Shares1 ZST Digital Networks, Inc. Common Stock UNDERWRITING AGREEMENT
______________
Shares1
Common
Stock
______
___, 2009
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
WestPark
Capital, Inc.
As
Representatives of the several Underwriters
c/o
Rodman & ▇▇▇▇▇▇▇, LLC
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
ZST
Digital Networks, Inc., a Delaware corporation (the “Company”), proposes to sell to
you and other firms and corporations named in Schedule A attached
hereto (the “Underwriters,” which term
shall also include any underwriter substituted as provided in Section 9 hereof),
for which you are acting as representatives (“Representatives”),
________________ shares (the “Primary Shares”) of the
Company’s Common Stock, par value $.0001 per share (“Common Stock”). In
addition, the Company proposes to grant to the Underwriters an option to
purchase, solely for the purpose of covering over-allotments, up to an
additional ______ shares of the Common Stock (the “Over-Allotment
Shares”). The Primary Shares and the Over-Allotment Shares are
collectively referred to below as the “Shares.” The
Company agrees with the several Underwriters as set forth below.
1. Representations, Warranties and
Certain Covenants of the Company. The Company represents and
warrants to, and the Company also covenants and agrees with, each of the
Underwriters as follows:
(a) The
Company has filed with the Securities and Exchange Commission (the “Commission”) a registration
statement on Form S-1 (No. 333-160343), including a preliminary prospectus,
relating to the Shares and such amendments to the registration statement and
prospectus included therein as may have been required to the date
hereof. The Company will file with the Commission
either: (i) prior to effectiveness of such registration
statement, a further amendment thereto, including a form of prospectus, and if
required after effectiveness of such registration statement, a final prospectus
in accordance with Rule 424(b) of the rules and regulations (“Rules and Regulations”) under
the Securities Act of 1933, as amended (the “Act”); or (ii) after
effectiveness of such registration statement, a final prospectus in accordance
with Rules 430A and 424(b) of the Rules and Regulations. Any such
preliminary prospectus and any prospectus included in the registration statement
at the time it becomes effective that omits information pursuant to
Rule 430A of the Rules and Regulations, is referred to herein as a “preliminary prospectus”; such
registration statement, as it may have been amended at the time when it becomes
effective, including financial statements, exhibits and the information, if any,
deemed to be a part of such registration statement by virtue of Rule 430A of the
Rules and Regulations, is referred to herein as the “Registration Statement”; the
preliminary prospectus that was included in the Registration Statement
immediately prior to the time it became effective is referred to herein as the
“Pricing Prospectus”;
such final form of prospectus, in the form in which it was first filed pursuant
to Rule 424(b) of the Rules and Regulations or, if no filing pursuant to
Rule 424(b) of the Rules and Regulations is made, in the form included in
the Registration Statement at the time it becomes effective, is referred to
herein as the “Prospectus”; and, if
applicable, any “issuer free writing prospectus” as defined in Rule 433 under
the Act relating to the Shares is hereinafter called an “Issuer Free Writing
Prospectus”. If the Company has filed an abbreviated
registration statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Act (the “Rule 462 Registration
Statement”), then any reference herein to the term “Registration
Statement” shall be deemed to include such Rule 462 Registration
Statement.
1 Plus an
option to purchase from the Company up to an aggregate of _______ additional
shares solely to cover over-allotments.
1
(b) The
Commission has not issued an order preventing or suspending the use of any
preliminary prospectus or Issuer Free Writing Prospectus, if applicable, and no
proceedings for such purpose are pending before or, to the Company’s knowledge,
threatened or contemplated by the Commission, and the Company has complied in
all material respects with all requests by the Commission for additional
information in connection therewith. Each preliminary prospectus and
the Prospectus delivered to the Underwriters for use in connection with this
offering will be substantially identical to the electronically transmitted
copies thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the extent
permitted by Regulation S-T. At the date of this Agreement and at the
date the Registration Statement becomes effective the Registration Statement,
and the Pricing Prospectus and Prospectus conform, and any amendments or
supplements thereto will conform, in all material respects to the requirements
of the Act and the Rules and Regulations. At the date of this
Agreement, at the date the Registration Statement becomes effective and at the
Closing Date (as defined below), the Registration Statement will not include 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. At the date of this Agreement and at the date the
Registration Statement becomes effective the Prospectus, as amended or
supplemented, if applicable, will not include any untrue statement of a material
fact and will not omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. At the time that the
Registration Statement became effective, the Pricing Prospectus did not include
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. Provided, however, that the
Company makes no representations, warranties or agreements as to information
contained in or omitted from the Registration Statement, each preliminary
prospectus or Prospectus or any such amendment or supplement in reliance upon,
and in conformity with, written information furnished to the Company by the
Underwriters expressly for use therein, it being understood and agreed that the
only such information is that described as such in Section 7(c)
hereof.
(c) The
accountants who certified the financial statements and supporting schedules
included in the Registration Statement are independent public accountants as
required by the Act and the Rules and Regulations. The consolidated
financial statements of the Company set forth in the Registration Statement and
Prospectus, together with the related notes thereto, present fairly the
financial condition of the Company and its subsidiaries as of the dates
indicated and the results of operations and cash flows for the periods therein
specified in conformity with United States generally accepted accounting
principles (“GAAP”)
consistently applied throughout the periods involved (except as otherwise stated
therein). The selected financial data and the summary financial
information included in the Prospectus present fairly in all material respects
the information shown therein and have been compiled on a basis consistent with
that of the audited financial statements included in the Registration
Statement. The schedules set forth in the Registration Statement
present fairly the information required to be stated therein in conformity with
GAAP. All disclosures contained in the Registration Statement or the
Prospectus regarding “non-GAAP
financial measures” (as such term is defined by rules and regulations of
the Commission) comply in all material respects with Regulation G of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Item 10 of
Regulation S-K under the Act, to the extent applicable.
(d) There
are no contracts or documents that are required to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations that have not
been so filed.
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(e) The
Company has been duly organized and is validly existing, in good standing, under
the laws of the State of Delaware. The Company has all requisite
corporate power and authority to own, lease and operate its properties and to
conduct its business as is described in each preliminary prospectus and the
Prospectus. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required, except where the failure to so qualify or be in good
standing would not result in a material adverse effect on the condition
(financial or otherwise), business, prospects or results of operations of the
Company and its subsidiaries taken as a whole (a “Material Adverse
Effect”).
(f) Each
of the subsidiaries of the Company listed in Exhibit 21.1 to the Registration
Statement (the “Subsidiaries”) has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in each preliminary prospectus and the Prospectus and is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which such qualification is required, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect. Except as set forth in the Registration Statement,
the Company does not own any shares of capital stock or any other securities of
any corporation, nor does it have any equity interest, direct or indirect, in
any firm, partnership, association or other entity or subsidiary.
(g) The
authorized, issued and outstanding capital stock of the Company conforms to the
description thereof contained in the Pricing Prospectus and the
Prospectus. The issued and outstanding shares of Common Stock and the
Company’s Preferred Stock, par value $.0001 per share (“Preferred Stock”) have been
duly authorized and validly issued and are fully paid and
nonassessable. The sale of the Shares by the Company has been duly
authorized and after issuance of and payment for such Shares in accordance with
this Agreement, such Shares will be validly issued, fully paid and
nonassessable. The Underwriters will acquire good and marketable
title to the Shares to be sold by the Company, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, or other claim, and the holders
of the Common Stock and Preferred Stock are not entitled to any preemptive
rights with respect to the Shares to be sold by the Company. The
issued and outstanding shares of the capital stock of each of the Subsidiaries
of the Company have been duly authorized and validly issued, are fully paid and
nonassessable and are owned beneficially and of record, directly or indirectly,
by the Company free and clear of all liens, claims or encumbrances
whatsoever. None of the outstanding shares of capital stock of the
Company or any of its Subsidiaries was issued in violation of the preemptive or
similar rights of any securityholder arising by operation of law, under the
certificate of incorporation or by-laws of the Company or its Subsidiaries or
under any agreement or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them are bound.
(h) Except
as disclosed in each preliminary prospectus and the Prospectus and the financial
statements of the Company and the related notes thereto included in each
preliminary prospectus and the Prospectus, neither the Company nor any of its
Subsidiaries has outstanding any options or warrants to purchase, any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, warrants, rights, convertible
securities or obligations. Except as described in the Registration
Statement, each preliminary prospectus and Prospectus, there are no persons with
registration rights or other similar rights to have any securities registered by
the Company pursuant to the Registration Statement or otherwise registered by
the Company under the Act.
(i) Except
as contemplated in each preliminary prospectus and the Prospectus, subsequent to
the respective dates as of which information is given in the Registration
Statement, each preliminary prospectus and the Prospectus, neither the Company
nor any of its Subsidiaries has incurred any liabilities or obligations, direct
or contingent (including any off-balance sheet obligations or any “variable interest entities”
within the meaning of Financial Accounting Standards Board Interpretation No.
46), or entered into any transactions, not in the ordinary course of business,
that are material to the Company and its Subsidiaries taken as a whole, and
there has not been any dividend or distribution of any kind declared, paid or
made by the Company on any class of its capital stock, any material change in
the capital stock, short-term debt or long-term debt of the Company, or any
Material Adverse Effect.
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(j) Except
as set forth in each preliminary prospectus and the Prospectus, there are no
pending actions, suits or proceedings against the Company, any of its
Subsidiaries or any of their respective properties that, if determined adversely
to the Company or its Subsidiaries, would reasonably be expected, individually
or in the aggregate, to result in a Material Adverse Effect, or would materially
and adversely affect the ability of the Company to perform its obligations under
this Agreement, or that are otherwise material in the context of the sale of the
Shares by the Company; and no such actions, suits or proceedings are, to the
Company’s knowledge, threatened or contemplated.
(k) Except
as set forth in each preliminary prospectus and the Prospectus, the Company and
its Subsidiaries own or have valid leasehold interests in all material
properties and assets required for the operation of their business as now
conducted or as presently proposed to be conducted, including those described in
the Registration Statement, each preliminary prospectus and the Prospectus as
being owned by them; and each of the Company and its Subsidiaries has good and
marketable title to all properties and assets owned by it which are material to
its business, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use made or
to be made thereof by the Company or its subsidiaries. All real
property leases to which the Company or any of its Subsidiaries is a party are
valid, subsisting and, to the knowledge of the Company, enforceable by the
Company or such Subsidiary, in each case with no exceptions that would
materially interfere with the use made or to be made thereof by the Company or
its Subsidiaries and each of the Company and its Subsidiaries enjoys peaceful
and undisturbed possession under all such leases to which it is a party as
lessee.
(l) The
Company has the corporate power and authority to enter into this Agreement and
to perform all of its obligations hereunder. This Agreement has been
duly authorized, executed and delivered by the Company and constitutes a valid
and binding obligation of the Company in accordance with its terms except as (i)
rights to indemnification hereunder may be limited by applicable law and (ii)
the enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(m) The
Company is not in, and the execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated herein and
in the Registration Statement (including the issuance and sale of the Shares and
the use of the proceeds from the sale of the Shares as described in the Pricing
Prospectus and the Prospectus under the caption “Use of Proceeds”) and
compliance by the Company with its obligations hereunder do not and will not,
with or without the giving of notice or passage of time or both, result in a
violation, breach or conflict with the charter or bylaws of the Company or any
of its Subsidiaries or any agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or as to which any of their respective properties is
subject or any statute, order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its Subsidiaries
or any of their properties, except for any such violations, breaches or
conflicts that could not reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect; and no consent, approval,
authorization or order of, or filing with, any court or governmental agency or
body is required in connection with the transactions contemplated hereby except
as have been obtained and made under the Act and such as may be required under
state securities or “Blue Sky” laws.
(n) The
Company, together with its Subsidiaries, owns or possesses all material
trademarks, trade names and other rights to inventions, know-how, patents,
copyrights, confidential information and other intellectual property
(collectively, “intellectual
property rights”) necessary to conduct the business now operated by it,
and, except as disclosed in each preliminary prospectus and the Prospectus,
neither the Company nor any of its subsidiaries has received any notice or
otherwise become aware of any infringement of or conflict with asserted rights
of others with respect to any intellectual property rights, nor of any facts or
circumstances that would render any intellectual property rights invalid or
inadequate to protect the interest of the Company or any of its subsidiaries
therein, and which infringement or conflict, if determined adversely to the
Company or its subsidiaries, or invalidity or inadequacy could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect.
4
(o) Except
as disclosed in each preliminary prospectus and the Prospectus, there are no
contracts, agreements or understandings between the Company or any of its
Subsidiaries and any person that would give rise to a valid claim against the
Company, any of its Subsidiaries or any Underwriter for a brokerage commission,
finder’s fee or other like payment in connection with this
offering.
(p) The
Company and its Subsidiaries possess all material certificates, authorities or
permits issued by appropriate governmental agencies or bodies and have made all
material filings required under any federal, state, local or foreign law, rule
or regulation necessary to conduct the business now operated by them (the “Permits”) and have not
received any notice of proceedings relating to the revocation or modification of
any such Permit that, if determined adversely to the Company or its
Subsidiaries, would reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.
(q) No
labor dispute with the employees of the Company or any Subsidiary exists or, to
the knowledge of the Company or its Subsidiaries, is imminent that would
reasonably be expected to result in a Material Adverse Effect.
(r) Except
as disclosed in each preliminary prospectus and the Prospectus, neither the
Company nor any Subsidiary is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, “environmental laws”), owns or
operates any real property contaminated with any substance that is subject to
any environmental laws, is liable for any off-site disposal or contamination
pursuant to any environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim would
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect; and neither the Company nor any Subsidiary is aware of
any pending investigation that might lead to such a claim.
(s) The
Company and its Subsidiaries maintain systems of internal accounting controls
sufficient to provide reasonable assurance (except to the extent disclosed by
the Company in Exchange Act reports filed with the Commission prior to the date
hereof) 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 GAAP
and to maintain asset accountability; (iii) access to assets is permitted
only in accordance with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences. The Company and its Subsidiaries maintain disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e)
under the Exchange Act) that are designed to ensure that information required to
be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Commission, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management,
including its principal executive officer or officers and its principal
financial officer or officers, as appropriate to allow timely decisions
regarding required disclosure. The Company is otherwise in compliance in all
materials respects with all applicable effective provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and regulations issued thereunder by
the Commission.
(t) Reserved.
(u) No
relationship, direct or indirect, exists among the Company or any of its
Subsidiaries, on the one hand, and the directors, officers, customers, suppliers
or, to the Company’s knowledge, stockholders of the Company or its Subsidiaries,
on the other, that is required by the Act to be described in the Registration
Statement and Prospectus and that is not so described.
5
(v) Nothing
has come to the attention of the Company that has caused the Company to believe
that the statistical and market-related data included in the Registration
Statement, each preliminary prospectus and the Prospectus is not based on or
derived from sources that are reliable and accurate (in accordance with the
methodologies used to derive such statistical and market-related data set forth
in the underlying source material) in all material respects.
(w) The
Common Stock has been approved for listing on the NASDAQ Global Market, subject
to official notice of issuance.
(x) The
Company is not and, after giving effect to the offering and sale of the Shares
and the application of the proceeds thereof as described in each preliminary
prospectus and the Prospectus, will not be an “investment company” as defined
in the Investment Company Act of 1940.
(y) The
Company has not made any offer relating to the Shares that would constitute a
“free writing prospectus” as defined in Rule 405 under the Act.
(z) The
Company has the corporate power and authority to enter into the Warrant
Agreement (as defined in Section 6.1(n) below) and to perform all of its
obligations thereunder. The warrants (the “Warrants”) represented by the
Warrant Agreement have been duly authorized and after issuance of and payment
for such Warrants in accordance with the Warrant Agreement, such Warrants will
constitute a valid and binding obligation of the Company in accordance with
their terms except as (i) rights to indemnification hereunder may be limited by
applicable law and (ii) the enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles. The shares of Common Stock (the “Warrant Shares”) to be issued
upon exercise of the Warrants have been duly authorized and after issuance of
and payment for such Warrant Shares in accordance with the Warrants, such
Warrant Shares will be validly issued, fully paid and
nonassessable. The holders of the Common Stock are not entitled to
any preemptive rights with respect to the Warrant Shares.
2. Sale and Purchase of the
Shares.
(a) The
Company hereby agrees to sell the Primary Shares, to the several Underwriters as
set forth in Schedule A attached hereto, and the several Underwriters, in
reliance upon the representations, warranties and agreements herein contained,
but subject to the conditions hereinafter stated, agree, severally and not
jointly, to purchase from the Company, at the place and the time specified
below, the respective aggregate numbers of Primary Shares set forth in Schedule
A opposite their respective names, plus any additional Shares which such
Underwriters may become obligated to purchase pursuant to the provisions of
Section 2(b) hereof, at a price of $[_____] per Share.
(b) In
addition, on the basis of the representations and warranties herein contained,
from time to time upon not less than two days’ and not more than ten days’
notice from the Representatives to the Company, or its counsel, the Company
agrees to sell to the Underwriters (but only for the purpose of covering
over-allotments in the sale of the Primary Shares), all or any portion of the
Over-Allotment Shares, as specified by the Representatives in such notice, at
the purchase price stated in Section 2(a) hereof and the Underwriters
agree, severally and not jointly, to purchase such Over-Allotment
Shares. The Over-Allotment Shares may be purchased on the Closing
Date or at any time or times thereafter so long as the notice to purchase is
given not later than 45 days following the date of the
Prospectus. Over-Allotment Shares shall be purchased by each
Underwriter in the proportion that the number of Primary Shares set opposite the
name of each Underwriter in Schedule A hereto bears to the total number of
Primary Shares. No Over-Allotment Shares shall be delivered to or for
the accounts of the Underwriters unless the Primary Shares shall be
simultaneously delivered and paid for or shall theretofore have been delivered
and paid for as herein provided.
(c) The
respective purchase obligation of each Underwriter shall be subject to such
adjustments as the Representatives may make in their absolute
discretion.
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3. Terms of Offering and Authority to
Use Prospectus. The terms of the public offering by the
Underwriters of the Shares to be purchased by them shall be as set forth in the
Registration Statement, each preliminary prospectus and the
Prospectus. The Company has authorized the Representatives to use
preliminary prospectuses and to make them available for use by prospective
Underwriters and dealers and authorize the Underwriters and all dealers
acquiring Shares from an Underwriter to use the Prospectus (as amended or
supplemented, if the Company shall have furnished any amendments or supplements
thereto) in connection with the sale of the Shares until the earlier of the
completion of the public offering or the period as, in the opinion of counsel
for the Underwriters, the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer.
4. Payment and
Delivery.
(a) Payment
for the Primary Shares that the Underwriters agree to purchase hereunder shall
be made to the Company by wire transfer of immediately available funds to the
bank account designated by the Company at 7:00 a.m., Pacific Time, on ______ __,
2009 (unless postponed in accordance with the provisions of Section 9 hereof),
or at the time, date (not later than seven full business days thereafter) and
place agreed upon by the Representatives and the Company, against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Primary Shares in the form of certificates for the securities comprising the
Primary Shares. The date and time of this payment and delivery (which
may be postponed as provided in Section 9 hereof) are sometimes referred to
below as the “First Closing
Date.”
(b) Payment
for the Over-Allotment Shares that the Underwriters have the right to purchase
hereunder shall be made to the Company by wire transfer of immediately available
funds to the bank account designated by the Company at the time or times and on
the date or dates specified in the notice or notices delivered by the
Representatives against delivery to the Representatives for the respective
accounts of the several Underwriters of the Over-Allotment Shares in the form of
certificates for the securities comprising the Over-Allotment
Shares. The dates and times of these payments and deliveries are
herein singularly or collectively sometimes referred to as “Additional Closing
Date.” The term “Closing Date” refers to both
the First Closing Date and the Additional Closing Date.
(c) You,
individually and not as Representatives of the Underwriters, may (but shall not
be obligated to) make payment to the Company for Shares to be purchased by any
Underwriter whose funds shall not have been received by you at the date of
payment therefor for the account of that Underwriter. Any payment by
the Representatives shall not relieve that Underwriter from any of its
obligations hereunder.
(d) The
certificates for the Shares shall be registered in the name or names and shall
be in the denominations you, as Representatives, designate at least one full
business day prior to the First Closing Date, in the case of the Primary Shares,
and at least one full business day prior to any Additional Closing Date, in the
case of the Over-Allotment Shares. The Company agrees to cause
certificates for the Shares to be delivered pursuant to this Agreement at your
offices, at the offices of The Depository Trust Company, New York, New York, or
at such other places as may be designated by you as Representatives, and to be
made available for checking and packaging at one of the above offices or such
other places as may be designated by you as the Representatives at least one
full business day prior to the First Closing Date in the case of the Primary
Shares, and at least one full business day prior to any Additional Closing Date,
in the case of the Over-Allotment Shares.
5. Conditions of the Underwriters’
Obligations. The several obligations of the Underwriters
hereunder are subject to the following conditions:
(a) The
Registration Statement shall have become effective under the Act and, at the
Closing Date, no stop order suspending the effectiveness of the Registration
Statement or the qualifications of the Shares shall have been issued and no
proceedings for that purpose shall have been instituted before or, to the
knowledge of the Company or the Representatives, shall be contemplated by the
Commission or any state securities or “Blue Sky” commissioner or
authority.
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(b) At
each Closing Date, (i) the representations and warranties of the Company
contained in this Agreement shall be true and correct with the same effect as if
made on and as of such Closing Date and the Company shall have performed all of
the obligations and complied with all of the conditions hereunder on its part to
be performed or complied with on or prior to the Closing Date; (ii) the
Registration Statement, each preliminary prospectus and the Prospectus and any
amendments or supplements thereto shall in all material respects conform to the
requirements of the Act and the Rules and Regulations, and neither the
Registration Statement, any preliminary prospectus or the Prospectus, or any
amendment or supplement thereto, shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; (iii) there
shall have been, since the respective dates as of which information is given, no
material adverse change in the condition (financial or otherwise), business,
prospects or results of operations of the Company and its subsidiaries, taken as
a whole, from that set forth in the Registration Statement, each preliminary
prospectus and the Prospectus, except changes that the Registration Statement
indicates might occur after the effective date of the Registration Statement,
and neither the Company nor any of its Subsidiaries shall have incurred any
material liabilities or material obligations, direct or contingent, or entered
into any material transaction, contract or agreement not in the ordinary course
of business other than as referred to or contemplated in the Registration
Statement; and (iv) except as set forth in each preliminary prospectus and
the Prospectus, no action, suit or proceeding at law or in equity shall be
pending or, to the Company’ knowledge, threatened against the Company or any of
its Subsidiaries that would be required to be set forth in the Registration
Statement, and no proceedings shall be pending or, to the Company’ knowledge,
threatened against the Company or any of its Subsidiaries before or by any
commission, board or administrative agency in the United States or elsewhere,
wherein an unfavorable decision, ruling or finding could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect; and
you shall have received at each Closing Date, a certificate of the principal
executive officer and the principal financial or accounting officer of the
Company, dated as of such Closing Date, evidencing compliance with the
provisions of this Subsection 5(b), and confirming the accuracy of the
representations of the Company set forth in Section 1 hereof and confirming that
all conditions set forth herein to be met by the Company have been met as of
such date.
(c) No
Underwriter shall have discovered and disclosed to the Company prior to any
Closing Date that the Registration Statement, any preliminary prospectus or the
Prospectus or any amendment or supplement thereto, contains an untrue statement
of a fact that in the reasonable opinion of counsel to the Representatives is
material, or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
(d) On
each Closing Date you shall have received a signed opinion, dated as of such
date, of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Markiles LLP, counsel to the several
Underwriters, with respect to the sufficiency of all corporate proceedings and
other legal matters relating to this Agreement and the transactions contemplated
hereby, and the Company shall have furnished to such counsel such documents as
they may have reasonably requested for the purpose of enabling them to pass upon
such matters.
(e) On
each Closing Date you shall have received the signed opinion, dated as of such
date, of K&L Gates LLP, counsel to the Company, in form reasonably
satisfactory to counsel for the Underwriters, together with signed or
photostatic copies thereof for each of the other Underwriters.
(f) At
the time of the signing of this Agreement and on each Closing Date, you shall
have received a signed letter, dated, respectively, as of each such date, from
▇▇▇▇▇▇▇▇ & Company Certified Public Accountants PC, addressed to the
Underwriters (with executed copies for each of the Underwriters) in the form
heretofore approved by counsel for the Underwriters.
(g) As
of the effective date of the Registration Statement, the Common Stock shall be
listed on the NASDAQ Global Market, subject to official notice of
issuance.
(h) FINRA
shall have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements for this
offering.
8
(i) At
the date of this Agreement, the Representatives shall have received an agreement
substantially in the form of Annex A hereto signed by the persons listed on
Schedule B hereto, and such agreements shall be in full force and effect on the
Closing Date.
(j) All
proceedings taken at or prior to each Closing Date in connection with the sale
of the Shares shall be reasonably satisfactory in form and substance to you and
counsel to the several Underwriters, and at the time of signing this Agreement
and on the Closing Date, you and such counsel shall have received each and every
additional document, letter, opinion, certificate or other item dated and
executed in a manner reasonably satisfactory to you and such counsel, as you or
such counsel may reasonably request in connection with each preliminary
prospectus, the Prospectus, the Registration Statement, the offer and sale of
the Shares hereunder, or proceedings at the Closing Date.
If any of
the conditions herein provided for in this Section shall not have been fulfilled
as of the date indicated, all obligations of the several Underwriters under this
Agreement may be cancelled by the Representatives by notifying the Company of
such cancellation on or prior to the applicable Closing Date. The
Representatives may in their sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder,
whether in respect of the First Closing Date, an Additional Closing Date or
otherwise.
6. Covenants of the
Company.
6.1 The
Company covenants and agrees as follows:
(a) To
use all reasonable efforts to bring about the effectiveness of the Registration
Statement and not, at any time, whether before or after the effective date, to
file any amendment to the Registration Statement or Prospectus or supplement
thereto of which you shall not previously have been advised and furnished with a
copy or to which you or your counsel shall have objected or which is not in
compliance in all material respects with the Act and the Rules and Regulations,
and as soon as the Company is advised thereof, to advise the Representatives and
confirm this advice in writing (i) when the Registration Statement has
become effective and (ii) of the issuance by the Commission or any state
securities or “Blue Sky” commissioner or authority of any order suspending the
effectiveness of the Registration Statement or any qualification of the Shares
or prohibiting the sale of the Shares or the initiation or threatening of any
proceedings for any such purpose.
(b) To
deliver, on or before the effective date of the Registration Statement and from
time to time thereafter until the earlier of the completion of the public
offering or the period as, in the opinion of counsel for the Underwriters, the
Prospectus is required by law to be delivered in connection with sales by an
Underwriter or dealer, without charge, to the Representatives and to send to the
several Underwriters, at such office or offices as the Representatives may
designate, as many copies of the preliminary prospectus and Prospectus as the
Representatives may reasonably request. The copies of the
Registration Statement and each amendment thereto furnished to the Underwriters
will be substantially identical to the electronically transmitted copies thereof
filed with the Commission pursuant to ▇▇▇▇▇, except to the extent permitted by
Regulation S-T.
(c) To
furnish the Representatives, without charge, one executed copy of the
Registration Statement (including exhibits) and of any amendments thereto and to
furnish the Representatives, without charge, a reasonable number of conformed
copies of the Registration Statement (excluding exhibits) and of any amendments
thereto.
(d) To
furnish the Representatives with a copy of each proposed amendment or supplement
before amending or supplementing the Registration Statement or the
Prospectus.
9
(e) Until
the earlier of the completion of the public offering or the period as, in the
opinion of counsel for the Underwriters, the Prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, if any event
shall occur as a result of which it shall be necessary to amend or supplement
the Prospectus in order to comply with applicable law or to make the statements
therein, in light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, forthwith to prepare and furnish, at its own expense,
to the Underwriters and to dealers (whose names and addresses the
Representatives will furnish to the Company) to whom Shares may have been sold
by the Representatives and to any other dealers upon request, either amendments
or supplements to the Prospectus to effect such compliance or so that the
statements in the Prospectus, as so amended or supplemented, will not, in light
of the circumstances when the Prospectus is delivered to a purchaser, be
misleading. Neither the Representatives’ consent to, nor the Underwriters’
delivery of, any such amendment or supplement shall constitute a waiver of any
of the conditions set forth in Section 5.
(f) To
make generally available to the Company’s security holders, as soon as
practicable, but not later than fifteen months after the end of the Company’s
current fiscal quarter, an earnings statement (which need not be audited)
covering a period of twelve months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
the last paragraph of Section 11(a) of the Act and Rule 158.
(g) For
a period of three years following the date of this Agreement, to supply to the
Representatives, and to each other Underwriter who may so request in writing,
copies of such financial statements and other periodic and special reports as
the Company may from time to time furnish generally to holders of any class of
its securities, and to furnish the Representatives a copy of each annual report
on Form 10-K which it files with the Commission.
(h) To
cooperate with the Representatives in an endeavor to qualify the Shares for
offer and sale under the “blue sky” laws of such jurisdictions (domestic or
foreign) as the Representatives may request, and to pay, or reimburse if paid by
the Representatives, reasonable fees and disbursements of counsel for the
Underwriters and all other expenses and filing fees in connection therewith;
provided, however, that the Company shall not be required to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation as doing business in any jurisdiction.
(i) To
apply the net proceeds from the sale of the Shares in accordance with the
statement made under “Use of Proceeds” in the Prospectus.
(j) To
supply the Representatives with copies of all correspondence to and from and all
documents issued to and by the Commission in connection with the registration of
the Shares under the Act.
(k) To
obtain the prior written consent of the Representatives before making an offer
related to the Shares that would constitute a “free writing prospectus” as
defined in Rule 405 under the Act.
(l) To
comply with the requirements of Rule 433 under the Act applicable to any Issuer
Free Writing Prospectus, if any, including timely filing with the Commission or
retention where required and legending, and to satisfy all conditions of Rule
433 under the Act necessary to avoid a requirement of filing with the Commission
any electronic road show.
(m) To
give prompt notice to the Representatives and, if requested by the
Representatives, to prepare and furnish to each Underwriter a corrective Issuer
Free Writing Prospectus if at any time following the issuance of a Issuer Free
Writing Prospectus any event occurs as a result of which such Issuer Free
Writing Prospectus conflicts with the information in the Registration Statement,
the preliminary prospectus or the Prospectus.
(n) On
the Closing Date, the Company shall execute and deliver to each of ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, LLC and WestPark Capital, Inc, the warrant agreements in the form
attached hereto as Annex B (the “Warrant Agreement”),
evidencing Warrants representing the right to purchase in the aggregate
__________ shares of Common Stock (5% of the Primary Shares), at a
price equal to 125% of the initial offering price per share to the public as set
forth on the cover page of the Prospectus, for a period of five years from the
effective date of the Registration Statement.
10
6.2 Payment
of Expenses. The Company will pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, all costs and expenses incident to
the entry into and performance under this Agreement by the Company, and without
limiting the generality of the foregoing, all costs and expenses incident to
(i) the issuance, purchase, sale and delivery of the Shares to the
Underwriters, (ii) the registration of the Shares and preparing, printing
and shipping the Registration Statement and the underwriting documents,
(iii) the filing fees of the Commission, the Financial Industry Regulatory
Authority, Inc. (“FINRA”) (including fees for the NASDAQ Global Market) and
state securities and “Blue Sky” commissioners and authorities in connection with
the Registration Statement and this Agreement, and the reasonable fees,
disbursements and expenses of counsel for the Underwriters in connection with
state securities or “Blue Sky” matters and review by FINRA, (iv) the fees
and disbursements of counsel and accountants for the Company, (v) the
furnishing to the Representatives and, to the extent requested, the other
Underwriters of copies of the Registration Statement, any preliminary
prospectus, any Issuer Free Writing Prospectus, if applicable, the Prospectus,
this Agreement, the Blue Sky survey (preliminary and final), and of the
documents required by paragraphs (b), (c), (d) and (e) of Section 6.1, to be so
furnished, including costs of preparing, printing and shipment, (vi) the
preparation, printing, mailing, delivery, filing and distribution by the Company
of all supplements and amendments to the Prospectus required by paragraph (e) of
Section 6.1, (vii) the furnishing to the Representatives and the other
Underwriters of all reports and financial statements required by paragraphs (f)
and (g) of Section 6.1, (viii) the holding of informational meetings related to
the offer and sale of the Shares and all other road show expenses, and (ix) all
advertising costs and expenses related to the offer and sale of the Shares,
including publishing a “tombstone” advertisement in the national edition of the
Wall Street Journal. In addition to the foregoing expenses, the
Company shall at the Initial Closing Date pay to the Representatives a
non-accountable expense allowance equal to 1% of the gross proceeds from the
sale of the Primary Shares. If the sale of the Shares to the several
Underwriters pursuant to this Agreement is not consummated for any reason, other
than as specified in Section 9, the Company will reimburse the several
Underwriters for all of their out-of-pocket expenses (including reasonable fees
and expenses of counsel) incurred by the Underwriters in connection with this
Agreement or in investigating, preparing to market or marketing the
Shares.
6.3 The
Company covenants and agrees that except as expressly contemplated hereby, it
will not, directly or indirectly, (a) offer, pledge, sell, offer to sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of any of the shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock, or (b) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the shares of
Common Stock or such other securities convertible into, or exercisable or
exchangeable for, shares of Common Stock (whether any such transaction described
in clause (a) or (b) above is to be settled by delivery of the shares of Common
Stock or such other securities, in cash or otherwise), other than repurchases at
cost or without cost pursuant to the terms of the Company’s option and
restricted stock purchase agreements, in each case, beneficially owned (within
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended)
or otherwise controlled by the Company on the date hereof or hereafter acquired
or otherwise controlled, for a period beginning from the date hereof and
continuing to and including the date 24 months after the date of the Prospectus,
without the prior written consent of the Representatives; provided, however, that the
Company may, without the prior written consent of the Representatives, on behalf
of the Underwriters, (i) issue equity awards pursuant to equity incentive plans
described in the Registration Statement and the Prospectus to employees of the
Company (provided that such grants do not exceed 6% of the outstanding shares,
which includes the issuance of the Shares) and (ii) issue shares upon the
exercise of options and warrants and the conversion of preferred stock and
convertible debentures, in each case as described in the Registration Statement
and the Prospectus.
11
7. Indemnification and
Contribution.
(a) The
Company will indemnify and hold harmless each Underwriter (including
specifically each person who may be substituted for an Underwriter as provided
in Section 9 hereof), its partners, members, directors, officers and employees
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of them may
become subject under the Act or otherwise, and except as provided below, will
reimburse each of the Underwriters and each such controlling person, if any, for
any reasonable legal or other expenses as incurred by them or any of them in
connection with investigating or defending any actions whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or 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, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, the Prospectus, any
Issuer Free Writing Prospectus, if applicable, or any “issuer information” filed
or required to be filed pursuant to Rule 433(d) under the Act, or the omission
or alleged omission to state therein a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or (iii) any untrue statement or alleged untrue statement
of any material fact contained in any written or electronic materials, if any,
used in connection with the marketing of the Shares, including, without
limitation, slides, videos, films and tape recordings that are provided by the
Company or based upon information furnished by or on behalf of the Company,
unless the untrue statement or omission or alleged untrue statement or omission
was made in such Registration Statement, preliminary prospectus, Prospectus,
Issuer Free Writing Prospectus, if applicable, “issuer information” filed or
required to be filed pursuant to Rule 433(d) under the Act, or other materials
in reliance upon and in conformity with information furnished in writing to the
Company by you or any Underwriter through you expressly for use
therein. Promptly after receipt by any Underwriter, any partner,
member, director, officer or employee of any Underwriter, or any person
controlling the Underwriter of notice of the commencement of any action in
respect of which indemnity may be sought against the Company under this Section
7, the Underwriter will notify the Company in writing of the commencement
thereof, and, subject to the provisions stated below, the Company shall assume
the defense of the action (including the employment of counsel, who shall be
counsel reasonably satisfactory to such Underwriter or such person, as the case
may be, and the payment of expenses) insofar as such action shall relate to any
alleged liability in respect of which indemnity may be sought against it; provided that the failure to
notify the Company shall not relieve the Company from any liability that it may
have under this Section 7(a) except to the extent that the Company has been
materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and provided
further that the failure to notify the Company shall not relieve the
Company from any liability that it may have to an indemnified party otherwise
than under this Section 7(a). Any Underwriter or any controlling
person shall have the right to employ separate counsel in the action and to
participate in the defense thereof, but the fees and expenses of its counsel
shall not be at the expense of the Company unless the employment of that counsel
has been specifically authorized by the Company or the Company shall not, within
a reasonable time period, employ counsel or such Underwriter shall have
reasonably concluded that there may be defenses available to it that are
different from, additional to or in conflict with those available to the Company
(in which case the Company shall not have the right to direct the defense on
behalf of the Underwriters), in any of which events such fees and expenses shall
be borne by the Company, it being understood, however, that the Company shall
not be liable for the expenses of more than one separate counsel (in addition to
any local counsel) in any one proceeding or series of related
proceedings. The Company shall not be liable to indemnify any person
for any settlement of any action effected without the Company’s consent, unless
such settlement (i) includes an unconditional release of the Company from
all liability on any claims that are the subject matter of such action and
(ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act by or on behalf of the Company.
12
(b) Each
Underwriter severally and not jointly, will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act from and against any and all losses,
claims, damages, expenses or liabilities, joint or several, to which they or any
of them may become subject under the Act or otherwise, and, except as provided
below, will reimburse the Company and each such director, officer or controlling
person for any legal or other expenses as incurred by them or any of them in
connection with investigating or defending any actions whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
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, or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Prospectus or any Issuer Free
Writing Prospectus, if applicable, or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, but only
insofar as any such untrue statement or omission or alleged untrue statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company by you or any Underwriter through you expressly for
use therein. Promptly after receipt of notice of the commencement of
any action in respect of which indemnity may be sought against one or more
Underwriters under this Section 7, the indemnified party will notify the
Representatives in writing of the commencement thereof, and the Underwriter or
Underwriters against whom indemnity may be sought shall, subject to the
provisions stated below, assume the defense of the action (including the
employment of counsel, who shall be counsel reasonably satisfactory to the
Company and the payment of expenses) insofar as such action shall relate to any
alleged liability in respect of which indemnity may be sought against the
Underwriter or Underwriters; provided that the failure to
notify the Representatives shall not relieve the Underwriter from any liability
that it may have under this Section 7(b) except to the extent that the
Underwriter has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided further that the
failure to notify the Representatives shall not relieve the Underwriter from any
liability that it may have to an indemnified party otherwise than under this
Section 7(b). The Company and each director, officer or controlling
person shall have the right to employ separate counsel in any action and to
participate in the defense thereof, but the fees and expenses of their counsel
shall not be at the expense of any Underwriter unless the employment of that
counsel has been specifically authorized by the Underwriter or Underwriters
obligated to defend the action or the Underwriter or Underwriters obligated to
defend shall not, within a reasonable time period, employ counsel or the
Company, director, officer or controlling person shall have reasonably concluded
that there may be defenses available to it that are different from, additional
to or in conflict with those available to the Underwriter or Underwriters
obligated to defend the action (in which case the Underwriter or Underwriters
obligated to defend the action shall not have the right to direct the defense on
behalf of the Company, director, officer or controlling person), in any of which
events such fees and expenses shall be borne by the Underwriter or Underwriters
obligated to defend the action, it being understood, however, that the
Underwriter or Underwriters obligated to defend the action shall not be liable
for the expenses of more than one separate counsel (in addition to any local
counsel) in any one proceeding or series of related proceedings. The
Underwriter against whom indemnity may be sought shall not be liable to
indemnify any person for any settlement of any action effected without the
Underwriter’s consent unless such settlement (i) includes an unconditional
release of such Underwriter from all liability on any claims that are the
subject matter of such action and (ii) does not include a statement as to,
or an admission of, fault, culpability or a failure to act by or on behalf of
such Underwriter.
(c) It
is agreed that the only information supplied by the Underwriters in writing for
use in the Registration Statement, the preliminary prospectus, the Prospectus or
any Issuer Free Writing Prospectus, if applicable, is set forth in the second,
seventh and eighth paragraphs under the table under the heading “Underwriting”
and that no information has been omitted from the Registration Statement in
reliance on information supplied by the Underwriters in writing.
13
(d) In
order to provide for just and equitable contribution under the Act in any case
in which (i) any indemnified party makes claim for indemnification pursuant
to this Section 7, but it is insufficient to hold an indemnified party harmless
or judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that the express provisions of this Section 7
provide for indemnification in such case, or (ii) contribution under the
Act may be required on the part of any indemnified party; then the Company and
any such Underwriter, as applicable, shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys’ fees) in either such case (after
contribution from others) (A) in such proportions as is appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Underwriter, on the other hand, from the offering of the Shares or (B) if
the allocation provided by clause (A) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (A) above but also the relative fault of the
Company, on the one hand, and of the Underwriter, on the other hand, in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the
one hand, and the Underwriter, on the other hand, in connection with the
offering of Shares shall be deemed to be in the same respective proportions as
the net proceeds from the offering of the Shares (before deducting expenses)
received by the Company and the total underwriting discounts and commissions
received by the Underwriter, in each case as set forth in the table on the cover
of the Prospectus, bear to the aggregate public offering price of the
Shares. The relative fault of the Company, on the one hand, and the
Underwriter, on the other hand, shall be determined by reference to, among other
things, whether the untrue or allegedly untrue statement of a material fact or
the omission or alleged omission to state a material fact related to information
supplied by the Company or by the Underwriter and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a
result of the losses, damages, expenses, liabilities and claims referred to in
this subsection shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating, preparing to
defend or defending any action.
(e) The
parties agree that it would not be just and equitable if contribution pursuant
to this Section 7 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 that does not take account of the equitable considerations
referred to in subsection (e) above. Notwithstanding the provisions
of this Section 7, the contribution of each contributing Underwriter shall not
be in excess of its proportionate share (based on the ratio of the number of
Shares purchased by such Underwriter to the number of Shares purchased by all
contributing Underwriters) of the portion of such losses, claims, damages or
liabilities for which the Underwriters are responsible. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any person
having liability under Section 11 of the Act other than the Company and the
Underwriters. If the full amount of the contribution specified in
this Section 7 is not permitted by law, then the Company and any Underwriter, as
the case may be, shall be entitled to contribution from the Company or the
Underwriters, as the case may be, to the full extent permitted by
law.
8. Effective Date and
Termination.
(a) This
Agreement shall become effective at 10:00 a.m., Pacific Time, on the first full
business day following the day on which the Registration Statement becomes
effective or at the time of the public offering of any of the Shares by the
Underwriters after the Registration Statement becomes effective, whichever time
shall first occur. The time of the public offering of Shares shall
mean the time of the release by you, for publication, of the first newspaper
advertisement, which is subsequently published, relating to the Shares, or the
time at which the Shares are first generally offered by the Underwriters to
dealers by letter or telegram, whichever shall first occur. You may
prevent this Agreement from becoming effective without liability of any party to
any other party, except as otherwise provided in Sections 8(b) and (c), by
giving notice as indicated below in Section 8(b) prior to the time when this
Agreement would otherwise become effective as herein provided.
14
(b) This
Agreement, except for Sections 6.2, 7, 8(c), 10, 11 and 12, may be terminated by
the Representatives by notifying the Company at any time prior to delivery of
and payment for the Primary Shares, and the option referred to in Section 2(b)
hereof, if exercised, may be cancelled at any time prior to any Additional
Closing Date, if, in the Representatives’ judgment, payment for and delivery of
the Shares is rendered impracticable or inadvisable by reason of (i) the
Company having sustained a material loss, whether or not insured, by reason of
fire, earthquake, flood, accident or other calamity, or from any labor dispute
or court or government action, order or decree, (ii) trading in securities
generally on the New York Stock Exchange, the NYSE Amex or NASDAQ Global Market
having been suspended or limited, (iii) material governmental restrictions
having been imposed on trading in securities generally, (iv) a banking
moratorium having been declared by Federal or New York state authorities,
(v) any material adverse change in the financial markets in the United
States, (vi) any major disruption of settlements of securities or clearance
services in the United States, (vii) any attack on, outbreak or escalation
of hostilities or act of terrorism involving the United States, any declaration
of war by Congress or any other national or international calamity or emergency
or any change or development in national or international political, financial
or economic conditions if, in the judgment of a majority in interest of the
Underwriters including the Representatives, the effect of any such attack,
outbreak, escalation, act, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public offering or
the sale of and payment for the Shares, (viii) the passage by the Congress
of the United States or by any state legislative body, of any act or measure, or
the adoption or proposed adoption of any orders, rules, legislation or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, that the Representatives believe could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect or a material adverse impact on the market for the
Shares offered hereby, (ix) any Material Adverse Effect having occurred,
since the respective dates as of which information is given in the Registration
Statement, any preliminary prospectus or the Prospectus that, in the
Representatives’ judgment, makes it impracticable or inadvisable to offer or
deliver the Shares on the terms contemplated by the Prospectus, or (x) any of
the conditions specified in Section 5 hereof not having been fulfilled or waived
in writing by the Representatives, at or prior to the Closing Date, when and as
required by this Agreement to be fulfilled.
(c) If
this Agreement shall be terminated pursuant to any of the provisions hereof,
except as provided in Sections 6.2 and 7, the Company shall not be under
any liability to any Underwriter and no Underwriter be under any liability to
the Company, except that no Underwriter which shall have failed or refused to
purchase the Shares agreed to be purchased by it hereunder (other than for a
reason sufficient to justify the termination of this Agreement pursuant to
Section 8(b)) shall be relieved of liability to the Company or to the other
Underwriters for damages occasioned by its default.
9. Default of
Underwriters. If one or more of the Underwriters shall fail or
refuse (other than for a reason sufficient to justify the termination of this
Agreement pursuant to Section 8(b)) to purchase on the First Closing Date or any
Additional Closing Date the aggregate number of Primary Shares or Over-Allotment
Shares agreed to be purchased by such Underwriter or Underwriters and the
aggregate number of Primary Shares or Over-Allotment Shares agreed to be
purchased by the Underwriter or Underwriters shall not exceed 10% of the total
number of Primary Shares or Over-Allotment Shares (as the case may be) to be
sold hereunder to the Underwriters, then each of the non-defaulting Underwriters
shall be obligated to purchase these Primary Shares or Over-Allotment Shares on
the terms herein set forth in proportion to their respective obligations
hereunder. In that case, the Representatives and the Company shall
have the right to postpone the First Closing Date or any Additional Closing Date
(as the case may be) for a period of not more than seven days in order that
necessary changes and arrangements may be effected.
If one or
more of the Underwriters shall fail or refuse (other than for a reason
sufficient to justify the termination of this Agreement pursuant to Section
8(b)) to purchase on the First Closing Date or any Additional Closing Date the
aggregate number of Primary Shares or Over-Allotment Shares agreed to be
purchased by such Underwriter or Underwriters and the aggregate number of
Primary Shares or Over-Allotment Shares agreed to be purchased by such
Underwriter or Underwriters shall exceed 10% of the total number of Primary
Shares or Over-Allotment Shares (as the case may be) to be sold hereunder to the
Underwriters, then the non-defaulting Underwriters shall have the right to
purchase, or procure one or more Underwriters reasonably acceptable to the
Company, to purchase, in such proportions as they may agree upon and upon the
terms herein set forth, the Primary Shares or Over-Allotment Shares that such
defaulting Underwriter or Underwriters agreed to purchase, and this Agreement
shall be carried out accordingly. If such other Underwriters do not
exercise this right within 36 hours after receiving notice of the default, then
the Company shall be entitled to an additional period of 24 hours within which
to procure another party or parties reasonably satisfactory to the
Representatives to purchase or agree to purchase these Primary Shares or
Over-Allotment Shares on the terms herein set forth. In any such
case, the Representatives and the Company shall have the right to postpone the
First Closing Date or any Additional Closing Date (as the case may be) for a
period of not more than seven days in order that necessary changes and
arrangements may be effected. If this paragraph becomes applicable
and neither the non-defaulting Underwriters nor the Company shall make
arrangements within the period stated for the purchase of the Primary Shares or
Over-Allotment Shares that the defaulting Underwriter or Underwriters agreed to
purchase, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter to the Company and without liability on the part of
the Company except as provided in Section 7. The provisions of
this Section 9 shall not in any way affect the liability of any defaulting
Underwriter to the Company arising out of the default.
15
10. Representations and Agreement to
Remain in Effect. The expense, reimbursement and
indemnification agreements contained in Sections 6, 7 and 8 shall survive any
termination of this Agreement; and the representations, warranties and covenants
of the Company set forth in this Agreement shall remain operative and in full
force and effect regardless of (i) any investigation made by or on behalf
of any of the Underwriters, the Company or any controlling person, director or
officer of the Company or the Underwriters, and (ii) delivery, acceptance
of and payment for the Shares under this Agreement.
11. Parties in
Interest. This Agreement has been and is made solely for the
benefit of the Underwriters and the Company, and their respective successors and
assigns, and to the extent expressed herein, for the benefit of persons
controlling the Company or any of the Underwriters, and their respective
directors and officers, and no other person, partnership, association or
corporation shall acquire or have any right under or by virtue of this
Agreement. The term “successors and assigns” shall
not include any purchaser of Shares from any Underwriter merely because of such
purchase.
12. Notices, Headings, Applicable Law,
Etc. Except as otherwise provided in this Agreement, all
statements, requests, notices and other communications hereunder shall be in
writing and shall be mailed, delivered, telegraphed or sent by facsimile
transmission and confirmed to the Representatives at the address set forth
above, attention: Corporate Finance (facsimile
number: (___) ___-_____), with a copy to WestPark Capital, Inc., ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; and if to the Company
attn: Vice President Investor Relations (facsimile
number: (___) ______________. Notices shall be effective
upon receipt. Any party may change the address at which it is to
receive communications hereunder upon notice to the other parties as provided
above. This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and the officers and directors
and controlling persons referred to in Section 7, and no other person will
have any right or obligation hereunder. 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
Agreement. The headings in this Agreement have been inserted as a matter of
convenience and reference and are not a part of this Agreement. The
Agreement shall be construed in accordance with the internal laws, and not the
laws pertaining to choice or conflict of laws, of the State of
California.
[Signature
page follows]
16
Please
confirm that the foregoing correctly sets forth the agreement among
us.
|
Sincerely
yours,
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|
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By
|
|
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▇▇▇▇▇
▇▇, Chief Executive Officer and
Chairman
|
|
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Confirmed
and Accepted as of the
|
|
|
date
first above written.
|
|
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▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
|
|
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By
|
|
|
Title:
|
|
|
WestPark
Capital, Inc.
|
|
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By
|
|
|
Title:
|
|
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For
itself and as the Representatives
|
|
|
of
the several
Underwriters.
|
|
Signature
Page to Underwriting Agreement
SCHEDULE
A
UNDERWRITERS
|
Underwriter
|
Number
of Shares
|
|||
|
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
|
||||
|
WestPark
Capital, Inc.
|
||||
|
Total
|
||||
SCHEDULE
B
PERSONS
SUBJECT TO LOCK-UP
|
|
1.
|
▇▇▇▇▇
▇▇
|
|
|
2.
|
▇▇▇▇▇
▇▇▇
|
|
|
3.
|
Yang
Ai Mei
|
|
|
4.
|
Tian
▇▇ ▇▇▇
|
|
|
5.
|
▇▇▇▇▇
▇▇▇▇
|
|
|
6.
|
▇▇▇
▇▇▇ Fang
|
|
|
7.
|
▇▇▇▇
▇▇▇ Su
|
|
|
8.
|
Xue
Na
|
|
|
9.
|
▇▇
▇▇▇▇▇
|
|
|
10.
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
|
|
11.
|
Sun
Hui
|
|
|
12.
|
▇▇
▇▇▇▇▇▇
|
|
|
13.
|
▇▇▇▇
▇▇▇▇
|
|
|
14.
|
Richever
Limited
|
|
|
15.
|
Easywell
Limited
|
|
|
16.
|
Starlink
Asia Limited
|
ANNEX
A
FORM
OF LOCK-UP AGREEMENT
______
___, 2009
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
WestPark
Capital, Inc.
As
Representatives of the several Underwriters
c/o
Rodman & ▇▇▇▇▇▇▇, LLC
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
|
Re:
|
Proposed
Offering of Common Stock
|
Dear
Ladies and Gentlemen:
This
letter is being delivered to you in accordance with the proposed Underwriting
Agreement (the “Underwriting Agreement”) between ZST Digital Networks, Inc. (the
“Company’) and ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC and WestPark Capital, Inc. (the
“Representatives”), as representatives of the several Underwriters named in
Schedule A thereto (the “Underwriters”), relating to an underwritten public
offering of common stock of the Company, par value $0.0001 per share, (the
“Common Stock”). The undersigned, the beneficial owner of shares of
the Company’s Common Stock, understands that the Company intends to sell shares
of Common Stock of the Company and to grant to the Underwriters an
over-allotment option to purchase additional shares of Common Stock (the
“Offering”). All capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the Underwriting
Agreement.
In order
to induce the Company and the Underwriters to enter into the Underwriting
Agreement and to proceed with the Offering, and in recognition of the benefit
that such Offering will confer upon the undersigned as a stockholder of the
Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned irrevocably
agrees, with each Underwriter to be named in the Underwriting Agreement, for the
benefit of the Company, you and the other Underwriters, that the undersigned
will not publicly announce any intention to, will not allow any affiliate or
subsidiary, if applicable, to, and will not itself, without the prior written
consent of the Representatives on behalf of the Underwriters, directly or
indirectly, (i) offer, pledge, sell, offer to sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend or otherwise transfer or dispose
of any of the shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, shares of Common Stock, or (ii) enter into any
swap or other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the shares of Common Stock or such other securities
convertible into, or exercisable or exchangeable for, shares of Common Stock
(whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of the shares of Common Stock or such other securities, in
cash or otherwise), in each case, beneficially owned (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended) or otherwise
controlled by the undersigned on the date hereof or hereafter acquired or
otherwise controlled, for a period beginning from the date hereof and continuing
to and including the date 24 months after the date of the Prospectus (as such
term is defined in the Underwriting Agreement); provided, however, that, if the
undersigned is an individual, the undersigned may, without the prior written
consent of the Representatives on behalf of the Underwriters, (i) transfer
shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, Common Stock either during his or her lifetime or, on death,
by bona fide gifts, will or intestacy to members of the undersigned’s immediate
family or to trusts exclusively for the benefit of members of the undersigned’s
immediate family, provided that, prior to any such transfer, such transferee
executes an agreement, satisfactory to the Representatives, pursuant to which
such transferee agrees to receive and hold such shares subject to the provisions
hereof and that there shall be no further transfer except in accordance with the
provisions hereof, and (ii) exercise options held in the undersigned's name
to purchase shares of Common Stock provided that, any securities obtained upon
the exercise of such option will be held subject to the provisions hereof and
that there shall be no further transfer of any such securities except in
accordance with the provisions hereof. For purposes of this
paragraph, “immediate family” shall mean the undersigned’s spouse, lineal
descendents, father, mother, brothers or sisters (including any such relatives
by adoption).
The
restriction on transfers described in the immediately preceding paragraph shall
not apply to the sale of any shares of Common Stock to the Underwriters pursuant
to the Underwriting Agreement.
The
undersigned confirms that he, she or it understands that the Underwriters and
the Company will rely upon the representations set forth in this agreement in
proceeding with the Offering. The undersigned agrees and consents to
the entry of stop transfer instructions with the Company’s transfer agent
against the transfer of Common Stock except in compliance with this
agreement. This agreement shall be binding on the undersigned and
his, her or its respective successors, heirs, personal representatives and
assigns. If for any reason the Underwriting Agreement shall be
terminated prior to the Closing Date (as such term is defined in the
Underwriting Agreement), the agreement set forth above shall likewise be
terminated.
|
Sincerely,
|
|
Signature
|
|
Name
|
|
Title
|
2