to
the Company, either in connection with the transactions contemplated by this
Agreement or any matters leading up to such transactions, and the Company hereby
confirms its understanding and agreement to that effect. The Company and the
Underwriters agree that they are each responsible for making their own
independent judgments with respect to any such transactions, and that any
opinions or views expressed by the Underwriters to the Company regarding such
transactions, including but not limited to any opinions or views with respect
to
the price or market for the Company’s securities, do not constitute advice or
recommendations to the Company. The Company hereby waives and releases, to
the
fullest extent permitted by law, any claims that the Company may have against
the Underwriters with respect to any breach or alleged breach of any fiduciary
or similar duty to the Company in connection with the transactions contemplated
by this Agreement or any matters leading up to such transactions.
Maxim
Group LLC
Canaccord
▇▇▇▇▇ Inc.
________________,
2008
Page 42
of 42
If
the
foregoing correctly sets forth your understanding, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute
a
binding agreement among us.
Very
truly yours,
By:
________________________________
Name:
Title:
Accepted
by the Representatives, acting for itself and as
Representatives
of the Underwriters named on Schedule
A
attached hereto,
as
of the date first written above:
MAXIM
GROUP LLC
By:
_______________________________________
Name:
Title:
CANACCORD
▇▇▇▇▇ INC.
By:
_______________________________________
Name:
Title:
[Signature
Page to Underwriting Agreement]
SCHEDULE
A
Underwriters
|
Underwriter
|
Total
Number of Firm
Units
to be Purchased
|
Number
of Additional
Units
to be Purchased
if
Option is Fully Exercised
|
|
Maxim
Group LLC
|
11,000,000
|
1,650,000
|
|
Canaccord
▇▇▇▇▇ Inc.
|
|
|
|
TOTAL
|
11,000,000
|
1,650,000
|
ANNEX
I
_____________,
2008
MAXIM
GROUP LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
CANACCORD
▇▇▇▇▇ INC.
c/o
Maxim
Group LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Re:
SMG
Indium Resources Ltd. Lock-Up Agreement
Ladies
and Gentlemen:
This
letter agreement (this “Agreement”)
relates to the public offering (the “Offering”)
by SMG
Indium Resources Ltd., a company organized and existing under the laws of the
State of Delaware (the “Company”),
of
shares of units of its securities (the “Units”),
each
unit consisting of one share of the Company’s common stock, par value $0.001 per
share (the “Common
Stock”),
and
one warrant to purchase one share of Common Stock (the “Warrants”).
The
Offering is governed by a certain Underwriting Agreement (the “Underwriting
Agreement”),
to be
entered into by and between the Company, Maxim Group LLC and Canaccord ▇▇▇▇▇
Inc. (the “Representatives”),
as
representatives of the several underwriters named therein.
In
order
to induce the Representatives to underwrite the Offering, the undersigned hereby
agrees that, without the prior written consent of the Representatives, which
consent shall not be unreasonably withheld, during the period from the date
hereof until and through the twelve (12) month anniversary of the closing of
the
offering contemplated by the Underwriting Agreement (the “Lock-Up
Period”),
the
undersigned: (a) will not, directly or indirectly, offer, sell, agree to offer
or sell, solicit offers to purchase, grant any call option or purchase any
put
option with respect to, pledge, borrow or otherwise dispose of any Relevant
Security (as defined below), and (b) will not establish or increase any “put
equivalent position” or liquidate or decrease any “call equivalent position”
with respect to any Relevant Security (in each case within the meaning of
Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and
regulations promulgated thereunder), or otherwise enter into any swap,
derivative or other transaction or arrangement that transfers to another, in
whole or in part, any economic consequence of ownership of a Relevant Security,
whether or not such transaction is to be settled by delivery of Relevant
Securities, other securities, cash or other consideration. For the purpose
of
allowing you to comply with FINRA Rule 2711(f)(4), if (1) during the last 17
days of the Lock-Up Period, the Company releases earnings results or publicly
announces other material news or a material event relating to the Company occurs
or (2) prior to the expiration of the Lock-Up Period, the Company announces
that
it will release earnings results during the 16 day period beginning on the
last
day of the Lock-Up Period, then in each case the Lock-Up Period will be extended
until the expiration of the 18 day period beginning on the date of release
of
the earnings results or the public announcement regarding the material news
or
the occurrence of the material event, as applicable, unless you waive, in
writing, such extension. The undersigned hereby acknowledges that the Company
has agreed not to accelerate the vesting of any option or warrant or the lapse
of any repurchase right prior to the expiration of the Lock-Up Period. In
furtherance of the foregoing, the Company, and any duly appointed transfer
agent
for the registration or transfer of the securities described herein, are hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this Lock-Up Agreement.
I-1
As
used
herein, the term “Relevant
Security”
means
any Units, Common Stock, Warrants or other security of the Company thereof
that
is convertible into, or exercisable or exchangeable for Common Stock or equity
securities of the Company or that holds the right to acquire any Common Stock
or
equity securities of the Company or any other such Relevant Security.
The
undersigned hereby authorizes the Company during the Lock-Up Period to cause
any
transfer agent for the Relevant Securities to decline to transfer, and to note
stop transfer restrictions on the stock register and other records relating
to,
Relevant Securities for which the undersigned is the record holder and, in
the
case of Relevant Securities for which the undersigned is the beneficial but
not
the record holder, agrees during the Lock-Up Period to cause the record holder
to cause the relevant transfer agent to decline to transfer, and to note stop
transfer restrictions on the stock register and other records relating to,
such
Relevant Securities.
The
undersigned hereby further agrees that, without the prior written consent of
the
Representatives, which consent shall not be unreasonably withheld, during the
Lock-Up Period the undersigned will not: (x) file or participate in the filing
with the Securities and Exchange Commission of any registration statement,
or
circulate or participate in the circulation of any preliminary or final
prospectus or other disclosure document with respect to any proposed offering
or
sale of a Relevant Security and (y) exercise any rights the undersigned may
have
to require registration with the Securities and Exchange Commission of any
proposed offering or sale of a Relevant Security.
Notwithstanding
the foregoing, and subject to the conditions below, the undersigned may transfer
the Relevant Securities in the transactions described in clauses (i) through
(vi) below without the prior written consent of Maxim, provided that (1) Maxim
receives a signed lock-up agreement for the balance of the lock-up period from
each donee, trustee, distributee, or transferee, as the case may be, (2) any
such transfer shall not involve a disposition for value, (3) such transfers
are
not required to be reported in any public report or filing with the Securities
and Exchange Commission, or otherwise during the lock-up period and (4) the
undersigned does not otherwise voluntarily effect any public filing or report
regarding such transfers during the lock-up period:
|
(i)
|
as
a bona fide gift or gifts; or
|
|
(ii)
|
to
any trust for the direct or indirect benefit of the undersigned or
the
immediate family of the undersigned;
or
|
I-2
|
(iii)
|
as
a distribution to members, partners or stockholders of the
undersigned;
|
|
(iv)
|
to
the undersigned’s affiliates or to any investment fund or other entity
controlled or managed by the undersigned, provided that such affiliate,
investment fund or other entity controlled or managed by the undersigned
shall not be formed for the sole purpose of transferring, for value
or
otherwise, the Relevant Securities;
or
|
|
(v)
|
to
any beneficiary of the undersigned pursuant to a will or other
testamentary document or applicable laws of descent;
or
|
|
(vi)
|
to
any corporation, partnership, limited liability company or other
entity
all of the beneficial ownership interests of which are held by the
undersigned or immediate family of the
undersigned.
|
For
purposes of this lock-up agreement, “immediate family” shall mean any
relationship by blood, marriage or adoption, not more remote than first
cousin.
Furthermore,
notwithstanding the foregoing, during the lock-up period, the undersigned may
sell shares of Common Stock of the Company purchased by the undersigned on
the
open market following the Public Offering if and only if (i) such sales are
not
required to be reported in any public report or filing with the Securities
Exchange Commission, or otherwise and (ii) the undersigned does not otherwise
voluntarily effect any public filing or report regarding such sales.
The
undersigned hereby represents and warrants to the Representatives and the
Company that the undersigned has full power and authority to enter into this
Agreement and that this Agreement constitutes the legal, valid and binding
obligation of the undersigned, enforceable in accordance with its terms. Upon
request, the undersigned will execute any additional documents necessary in
connection with enforcement hereof. Any obligations of the undersigned shall
be
binding upon the successors and assigns of the undersigned from the date first
above written.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without regard to the conflicts of laws principles thereof.
Delivery of a signed copy of this letter by facsimile transmission shall be
effective as delivery of the original hereof.
Very
truly yours,
__________________________________________
I-3
ANNEX
II
Issuer
Free Writing Prospectus
II-1