2,500,000 Shares of Common Stock DEBT RESOLVE, INC. UNDERWRITING AGREEMENT
EXHIBIT
1.1
2,500,000
Shares of Common Stock
DEBT
RESOLVE, INC.
__________________,
2006
EKN
Financial Services, Inc.
▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
As
Representative of the Underwriters
named
on Schedule
A
hereto
Ladies
and Gentlemen:
Debt
Resolve, Inc., a corporation organized and existing under the laws of State
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 EKN Financial Services, Inc. is acting as representative (in such capacity,
the “Representative”),
to
sell and issue to the Underwriters an aggregate of 2,500,000 shares (the
“Firm
Shares”)
of its
common stock, par value $.001 per share (the “Common
Stock”).
In
addition, the Company proposes to sell to the Underwriters, upon the terms
and
conditions set forth in Section 2 hereof, an aggregate additional amount of
375,000 shares of Common Stock (the “Additional
Shares,”
which
shall be up to 15% of the Firm Shares). The Firm Shares and any Additional
Shares purchased by the Underwriters are referred to herein as the “Shares.”
In
addition, the Company shall, at the Closing (as defined herein) issue to the
Representative a warrant to purchase up to ____________________
shares
of
Common Stock (____% of the number of Firm Shares sold in the Offering assuming
the over-allotment option is not exercised) (such warrant, the “Representative’s
Warrant”).
The
Shares and the Representative’s Warrant are more fully described in the
Registration Statement and Prospectus referred to below. The offering and sale
of the Shares contemplated by this underwriting agreement (this “Agreement”)
is
referred to herein as the “Offering.”
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, as follows:
(a) (i)
The
Company has filed with the U.S. Securities and Exchange Commission (the
“Commission”)
a
registration statement on Form SB-2 (Registration No. 333-135911), and
amendments thereto, and related preliminary prospectuses for the registration
under the Securities Act of 1933, as amended (the “Securities
Act”),
of
the Shares, which registration statement, as so amended (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.”
EKN
Financial Services, Inc.
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2006
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(ii) 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.”
(iii) The
Preliminary Prospectus dated _________________, 2006, that was included in
the
Registration Statement at the Time of Sale (as defined below) is referred to
herein as the “Sale
Preliminary Prospectus”,
except
that if any revised prospectus or prospectus supplement shall be provided to
the
Underwriters by the Company for use in connection with the Offering which
differs from the Prospectus (whether or not such revised prospectus or
prospectus supplement is required to be filed by the Company pursuant to Rule
424(b)), the term “Prospectus” shall also refer to such revised prospectus or
prospectus supplement, as the case may be, from and after the time it is first
provided to the Underwriters for such use.
(iv) For
purposes of this Agreement and the Securities Act, “Time
of Sale”,
means
________ p.m., New York City time, on the date of this Agreement.
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.”
(v) 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 shares of Common Stock (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.
(vi) All
of
the Shares 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.
(vii) 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.
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Financial Services, Inc.
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2006
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(viii) 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. 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.
(ix) If,
subsequent to the date of this Agreement, the Company or the Representative
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.
of
40 At
the
time of the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement or the effectiveness of any post-effective amendment
to
the Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 424(b), when any supplement to or amendment of
the
Prospectus is filed with the Commission, when any document filed under the
Exchange Act was or is filed with the Commission and at the Closing Date and
the
Additional Closing Date (as hereinafter respectively defined), if any, the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus
and
any amendments thereof and supplements or exhibits thereto complied or will
comply in all material respects with the applicable provisions of the Securities
Act, the Exchange Act and the Rules and Regulations, and did not and will not
contain an untrue statement of a material fact and did not and will not omit
to
state any material fact required to be stated therein or necessary in order
to
make the statements therein: (i) in the case of the Registration Statement,
not
misleading, and (ii) in the case of the Sale Preliminary Prospectus or the
Prospectus, in light of the circumstances under which they were made, not
misleading. When any Preliminary Prospectus (including the Sale Preliminary
Prospectus) was first filed with the Commission (whether filed as part of the
Registration Statement or any amendment thereto or pursuant to Rule 424(a)
of
the Regulations), and when any amendment thereof or supplement thereto was
first
filed with the Commission, such Preliminary Prospectus and any amendments
thereof and supplements thereto complied in all material respects with the
applicable provisions of the Securities Act, the Regulations and the Exchange
Act and did not contain an untrue statement of a material fact and did 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. No representation and warranty is made in this
subsection (b), however, with respect to any information contained in or omitted
from the Registration Statement or the Prospectus or any related Preliminary
Prospectus or any amendment thereof or 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 Representative specifically for use
therein. The parties acknowledge and agree that such information (the
“Underwriters’
Information”)
provided by or on behalf of any Underwriter consists solely of: (x) the names
of
the Underwriters appearing in the “Underwriting” section of the Prospectus, (y)
the contents of the subsections of the “Underwriting”
section of the Prospectus
captioned “Stabilization” and “Foreign Regulatory Restrictions on Purchase of
the Common Stock” and (z) the contents of the first paragraph of the subsection
of the “Underwriting” section of the Prospectus captioned “Pricing of
Securities”.
EKN
Financial Services, Inc.
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2006
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(c) The
Common Stock is registered pursuant to Section 12(b) of the Exchange Act. The
Company is subject to the reporting requirements of Section 13 or 15(d) of
the
Exchange Act and files reports with the Commission on the ▇▇▇▇▇ system.
(d) The
Company has filed with the Commission a Form 8-A (File Number 000-____________)
to reflect trading on the AMEX. The registration of the Common Stock on Form
8-A
has been declared effective by the Commission on the date hereof.
(e) The
documents, exhibits or other materials incorporated or deemed to be
incorporated by reference
in the
Sale Preliminary Prospectus 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 Regulations and the Exchange Act and,
when read together with the other information in the Sale Preliminary Prospectus
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 which are required to be described in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus
or
filed as exhibits to the Registration Statement by the Securities Act, the
Regulations or the Exchange Act and which have not been so described, filed
or
incorporated by reference.
EKN
Financial Services, Inc.
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2006
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(f) ▇▇▇▇▇▇
& Kliegman LLP (“M&K”),
who
has certified the financial statements and supporting schedules and information
of the Company that are included in the Registration Statement, is an
independent registered public accounting firm as required by the Securities
Act,
the Regulations and the Exchange Act and the rules and regulations promulgated
by the Public Company Accounting Oversight Board (the “PCAOB”).
M&K is duly registered and in good standing with the PCAOB. M&K 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.
(g) The
Shares 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 Shares on the AMEX.
(h) Except
for DRV Capital LLC , a wholly-owned subsidiary of the Company (the “Subsidiary”),
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”).
(i) Subsequent
to the respective dates as of which information is presented in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus, and except as
disclosed in the Registration Statement 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 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
Sale Preliminary Prospectus or the Prospectus) of the Company or the Subsidiary;
(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 Sale Preliminary Prospectus and the Prospectus, neither Company nor the
Subsidiary has 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 or the Subsidiary, either
individually or in the aggregate, except for liabilities, obligations and
transactions which are disclosed in the Registration Statement and the
Prospectus.
(j) As
of the
dates indicated in the Sale Preliminary Prospectus 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. All of the issued and outstanding shares of capital stock of the
Company are duly authorized and validly issued, fully paid and non-assessable
in
compliance with all applicable state, federal and foreign laws; the holders
thereof have no rights of rescission with respect thereto and such securities
were 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.
The offer and sale of all outstanding capital stock of the Company since
February 24, 2003 were at all relevant times either registered under the
Securities Act and the applicable state securities or “blue sky” laws or, based
in part on the representations and warranties of the purchasers of such capital
stock, exempt from such registration requirements.
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Financial Services, Inc.
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2006
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(k) The
Shares have been duly and validly authorized and reserved for issuance and,
when
issued,
delivered
and
paid
for in
accordance with this Agreement
and as
described in the Sale Preliminary Prospectus and the Prospectus on each of
the
Closing Date and the Additional Closing Date, as applicable, will
be
validly issued, fully paid and non-assessable in compliance with all applicable
state, 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 the Shares in the Offering. The shares of Common Stock
representing the Shares conform to the descriptions thereof contained in the
Registration Statement and the Prospectus. Except as disclosed in the
Registration Statement, the Sale Preliminary Prospectus 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.
(l) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, no director, officer or key employee of the Company 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.
(m) Each
of
the Company and the Subsidiary has been duly incorporated or formed, and validly
exists as an entity in good standing, under the laws of its jurisdiction of
incorporation or organization. Each of the Company and the Subsidiary has all
requisite power and authority to carry on its business as it is currently being
conducted and as described in the Sale Preliminary Prospectus and the
Prospectus, and to own, lease and operate its properties. Each of the Company
and the Subsidiary 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 or the Prospectus) of the
Company and the Subsidiary, individually or taken as a whole; (ii) the long-term
debt or capital stock of the Company or the Subsidiary; 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”).
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Financial Services, Inc.
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(n) Each
of
the Company and the Subsidiary 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) 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
clauses (ii) and (iii) above), for those defaults or violations which, either
individually or in the aggregate, would not have a Material Adverse Effect.
(o) The
Company has full right, power and authority to execute and deliver this
Agreement, the Representative’s Warrant 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).
(p) The
execution, delivery, and performance of the Transaction Documents and the
consummation of the transactions contemplated by the Transaction Documents,
the
Registration Statement and the Prospectus 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 or the
Subsidiary pursuant to any indenture, mortgage, deed of trust, loan agreement
or
other agreement, instrument, franchise, license or permit to which the Company
or the Subsidiary or their respective Affiliates is a party or by which the
Company or the Subsidiary or their respective 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
the Subsidiary, 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 clauses (i) and (iii) above), for those conflicts, defaults or
violations which, either individually or in the aggregate, would not have a
Material Adverse Effect..
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Financial Services, Inc.
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(q) Each
of
the Company and the Subsidiary has all necessary 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 Sale
Preliminary Prospectus and the Prospectus, and each such Consent is valid and
in
full force and effect.
Neither
the Company nor the Subsidiary has received notice of any investigation or
proceedings which results in or, if decided adversely to the Company or the
Subsidiary, could reasonably be expected to result in, the revocation of, or
imposition of a materially burdensome
restriction on, any Consent. No Consent contains a materially burdensome
restriction not adequately disclosed in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus.
(r) Each
of
the Company and the Subsidiary 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 (within
the
meaning of Rule 144 of the Regulations) (“Affiliates”),
the
non-compliance with which would not have a Material Adverse Effect. Without
limiting the generality of the foregoing, each of the Company and the Subsidiary
are in compliance with the Fair Debt Collection Practices Act, the
Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Opportunity Act,
the Fair Credit Reporting Act, the Electronic Funds Transfer Act, the
▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and the respective rules and regulations thereunder,
the
failure to comply with which could be reasonably expected to have a Material
Adverse Effect.
(s) Except
as
disclosed in the Sale Preliminary Prospectus or the Prospectus, neither the
Company nor the Subsidiary is a party to any agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, or has adopted any board resolutions
at
the request of a regulatory authority, which restricts the conduct of its
business, nor has the Company or the Subsidiary been advised by any regulatory
authorities that it is contemplating issuing or requesting (or considering
the
appropriateness of issuing or requesting) any of the foregoing.
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Financial Services, Inc.
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(t) The
Representative’s Warrant will conform to the description thereof in the
Registration Statement and in the Prospectus and, when sold to and paid for
by
the Representative in accordance with the Representative’s Warrant, will have
been duly authorized and validly issued and will constitute a valid and binding
obligation of the Company. The shares of Common Stock issuable upon exercise
of
the Representative’s Warrant (the “Representative’s
Warrant Shares”)
have
been duly authorized and reserved for issuance upon exercise of the
Representative’s Warrant 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 the Representative’s Warrant, will be validly
issued, fully paid, nonassessable and free of preemptive rights and will conform
to the description thereof in the Prospectus.
(u) 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 Representative’s
Warrant or consummation of each of the transactions contemplated by this
Agreement and the Representative’s Warrant, including the issuance, sale and
delivery of the Shares and the Representative’s Warrant Shares to be issued,
sold and delivered hereunder and thereunder, except the registration under
the
Securities Act of the Shares and the Representative’s Warrant Shares and the
approval for listing of the Shares on AMEX, each of which has become effective,
and such Consents as may be required under state securities or blue sky laws
or
the by-laws and rules of the AMEX, the National Association of Securities
Dealers, Inc. (the “NASD”)
or
NASD Regulation, Inc. in connection with the purchase and distribution of the
Shares by the Underwriters, each of which has been obtained and is in full
force
and effect.
(v) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus 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 or Subsidiary is a party or of which any property,
operations or assets of the Company or the Subsidiary is the subject which,
either individually or in the aggregate, if determined adversely to the Company
or Subsidiary, 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 actual or pending proceedings,
litigation and arbitration against or involving the Company or Subsidiary could
not reasonably be expected to have a Material Adverse Effect.
(w) The
financial statements, including the notes thereto, and the supporting schedules
included in the Registration Statement, the Sale Preliminary Prospectus 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 and the Subsidiary. Except as otherwise stated in the Registration
Statement, the Sale Preliminary Prospectus 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. The supporting schedules included in the Registration
Statement 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 pursuant to the Securities Act and the Regulations. The other
financial and statistical information included in the Registration Statement,
the Sale Preliminary Prospectus 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 Sale Preliminary Prospectus and the Prospectus and the books
and
records of the respective entities presented therein.
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Financial Services, Inc.
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(x) There
are no pro forma or as adjusted financial statements which are required to
be
included in
the Registration Statement, the Sale Preliminary Prospectus and
the Prospectus in accordance with Regulation
S-X promulgated 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 Sale Preliminary Prospectus and the Prospectus
has
been properly compiled and prepared in accordance with the applicable
requirements of the Securities Act and the 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 pro
forma
as adjusted financial information included in the Registration Statement, the
Sale Preliminary Prospectus 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 as adjusted adjustments
give
appropriate effect to those assumptions; and the pro forma and as adjusted
financial information reflect the proper application of those adjustments to
the
corresponding historical financial statement amounts.
(y) The
statistical, industry-related and market-related data included in the
Registration Statement, the Sale Preliminary Prospectus 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.
(z) Except
as
described in the Registration Statement, the Sale Preliminary Prospectus 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.
EKN
Financial Services, Inc.
______________,
2006
Page 11 of
40
(aa) The
Company’s Board of Directors has validly appointed an audit committee and
nominating committee whose composition satisfies the requirements of the rules
and regulations of the AMEX and the Company’s Board of Directors and/or audit
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.
(bb) The
Company is in material compliance with the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act
of 2002, as amended (“Sarb-Ox”),
that
are 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, except for
violations which, singly or in the aggregate, would not have a Material Adverse
Effect. Without limiting the generality of the foregoing, as of the effective
date of the Registration Statement: (i) all members of the Company’s Board of
Directors who are required to be “independent” (as that term is defined under
applicable laws, rules and regulations), including, without limitation, all
members of the audit committee of the Company’s Board of Directors, meet the
qualifications of independence as set forth under applicable laws, rules and
regulations and (ii) the audit committee of the Company’s Board of Directors has
at least one member who is an “audit committee financial expert” (as that term
is defined under applicable laws, rules and regulations).
(cc) The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-14 and 15d-14 under the Exchange Act), which:
(i) are designed to ensure that material information relating to the Company
and
the Subsidiary is made known to the Company’s principal executive officer and
its principal financial officer by others within the Company and the Subsidiary;
and (ii) are effective in performing the functions for which they were
established. There: (i) are not any significant deficiencies in the design
or
operation of internal controls, which could adversely affect the Company’s
ability to record, process, summarize and report financial data or (ii) has
not
been any fraud, whether or not material, that involves management or other
employees who have a significant role in the internal controls of the Company
or
Subsidiary. Since the date of the most recent evaluation of the Company’s
disclosure controls and procedures, there have been no significant changes
in
internal controls or in other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
(dd) No
relationship, direct or indirect, exists between or among any of the Company,
the Subsidiary or any respective Affiliate, on the one hand, and any director,
officer, shareholder, customer or supplier of the Company, the Subsidiary or
any
respective Affiliate of the Company, on the other hand, which is required by
the
Securities Act, the Regulations or the Exchange Act to be described in the
Registration Statement, the Sale Preliminary Prospectus or the Prospectus,
which
is not so described as required. Except as disclosed in the Registration
Statement 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 or Subsidiary to or for the benefit
of
any of the officers or directors of the Company or Subsidiary or any of their
respective family members, except as disclosed in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus. Each of the Company and
Subsidiary has not, in violation of Sarb-Ox, directly or indirectly, including
through any Affiliate of the Company or Subsidiary (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 or Subsidiary.
EKN
Financial Services, Inc.
______________,
2006
Page
12 of
40
(ee) Transactions
Affecting Disclosure to NASD.
(i) Except
as
described in the Registration Statement, the Sale Preliminary Prospectus 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 or Subsidiary with respect to the sale of the Shares
hereunder or any other arrangements, agreements or understandings of the Company
or Subsidiary or, to the Company or Subsidiary’s knowledge, the officers,
directors and employees of the Company or the Subsidiary that may affect the
Underwriters’ compensation, as determined by the NASD.
(ii) Except
as
previously disclosed to the Representative, no officer, director, or beneficial
owner 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 the NASD.
(iii) No
proceeds from the sale of the Shares (excluding underwriting compensation)
will
be paid to any NASD member, or any persons associated or affiliated with a
member of the NASD, except as specifically contemplated herein.
(iv) Except
as
described in the Registration Statement, 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 the NASD.
(ff) Intellectual
Property.
(i) Each
of
the Company and the Subsidiary: (i) owns, licenses or otherwise possesses the
right to use trademarks, trade names, service marks, patent rights, patent
applications, copyrights, domain names, licenses, approvals, trade secrets,
inventions, technology, know-how and other similar rights (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) (collectively, “Intellectual
Property Rights”)
as are
necessary or material to conduct its business as now conducted and to conduct
its business as now under developed and as described in the Registration
Statement, the Sale Preliminary Prospectus and Prospectus, and (ii) have no
reason to believe that the conduct of their respective businesses does or will
conflict with, and have not received any written notice of any claim of conflict
with, any such rights of others. To the knowledge of the Company and the
Subsidiary, there is no infringement by third parties of any such Intellectual
Property Rights and the Company and the Subsidiary are unaware of any facts
that
would form a reasonably basis for any such claim.
EKN
Financial Services, Inc.
______________,
2006
Page 13 of
40
(ii) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus and
Prospectus: (A) there is no actual, pending or, to the Company’s knowledge,
threatened action, suit, proceeding, or claim by others challenging the rights
of the Company or the Subsidiary 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 of
Subsidiary 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 pending or
threatened action, suit, proceeding, or claim by others challenging the validity
or scope of any such Intellectual Property Rights owned by the Company or
Subsidiary and each of the Company and Subsidiary is unaware of any facts which
would form a reasonable basis for any such claim; (D) the operation of business
of the Company and the Subsidiary as now conducted and in connection with the
proprietary purchase and collection of distressed consumer receivable portfolios
described in the Registration Statement, the Sale Preliminary Prospectus and
Prospectus, as being under development by the Company (either independently
or
in collaboration with third parties), 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. Neither the Company nor Subsidiary is 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 Sale Preliminary Prospectus and Prospectus and
are
not described therein in all material respects.
(iii) The
Company and/or its licensors have duly and properly filed or caused to be filed
with the U.S. Patent and Trademark Office (the “PTO”)
and
applicable foreign and international patent authorities, all patent applications
owned by the Company and/or its licensors (the “Company
Patent Applications”).
The
Company and/or its licensors have complied in all material respects with the
PTO’s duty of candor and disclosure for the Company Patent Applications and have
made no material misrepresentation in the Company Patent Applications. The
Company Patent Applications disclose patentable subject matters, and the Company
and/or its licensors have not been notified of any material fact known by the
Company that would preclude the issuance of patents with respect to the Company
Patent Applications or would render such patents invalid or unenforceable.
No
third party possesses rights to the Company’s Intellectual Property Rights that,
if exercised, could enable such party to develop products competitive to those
the Company intends to develop as described in the Registration Statement and
Prospectus.
EKN
Financial Services, Inc.
______________,
2006
Page 14 of
40
(iv) Other
than as disclosed in the Registration Statement, the Sale Preliminary Prospectus
and Prospectus, there are no rulemaking or similar proceedings before the PTO,
which affect or involve the Company or Subsidiary or any of the technologies
that the Company and/or its licensors have developed, is developing or proposes
to develop or uses or proposes to use, which, if the subject of an action
unfavorable to the Company, would result in a Material Adverse
Change.
(v) 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.
(gg) Neither
the Company, the Subsidiary nor any of their respective 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.
(hh) 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 Shares pursuant to the Registration Statement.
(ii) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus 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 Shares 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.
(jj) 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.
EKN
Financial Services, Inc.
______________,
2006
Page 15 of
40
(kk) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus 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 the NASD.
(ll) 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 Sale Preliminary Prospectus 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 Sale Preliminary Prospectus 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.
(mm) Each
of the Company and Subsidiary maintains insurance of the types and in the
amounts which are reasonably
considered adequate for companies engaged in similar businesses in similar
industries, all of which insurance is in full force and effect,
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 Regulations, the
Exchange Act 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 and (iii) business interruption insurance.
The
Company maintains and will continue to maintain insurance (of which the Company
is the beneficiary) with at least $1,000,000 of coverage of the life of ▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇▇ for a period of three (3) years from the Closing Date with
an
insurer rated at least AA or better in the most recent addition of “Best’s Life
Reports”.
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.
EKN
Financial Services, Inc.
______________,
2006
Page 16 of
40
(nn) Each
of
the Company and Subsidiary 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 or Subsidiary’s federal, state, local or foreign taxes is presently in
effect or, to the Company’s knowledge, is pending or 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.
(oo) No
labor
disturbance by the employees of the Company currently exists or is likely to
occur.
(pp) Each
of
the Company and Subsidiary 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. Neither the Company nor the Subsidiary
has 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.
(qq) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, neither the Company nor the Subsidiary is 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.
EKN
Financial Services, Inc.
______________,
2006
Page 17 of
40
(rr) The
Registration Statement, the Sale Preliminary Prospectus and the Prospectus
identify 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 Subsidiary or any of their respective ERISA
Affiliates, and (iii) covers any employee or former employee of the Company
or
Subsidiary 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.
(ss) Except
as
set forth in the Registration Statement, the Sale Preliminary Statement or
the
Prospectus, there is no liability in respect of post-retirement health and
medical benefits for retired employees of the Company or Subsidiary 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 Employee Plans of the Company or Subsidiary, 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 Subsidiary 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.
(tt) The
execution of this Agreement, the Representative’s Warrant 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 or Subsidiary.
(uu) 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 or Subsidiary would have any liability;
each
employee benefit plan of the Company or Subsidiary is in compliance in all
material respects with applicable law, including (without limitation) ERISA
and
the Code; each of the Company and Subsidiary 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 and Subsidiary 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.
EKN
Financial Services, Inc.
______________,
2006
Page 18 of
40
(vv) Neither
the Company nor Subsidiary nor, to the knowledge of each of the Company and
the
Subsidiary, any of their respective 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.
(ww) The
Company has not offered, or caused the Underwriters to offer, the Firm Shares
to
any Person or entity with the intention of unlawfully influencing: (i) a
customer or supplier of the Company or Subsidiary or their respective 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.
(xx) 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 discussed or described in any Preliminary Prospectus or
Prospectus), operations or results of operations of the Company taken as a
whole.
(yy) As
used
in this Agreement, the term “knowledge
of the Company”
or
“to
the Company’s knowledge”
(or
similar language) shall mean the knowledge of the officers and directors of
the
Company who are named in the Prospectus, with the assumption that such officers
and directors shall have made reasonable and diligent inquiry of the matters
presented.
(zz) Any
certificate signed by or on behalf of the Company and delivered to the
Representative or to Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP, as counsel to the
underwriters in the Offering (“Underwriters’
Counsel”)
in
connection with the closing of the Offering 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 Shares and the Representative’s
Warrants.
(a) On
the
basis of the representations, warranties, covenants and agreements herein
contained, subject to the terms and conditions herein, 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 $_______, the
number of Firm Shares set forth opposite their respective names on Schedule
A
hereto
together with any additional number of Shares which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 9 hereof.
EKN
Financial Services, Inc.
______________,
2006
Page 19 of
40
(b) Payment
of the purchase price for, and delivery of certificates representing, the Firm
Shares shall be made at the offices of Underwriters’ Counsel, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be agreed
upon
by the Representative 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 Representative 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 Shares is referred to herein as the “Closing.”
(c) Payment
of the purchase price for the Firm Shares shall be made on the Closing Date
by
wire transfer in immediately available funds to, or as directed by, the Company
upon delivery of certificates for the Firm Shares to the Representative through
the facilities of The Depository Trust Company for the respective accounts
of
the several Underwriters. Certificates for the Firm Shares shall be registered
in such name or names and shall be in such denominations as the Representative
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, subject to the terms and conditions herein, the
Company hereby grants to the Underwriters, severally and not jointly, an option
to purchase up to an aggregate of 375,000 Additional Shares at the same purchase
price per share to be paid by the Underwriters for the Firm Shares as set forth
in Section 2(a) above, for the sole purpose of covering over-allotments in
the
sale of Firm Shares 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
date of the Prospectus, by written notice from the Representative to the
Company. Such notice shall set forth the aggregate number of Additional Shares
as to which the option is being exercised and the date and time, as reasonably
determined by the Representative, when the Additional Shares 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 second (2nd) 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 Shares, each
Underwriter, acting severally and not jointly, agrees to purchase from the
Company the number of Additional Shares that bears the same proportion of the
total number of Additional Shares then being purchased as the number of Firm
Shares 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 Shares that the Underwriters have agreed to purchased hereunder,
subject, however, to such adjustments to eliminate fractional shares as the
Representative, in its sole discretion, shall make.
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(e) Payment
of the purchase price for, and delivery of certificates representing, the
Additional Shares shall be made at the office of Underwriters’ Counsel, or at
such other place as shall be agreed upon by the Representative 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 Representative and the Company.
(f) Payment
of the purchase price for the Additional Shares shall be made by wire transfer
in immediately available funds to or as directed by the Company upon delivery
of
certificates for the Additional Shares to the Representative through the
facilities of The Depository Trust Company for the respective accounts of the
several Underwriters. Certificates for the Additional Shares shall be registered
in such name or names and shall be in such denominations as the Representative
may request at least two (2) business days before the Additional Closing Date.
The Company will permit the Representative to examine and package such
certificates for delivery at least one full business day prior to the Additional
Closing Date.
(g) On
the
Closing Date, the Company shall issue to the Representative the Representative’s
Warrant. The Representative’s Warrant shall contain the terms and provisions
described herein and as set forth more particularly in the Representative’s
Warrant to be executed by the Company on the Closing Date, including, but not
limited to: (i) one demand registration right and unlimited piggyback
registration rights for a period of five years from the Closing Date, (ii)
cashless exercise; (iii) customary adjustments in the event of stock dividends,
splits, mergers, recapitalizations, reorganization or consolidation, and other
events; and (iv) prohibitions of mergers, consolidations or other
reorganizations of or by the Company or the taking by the Company of other
action during the five-year period following the Closing Date, unless adequate
provision is made to preserve, in substance, the rights and powers incidental
to
the Representative’s Warrant. The Representative’s Warrant shall not be
redeemable. As provided in the Representative’s Warrant, the Representative may
designate that the Representative’s Warrant be issued in varying amounts
directly to other Underwriters and selling group members and to bona fide
officers of the Underwriters and selling group members. As further provided,
no
sale, transfer, assignment, pledge or hypothecation of the Representative’s
Warrant shall be made for a period of 6 months from the Closing Date, except:
(a) by operation of law or reorganization of the Company, or (b) to the officers
and employees of the Underwriters and members of the selling group and/or their
respective officers and employees.
3. Offering.
Upon
authorization of the release of the Firm Shares or, as the case may be, the
Additional Shares, by the Representative, the Underwriters propose to offer
the
Shares for sale to the public upon the terms and conditions set forth in the
Prospectus. Each of the Underwriters will offer and sell the Shares in the
United States and in any foreign jurisdiction in compliance with applicable
law,
and the Representative will cause each selected dealer, if any, employed by
the
Underwriters in connection with the Offering to do the same. None of the
Underwriters will offer or sell the Shares in any jurisdiction other than the
United States and the foreign countries listed in the “Underwriting” section of
the Prospectus without the Company’s prior written consent, which consent shall
not be unreasonably withheld, conditioned or delayed.
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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 Representative of such
timely filing.
(b) The
Company will notify the Representative promptly (and, if requested by the
Representative, 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
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 or the Prospectus, including but not limited to Rule 462(b) of the
Regulations, (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 Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose or 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 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 Representative shall
reasonably object in writing after being timely furnished in advance a copy
thereof. The Company will provide the Representative with copies of all such
amendments, filings and other documents a sufficient time prior to any filing
or
other publication thereof to afford the Representative a reasonable opportunity
to review and comment thereon.
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(c) The
Company shall comply with the Securities Act, the Regulations and the Exchange
Act 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 Shares is required to be delivered under the Securities Act,
the
Exchange Act and all applicable Rules and Regulations in connection with the
sales of Shares, any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would, in the reasonable 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 Representative 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 Representative)
which will correct such statement or omission or which will effect such
compliance and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(d) The
Company will promptly deliver to the Underwriters and Underwriters’ Counsel,
upon request, 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, 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 City 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 of the Regulations and Section
4(b)
of the Securities Act.
(f) If
the Company elects to rely on Rule 462(b), 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 A.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).
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(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 Shares.
(h) The
Company will use its best efforts, in cooperation with the Representative,
at or
prior to the time of effectiveness of the Registration Statement, to qualify
the
Shares for offering and sale under the securities laws relating to the offering
or sale of the Shares of such jurisdictions, domestic or foreign, as the
Representative 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.
(i) Each
of
the Company’s officers and directors and holders of more than 5% of the
outstanding shares of Common Stock or of securities exercisable for or
convertible into more than 5% of the outstanding shares of Common Stock as
of
the Closing Date (the “Lock-Up
Parties”)
shall
enter into a written agreement with the Representative that: (i) for a period
of
twelve (12) months after the Closing Date (the “Lock-Up
Period”),
he,
she or it will not publicly offer, issue, sell contract to sell, encumber,
grant
any option for the sale of or otherwise dispose of any securities of the
Company, including shares of Common Stock underlying options, warrants or any
other convertible security, owned directly, indirectly or beneficially by him,
her or it (as defined by the Exchange Act) and (ii) any such sale of securities
within the Lock-Up Period shall be executed by the Representative; provided,
however,
that
clause (ii) above shall not apply to the issuance of shares of Common Stock
upon
the exercise of currently outstanding options, warrants and options that may
be
issued pursuant to an Incentive Compensation Plan reasonably acceptable to
the
Representative and warrants issued to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇ in connection with a private placement completed by the Company
in
June 2006. The Company acknowledges that: (x) Representative’s determination, if
any, to release all or any portion of the securities from the Lock-Up Period
will depend on several factors including, but not limited to, the market price
and demand for the Shares and the general condition of the securities markets
and (y) any decision by the Representative to shorten the Lock-Up Period is
arbitrary and may not be based on any specific parameters.
The
Company will cause each of the Lock-Up Parties to deliver to the Representative
the agreements of each of the Lock-Up Parties to the foregoing effect prior
to
the Closing Date, which agreements shall be substantially in the form attached
hereto as Annex
II.
(j) During
the twelve (12) months following the Closing, the Company will not 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 Representative. 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 30 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 any other exchange or electronic
quotation system on which the Common Stock is then listed.
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(k) The
Company agrees that it will, upon completion of the proposed public offering
contemplated herein, for a period of no less than one (1) year, engage a
designee of Representative as an advisor (the “Advisor”)
to its
Board of Directors, which Advisor shall attend meetings of the Board of
Directors and receive all notices and other correspondence and communications
sent by the Company to members of its Board of Directors. The Advisor shall
not
be entitled to any compensation, other than reimbursement for all reasonable
costs incurred in attending such meetings including, food, lodging, and
transportation. The Company further agrees that, during said one (1) year year
period, it shall schedule no less than four (4) formal and “in person” meetings
of its Board of Directors in each such year at which meetings such Advisor
shall
be permitted to attend as set forth herein; said meetings shall be held
quarterly each year and ten (10) days advance notice of such meetings shall
be
given to the Advisor. Further, during such one (1) year period, the Company
shall give notice to the Representative with respect to any proposed
acquisitions, mergers, reorganizations or other similar transactions. The
Company shall indemnify and hold such Advisor harmless against any and all
claims, actions, damages, costs and expenses, and judgments arising solely
out
of the attendance and participation of such Advisor at any such meeting
described herein, and, if the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, it shall, if
possible and commercially reasonable, include such Advisor as an insured under
such policy.
(l) For
a period of two (2) years from the Closing Date, the Company, at its expense,
shall provide the Representative a subscription to the Company’s weekly
Depository Transfer Company Security Position Reports.
(m) For
a period of three (3) years from the Closing Date, the Company, at its expense,
shall obtain
and keep current a listing in the Standard & Poors Manual;
(n) During
the period of three (3) years from the effective date of the Registration
Statement, the Company will furnish (if not otherwise 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 Representative may from time to time reasonably
request.
(o) The
Company will not issue press releases or engage in any other publicity, without
the Representative’s prior written consent, for a period ending at 5:00 P.M.,
New York City time, on the first business day following the fortieth (40th)
day
following the Closing Date, other than normal and customary releases issued
in
the ordinary course of the Company’s business.
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(p) 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 ▇▇▇▇▇ ▇.
Bruchetta 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.
(q) The
Company will retain for no less than three (3) years from the Closing Date,
an
independent registered public accounting firm registered with the PCAOB and
acceptable to the Representative.
(r) The
Company will engage and retain for no less than two (2) years from the Closing
Date, a financial public relations firm reasonably acceptable to the
Representative, which firm shall be experienced in assisting issuers in public
offerings of securities and in their relations with their securityholders.
(s) The
Company has or will retain a transfer agent reasonably acceptable to the
Representative for the Shares and shall continue to retain such transfer agent
(or another transfer agent reasonably acceptable to the Representative) for
a
period of three (3) years following the Closing Date.
(t) The
Company will apply the net proceeds from the sale of the Shares as set forth
under the caption “Use of Proceeds” in the Prospectus in all material respects.
Without
the written consent of the Representative, no proceeds of the Offering will
be
used to pay any accrued salaries to any employees or former
employees.
(u) The
Company will use its best efforts to effect and maintain the listing of the
Shares on the AMEX.
(v) 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 Regulations and the Exchange Act within the time periods required
thereby.
(w) 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 Shares and the Additional Shares.
(x) The
Company will not take, and will cause its Affiliates not to take, directly
or
indirectly, 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 Shares or any other shares of Common Stock.
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(y) The
Company shall cause to be prepared and delivered to the Representative, 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 Representative that may be transmitted
electronically by the other Underwriters to offerees and purchasers of the
Shares for at least the period during which a Prospectus relating to the Shares
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 Representative 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 Shares 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.
(z) The
Company agrees that, unless it obtains the prior written consent of
Representative, it will not make any offer relating to the Shares that would
constitute an Issuer Free Writing Prospectus, as defined in Rule 433 of the
Regulations, or that would otherwise constitute a “free writing prospectus,” as
defined in Rule 405 of the Regulations, required to be filed with the
Commission or retained by the Company under Rule 433 of the Regulations. Any
such free writing prospectus consented to by the Representative is hereinafter
referred to as a “Permitted
Free Writing Prospectus.”
The
Company agrees that it has treated or agrees that it will treat each Permitted
Free Writing Prospectus as an Issuer Free Writing Prospectus and has complied
and will comply with the requirements Rule 164 and Rule 433 of the
Regulations applicable to any Permitted Free Writing Prospectus, including
in
respect of timely filing with the Commission where required, legending and
record keeping.
5. Consideration;
Payment of Expenses.
(a) In
consideration of the services to be provided for hereunder, the Company shall
pay to the Underwriters or their respective designees their pro rata portion
(based on the Shares purchased) of the following compensation:
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(i) an
underwriting discount of ____ percent (____%) of the gross proceeds of the
Offering; and
(ii) a
non-accountable expense allowance equal to ____ percent (___%) of the gross
proceeds of the Offering (exclusive of proceeds from the sale of Additional
Shares).
(b) The
Representative 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 the NASD to the effect that the Underwriters’ aggregate
compensation is in excess of NASD rules or that the terms thereof require
adjustment.
(c) Whether
or not the transactions contemplated by this Agreement, the Registration
Statement, the Sale Preliminary Prospectus 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 Shares and the Representative Warrant
Shares under the Securities Act and the Offering;
(iii) if
the
Closing occurs, the cost of two (2) bound volumes of the Offering documents
for
the Representative;
(iv) all
expenses in connection with the qualification of the Shares and the
Representative Warrant Shares for offering and sale under state or foreign
securities or blue sky laws, including the reasonable fees and disbursements
of
Underwriters’ Counsel in connection with such qualification and in connection
with any blue sky survey undertaken by such counsel;
(v) the
filing fees incident to, and the reasonable fees and disbursements of
Underwriters’ Counsel in connection with, securing any required review by the
NASD of the terms of the Offering;
(vi) all
fees
and expenses in connection with listing the Shares on the AMEX;
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(vii) all
expenses incurred by the Company in connection with attending or hosting “road
show” meetings with prospective purchasers of the Shares;
(viii) any
stock
transfer taxes incurred in connection with this Agreement or the
Offering;
(ix) the
cost
of preparing stock certificates representing the Shares;
(x) the
cost
and charges of any transfer agent or registrar for the Shares;
and
(xi) 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 $5,000 to Underwriters’
Counsel in consideration of “Blue Sky” services rendered
if the
Common Stock sold in this Offering is listed on the AMEX. The
Company shall also
pay, as due, state registration, qualification and filing fees, NASD 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 in an amount not to exceed $3,000 per individual.
(f) It
is
understood, however, that except as provided in this Section, and Sections
6, 7
and 10 hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of Underwriters’ Counsel and the cost of commemorative Lucite
tombstones, if any. 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
accountable out-of-pocket expenses of the Underwriters (including but not
limited to reasonable fees and disbursements of Underwriters’ Counsel to the
Underwriters) incurred in connection herewith.
6. Conditions
of Underwriters’ Obligations.
The
obligations of the Underwriters to purchase and pay for the Firm Shares as
provided herein shall be subject to: (i) the accuracy in all material respects
of the representations and warranties of the Company herein contained, 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 Representative 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 Shares and any Additional Closing Date, if
different, for the Additional Shares, and each of the foregoing and following
conditions must be satisfied as of each Closing.
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(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
City time, on the date of this Agreement, or at such later time and date as
shall have been consented to in writing by the Representative. If the Company
shall have elected to rely upon Rule 430A of the Regulations, 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 Shares 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
Representative shall have received the favorable written opinion of ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, LLP, legal counsel for the Company, dated as of the Closing Date
addressed to the Underwriters in the form attached hereto as Annex
I.
(c) All
proceedings taken in connection with the sale of the Firm Shares and the
Additional Shares as herein contemplated shall be satisfactory in form and
substance to the Representative and to Underwriters’ Counsel.
(d) The
Representative 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 Regulations that 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 any
Preliminary Prospectus 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 and the Prospectus.
EKN
Financial Services, Inc.
______________,
2006
Page 30 of
40
(e) On
the date of this Agreement and on the Closing Date, the Representative shall
have received a “cold comfort” letter from M&K
dated as
of the date of delivery and addressed to the Underwriters and in form and
substance satisfactory to the Representative and Underwriters’
Counsel,
confirming that M&K is an independent registered public accounting firm
within the meaning of the Securities Act and the 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
or confirming the conclusions and findings set forth in such prior letter,
as
the case may be.
(f) 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,
and
except as otherwise disclosed therein), 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
reasonable judgment of the Representative, 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).
(g) The
Representative shall have received a lock-up agreement from each Lock-Up Party,
duly executed by the applicable Lock-Up Party, in each case substantially in
the
form attached hereto as Annex
II.
(h) The
Shares shall have been approved for listing on the AMEX.
(i) The
NASD
shall have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(j) 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 Shares; 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 Shares.
EKN
Financial Services, Inc.
______________,
2006
Page 31 of
40
(k) The
Company shall have delivered to the Representative written evidence of a life
insurance policy (with the Company as sole beneficiary thereof) in the amount
of
$1,000,000 on the life of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, and such policy shall be in full
force and effect.
(l) 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 Representative or to
Underwriters’ Counsel pursuant to this Section 6 shall not be reasonably
satisfactory in form and substance to the Representative and to Underwriters’
Counsel, all obligations of the Underwriters hereunder may be cancelled by
the
Representative at, or at any time prior to, the consummation of the Closing,
and
the obligations of the Underwriters to purchase the Additional Shares may be
cancelled by the Representative 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 any 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: (i) any untrue
statement or alleged untrue statement of a material fact contained in (A) the
Registration Statement, as originally filed or any amendment thereof, or any
related Preliminary Prospectus (including the Sale Preliminary Prospectus)
or
the Prospectus (in light of the circumstances in which such statement was made),
or in any supplement thereto or amendment thereof, or (B) any materials or
information provided to investors by, or with the approval of, the Company
in
connection with the marketing of the offering of the Shares, including any
road
show or investor presentations made to investors by the Company (whether in
person or electronically) or (ii) any omission or alleged omission to state
in
the Registration Statement, as originally filed or any amendment thereof, or
any
related Preliminary Prospectus (including the Sale Preliminary Prospectus)
or
the Prospectus or any supplement thereto or amendment thereof, a material fact
required to be stated therein or necessary to make the statements therein (x)
in
the case of the Registration Statement, not misleading, and (y) in the case
of
the Prospectus or any Preliminary Prospectus, in light of the circumstances
under which they were made, not misleading; provided,
however,
that the
Company will be liable in any such 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. 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.
EKN
Financial Services, Inc.
______________,
2006
Page
32 of
40
(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 reasonable attorneys’ fees and any and all reasonable 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)
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 Shares to be purchased by such
Underwriter hereunder.
(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, promptly 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.
EKN
Financial Services, Inc.
______________,
2006
Page 33 of
40
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:
EKN
Financial Services, Inc.
______________,
2006
Page
34
of
40
(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. 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
Shares 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 Shares to be purchased by each of the Underwriters
hereunder and not joint.
EKN
Financial Services, Inc.
______________,
2006
Page 35 of
40
9. Underwriter
Default.
(a) If
any
Underwriter or Underwriters shall default in its or their obligation to purchase
Firm Shares or Additional Shares hereunder, and if the Firm Shares or Additional
Shares with respect to which such default relates (the “Default
Shares”)
do not
(after giving effect to arrangements, if any, made by the Representative
pursuant to subsection (b) below) exceed in the aggregate 10% of the number
of
Firm Shares or Additional Shares, each non-defaulting Underwriter, acting
severally and not jointly, agrees to purchase from the Company that number
of
Default Shares that bears the same proportion of the total number of Default
Shares then being purchased as the number of Firm Shares set forth opposite
the
name of such Underwriter on Schedule
A
hereto
bears to the aggregate number of Firm Shares set forth opposite the names of
the
non-defaulting Underwriters, subject, however, to such adjustments to eliminate
fractional shares as the Representative in its sole discretion shall make.
(b) In
the
event that the aggregate number of Default Shares exceeds 10% of the number
of
Firm Shares or Additional Shares, as the case may be, the Representative 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 Shares on the terms contained herein. In the event that within five
calendar days after such a default the Representative does not arrange for
the
purchase of the Default Shares as provided in this Section 9, this Agreement
or,
in the case of a default with respect to the Additional Shares, the obligations
of the Underwriters to purchase and of the Company to sell the Additional Shares
shall thereupon terminate, without liability on the part of the Company with
respect thereto (except in each case as provided in Sections 4, 6, 7, 9 and
10(d)) or the Underwriters, 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 Shares are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
the Representative 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 Shares and Additional Shares.
10. Survival.
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 Shares 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.
EKN
Financial Services, Inc.
______________,
2006
Page 36 of
40
11. Effective
Date of Agreement; Termination.
(a) This
Agreement shall become effective upon the later of: (i) receipt by the
Representative and the Company of notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement.
(b) The
Representative shall have the right to terminate this Agreement at any time
prior to the Closing
or
to
terminate the obligations of the Underwriters to purchase the Additional Shares
at any time prior to an Additional
Closing Date, as the case may be, if: (i) a Material Adverse Change with respect
to the Company shall have occurred; or (ii) any domestic or international event
or act or occurrence has materially disrupted, or, in the opinion of the
Representative, will in the immediate future materially disrupt, the market
for
the Company’s securities or securities in general; or (iii) trading on the New
York Stock Exchange, The Nasdaq Global Market, the Nasdaq Capital Market or
the
AMEX 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 New York Stock Exchange, The
Nasdaq
Global
Market, the
Nasdaq Capital Market or
the AMEX
or by order of the Commission or any other governmental authority having
jurisdiction; or (iv) 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 (v) (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
if the effect of any such event in (A) or (B), in the reasonable judgment of
the
Representative, makes it impracticable or inadvisable to proceed with the
offering, sale and delivery of the Firm Shares or the Additional Shares, as
the
case may be, on the terms and in the manner contemplated by 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 Shares 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
Representative, 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.
EKN
Financial Services, Inc.
______________,
2006
Page 37 of
40
12. Notices.
All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing, and:
(a) if
sent
to the Representative or any Underwriter, shall be mailed, delivered, or faxed
and confirmed in writing, to: EKN Financial Services, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in each case,
with a copy to Underwriters’ Counsel at Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, 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, ▇▇▇▇▇▇▇▇▇ Trurig, LLP, at the addresses set forth
in the Registration Statement,
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 Representative, which address will be supplied
to any other party hereto by the Representative 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 Shares 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.
EKN
Financial Services, Inc.
______________,
2006
Page 38 of
40
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.
[Signature
Page Follows]
EKN
Financial Services, Inc.
______________,
2006
Page 39 of
40
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,
DEBT
RESOLVE, INC.
By:
________________________________
Name:
Title:
Accepted
by the Representative, acting for itself and as
Representative
of the Underwriters named on Schedule
A
attached hereto,
as
of the date first written above:
EKN
FINANCIAL SERVICES, INC.
By:
_______________________________________
Name:
Title:
[Signature
Page to Underwriting Agreement]
SCHEDULE
A
Underwriters
|
Underwriter
|
Total
Number of Firm Shares to be Purchased
|
Number
of Additional Shares to be Purchased if Option is Fully
Exercised
|
|
EKN
Financial Services, Inc.
|
||
|
TOTAL
|
ANNEX
II
Form
of Lock-Up Agreement
_____________,
2006
EKN
Financial Services, Inc.
▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
As
Representative of the Underwriters
Re: Debt
Resolve, Inc. Lock-Up Agreement
Ladies
and Gentlemen:
This
letter agreement (this “Agreement”)
relates to the proposed public offering (the “Offering”)
by
Debt Resolve, Inc., a Delaware corporation (the “Company”),
of
its Common Stock, par value $.001 per share (the “Stock”).
The
Offering is governed by the certain Underwriting Agreement, dated as of
_______________, 2006 (the “Underwriting
Agreement”),
by
and among the Company and EKN Financial Services, Inc. (the “Representative”),
as
representative of the several underwriters named therein.
In
order
to induce the Representative to underwrite the Offering, the undersigned (on
behalf of himself) hereby agrees that, without the prior written consent of
the
Representative during the period from the date hereof until twelve (12) months
from the date of the final prospectus for the Offering (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. As used herein
“Relevant
Security”
means
any common stock or other security of the Company or any Affiliate thereof
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 Affiliate 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.
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.
II-1
The
undersigned hereby further agrees that, without the prior written consent of
the
Representative 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.
The
undersigned hereby represents and warrants 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.
The
undersigned hereby acknowledges that Representative’s determination, if any, to
release all or any portion of the Relevant Securities from the Lock-Up Period
will depend on several factors including, but not limited to, the market price
and demand for the Shares and the general condition of the securities markets.
Any decision by the Representative decision to shorten the Lock-Up Period is
arbitrary and may not be based on any specific parameters.
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,
By:
_____________________________
Print
Name: _______________________
II-2