FIREPOND, INC. [ ] Shares of Common Stock (Par Value $0.001 Per Share) UNDERWRITING AGREEMENT
EXHIBIT 1.1
[ ] Shares of Common Stock
(Par Value $0.001 Per Share)
(Par Value $0.001 Per Share)
SHM Capital Inc.
[Other Representatives]
c/o SMH Capital Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
[Other Representatives]
c/o SMH Capital Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Firepond, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to the
several underwriters named in Schedule A hereto (the “Underwriters”), pursuant to this
underwriting agreement (the “Agreement”), an aggregate of [ ] ([ ]) shares of
common stock of the Company, par value $0.001 per share (the “Common Stock”). In addition, the
Company has granted to the Underwriters the option referred to in Section 3(d) hereof to purchase
an aggregate of not more than an additional [ ] ([ ]) shares of Common Stock, if
requested by the Underwriters in accordance with Section 3(d) hereof. It is understood that the
Underwriters propose to offer the “Shares” (as defined below) to be purchased hereunder to the
public upon the terms and conditions set forth in the “Registration Statement” (as defined below)
after the “Effective Date” (as defined below) of the Registration Statement. As used in this
Agreement, (a) the term “Firm Shares” shall mean the Common Stock to be issued and sold to the
Underwriters at the “First Closing Date” (as defined in Section 3(b) below); (b) the term “Option
Shares” shall mean any of the additional up to [ ] ([ ]) shares of Common Stock
that may be purchased pursuant to the option referred to in Section 3(d) hereof; and (c) the term
“Shares” shall mean the Firm Shares and the Option Shares collectively.
As the representative of the Underwriters, SMH Capital Inc. (“SMH Capital”) has informed the
Company that SMH Capital is authorized to enter into this Agreement on behalf of the several
Underwriters, and that the several Underwriters are willing, on the basis of the representations,
warranties, and agreements of the Company herein contained, and upon the terms but subject to the
conditions herein set forth, acting severally and not jointly, to purchase the number of Firm
Shares set forth opposite their respective names in Schedule A hereto, plus their pro rata
portion of the Option Shares if SMH Capital elects to exercise the over-allotment option in whole
or in part for the account of the several Underwriters. In addition, the Company will issue a
warrant (the “Underwriter’s Warrant”) to the Representative to purchase up to [ ] shares of
Common Stock (the “Warrant Shares”) for a five-year period, at an
exercise price per share equal to [$___] (110% of the offering price of the Shares) and will
not be redeemable by the Company.
As the representative of the Underwriters, SMH Capital has also informed the Company that (i)
the Underwriters have or will orally provide the pricing information set forth in Schedule
B to prospective purchasers prior to confirming sales of the Shares, and (ii) each Underwriter
has represented and agreed that, without the prior written consent of the Company and SMH Capital,
it has not made and will not make any offer relating to the Shares that would constitute a free
writing prospectus, and any such free writing prospectus, the use of which has been consented to by
the Company and SMH Capital, is listed in Schedule B hereto.
The Company hereby confirms its agreement with respect to the purchase of the Shares by the
Underwriters as follows:
1. Representations and Warranties of the Company. The Company hereby represents and
warrants to, and agrees with, the Underwriters that, as of the Effective Date, the First Closing
Date and each Option Closing Date (as defined below):
(a) A registration statement on Form SB-2 (File No. 333-145439) relating to the offering of
the Shares has been prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the “Act”), and the rules and regulations of the United States Securities
and Exchange Commission (the “Commission”) promulgated pursuant to the Act (the “Rules and
Regulations”), and said registration statement has been filed with the Commission under the Act.
Amendments to said registration statement have been similarly prepared and filed with the
Commission covering the registration of the Shares under the Act including the related preliminary
prospectus or preliminary prospectuses (each being hereinafter referred to as a “Preliminary
Prospectus” as further defined below), each of which has been furnished to the Underwriters. Each
Preliminary Prospectus was endorsed with the legend required by Item 501(b) of Regulation S-B of
the Rules and Regulations. As used in this Agreement and unless the context indicates otherwise,
the term “Registration Statement” refers to and means said registration statement, all exhibits,
financial statements and schedules included therein and the Prospectus (as defined below) included
therein, as finally amended and revised on or prior to the Effective Date and, in the event of any
post-effective amendment thereto or if any Rule 462(b) Registration Statement becomes effective
prior to the Closing Date (as hereinafter defined), shall also mean such registration statement as
so amended or such Rule 462(b) Registration Statement, as the case may be, and shall also include
any Rule 430A Information (as defined below) to be included in the Prospectus included therein at
the Effective Date, as provided by Rule 430A. The term “Effective Date” shall mean each date and
time that the Registration Statement, any post-effective amendment or amendments thereto and any
Rule 462(b) Registration Statement became or becomes effective. The term “Preliminary Prospectus”
refers to and means a preliminary prospectus filed with the Commission and included in said
Registration Statement before the Effective Date and any preliminary prospectus included in the
Registration Statement at the Effective Date that omits Rule 430A Information; the term “Pricing
Prospectus” shall mean the Preliminary Prospectus included in the Registration Statement
immediately prior to the Applicable Time; the term “Applicable Time” shall mean [___:___] New York
time on the date of this Agreement; the term “Issuer Free Writing Prospectus” shall mean any
“issuer free writing prospectus” as defined in Rule 433
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under the Act; the term “Rule 430A Information” shall mean information with respect to the
Shares and the offering thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A; and, the term “Prospectus” refers to and means the final
prospectus relating to the Shares that is first filed pursuant to Rule 424(b) or, if no filing
pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Shares
included in the Registration Statement at the Effective Date. If the Registration Statement is
amended or such Prospectus is supplemented after the Effective Date and prior to the Option Closing
Date, then the terms “Registration Statement” and “Prospectus” shall include such documents as so
amended or supplemented. Each Preliminary Prospectus and the Prospectus delivered to the
Underwriters for use in connection with the offer and sale of the Shares was identical to the
electronic version filed with the Commission via ▇▇▇▇▇, except to the extent permitted by
Regulation S-T.
(b) (i) The Pricing Prospectus as supplemented by any Issuer Free Writing Prospectus, other
documents and pricing information listed in Schedule C hereto, taken together
(collectively, the “Disclosure Package”) as of the Applicable Time did not include any untrue
statement of a material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading, (ii)
each Issuer Free Writing Prospectus listed in Schedule D hereto does not conflict with the
information contained in the Registration Statement, the Pricing Prospectus or the Prospectus, and
each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Disclosure
Package as of the Applicable Time, did not include any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however, that the foregoing
representations and warranties shall not apply to statements or omissions made in the Pricing
Prospectus or in an Issuer Free Writing Prospectus in reliance upon and conformity with written
information furnished to the Company through SMH Capital by or on behalf of any Underwriter
expressly for inclusion therein. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment to the Registration Statement or the Rule 462(b)
Registration Statement, as the case may be, at the time it became effective and at all subsequent
times through the First Closing Date and the Option Closing Date, complied and will comply in all
material respects with the Act and the applicable Rules and Regulations and did not and will not
contain any 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 not misleading. Each Preliminary
Prospectus, as of its date, and the Prospectus, as amended or supplemented, as of its date and at
all subsequent times through the First Closing Date and the Option Closing Date, did not and will
not contain any untrue statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under which they were made,
not misleading. The representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration Statement, any Rule
462(b) Registration Statement, or any post-effective amendment to the Registration Statement or the
Rule 462(b) Registration Statement, as the case may be, or the Prospectus, or any amendments or
supplements thereto, made in reliance upon and in conformity with information furnished to the
Company in writing through SMH Capital by or on behalf of any of the Underwriters expressly for
inclusion therein.
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(c) Neither the Commission nor any state regulatory authority has issued an order preventing
or suspending the use of any Preliminary Prospectus nor has the Commission or any such authority
instituted or, to the Knowledge of the Company (as defined below), threatened to institute any
proceedings with respect to such an order. When representations or warranties in this Agreement
are qualified to the “Knowledge of the Company” or “Company’s Knowledge,” they are given by the
Company to the extent of and qualified in all respects by the facts actually known to any of the
executive officers or directors of the Company, with an obligation of reasonable inquiry on the
part of such executive officers and directors, prior to the date such representations or warranties
are made. At the time of filing the Registration Statement, any 462(b) Registration Statement, and
any post-effective amendments, and as of the date of the Pricing Prospectus and the Prospectus and
any amendments or supplements thereto, and as of the date hereof, the Company was not and is not an
“ineligible issuer,” as defined in Rule 405 of the Act.
(d) The Company has not distributed and will not distribute, prior to the later of the Option
Closing Date and the completion of the Underwriters’ distribution of the Shares, any offering
material in connection with the offering and sale of the Shares other than a Preliminary
Prospectus, the Prospectus, the Registration Statement or, following receipt of written consent of
SMH Capital, which shall not be unreasonably withheld or delayed, any Issuer Free Writing
Prospectus.
(e) This Agreement has been duly authorized, executed and delivered by, and assuming due
authorization, execution and delivery by the other parties hereto, is a valid and binding agreement
of, the Company, enforceable against the Company in accordance with its terms, except as rights to
indemnification and contribution hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by general equitable
principles.
(f) The Company has been duly incorporated and is now, and at the First Closing Date (as
defined below) and each Option Closing Date (as defined below) will be, validly existing as a
corporation and in good standing under the laws of the States of Arizona, Colorado, Delaware,
Massachusetts, Michigan, and Minnesota, and has the corporate power and authority (i) to own or
lease, as the case may be, its properties, whether tangible or intangible, and conduct its business
as presently conducted and as described in the Pricing Prospectus (the “Business”) and (ii) to
execute, deliver and perform this Agreement and consummate the transactions contemplated hereby and
thereby. The Company has no subsidiaries. The Company is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in which the nature of the
business transacted by it or the character or location of its properties, in each case taken as a
whole, makes such qualification necessary, except where the failure to so qualify or be in good
standing would not reasonably be expected to have a material adverse effect upon the condition
(financial or otherwise), results of operations, income, shareholders’ equity, net worth, business,
assets or properties of the Company (a “Material Adverse Effect”). The Company has no equity
interests in any entity. The Company holds such permits, licenses, certifications, registrations,
approvals, consents, orders, franchises and other authorizations (collectively, “Permits”) from
state, federal, foreign or other regulatory authorities necessary for the conduct of its Business
and is in compliance
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with all laws and regulations and all orders and decrees applicable to it or to such Business,
except where the failure to hold such Permits or comply with such laws, regulations, orders or
decrees would not reasonably be expected to result in a Material Adverse Effect, and there are no
proceedings pending or, to the Knowledge of the Company, threatened, seeking to cancel, terminate
or limit such Permits.
(g) The consolidated financial statements of the Company, including the schedules and related
notes, filed with the Commission as part of the Registration Statement and included in the Pricing
Prospectus are correct in all material respects and fairly present the financial position of the
Company as of and at the dates thereof and the results of operations and cash flows of the Company
for the periods indicated therein and comply as to form in all material respects with the
applicable accounting requirements included in Regulation S-X of the Rules and Regulations. Such
financial statements have been prepared in accordance with generally accepted accounting principles
applied in the United States (“GAAP”) applied on a consistent basis throughout the periods
involved, except as otherwise stated in the Registration Statement and the Pricing Prospectus;
provided, however, that financial statements that are unaudited are subject to year-end adjustments
and do not contain footnotes required under GAAP. The selected consolidated financial data set
forth in the Registration Statement and the Pricing Prospectus fairly present in all material
respects the information shown therein at the respective dates thereof and for the respective
periods covered thereby and have been presented on a basis consistent with that of the audited and
unaudited financial statements included in the Registration Statement and the Pricing Prospectus.
Except as included in the Registration Statement and the Pricing Prospectus, no other financial
statement or supporting schedules are required to be included in the Registration Statement.
(h) The accounting firm of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, Inc., which has audited the financial
statements filed and to be filed with the Commission as part of the Registration Statement and
Pricing Prospectus, are registered independent public accountants with the Public Company
Accounting Oversight Board as required by the Act and the Rules and Regulations, and the Securities
Exchange Act of 1934, as amended (the “1934 Act”) and the rules and regulations thereunder. Except
as described in the Pricing Prospectus and as pre-approved in accordance with the requirements set
forth in Section 10A of the 1934 Act, ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. has not been engaged by the
Company to perform any “prohibited activities” (as defined in Section 10A of the 1934 Act).
(i) Subsequent to the respective dates as of which information is given in the Registration
Statement and the Pricing Prospectus and the Company’s latest financial statements filed with the
Commission as a part thereof, and except as described in the Registration Statement and the Pricing
Prospectus, (i) the Company has not incurred any material liability or obligation, direct or
contingent, or entered into any material transactions whether or not incurred in the ordinary
course of business; (ii) the Company has not sustained any material loss or interference with its
business from fire, storm, explosion, flood or other casualty (whether or not such loss is insured
against), or from any labor dispute or court or governmental action, order or decree; (iii) there
have not been, and through and including the First Closing Date, there will not be, any changes in
the capital stock or any material increases in the long-term debt or other securities of the
Company; (iv) the Company has not paid or declared any dividend or other distribution on its Common
Stock or its other securities or redeemed or repurchased any of its
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Common Stock or other securities, and (v) no change, event, development or circumstance has
occurred which would reasonably be expected to result in a Material Adverse Effect.
(j) No Permits of or filing with any government or governmental instrumentality, agency, body
or court, except as have been obtained or made under the Act, the “blue sky” or securities laws of
any state or the rules of the National Association of Securities Dealers, Inc. (“NASD”) (including
approval of underwriting compensation) or in connection with the listing of the Common Stock on the
American Stock Exchange, are required (i) for the valid authorization, issuance, sale and delivery
of the Firm Shares and the Option Shares to the Underwriters pursuant to this Agreement, and (ii)
the consummation by the Company of the transactions contemplated by this Agreement.
(k) Except as disclosed in the Registration Statement and Pricing Prospectus, there is neither
pending nor, to the Knowledge of the Company, threatened in writing, against the Company any claim,
action, suit, or proceeding at law or in equity, arbitration, investigation or inquiry to which the
Company or any of its officers, key employees, directors or 5% or greater securityholders is a
party and involving the Company’s properties or businesses, before or by any court, arbitration
tribunal or governmental instrumentality, agency, or body.
(l) There is no contract or other document which is required by the Act or by the Rules and
Regulations to be described in the Registration Statement or the Pricing Prospectus or to be filed
as an exhibit to the Registration Statement which has not been so described or filed as required
and each contract or document which has been described in the Registration Statement and Pricing
Prospectus has been described accurately, in all material respects, and presents fairly, in all
material respects, the information required to be described and each such contract or document
which is filed as an exhibit to the Registration Statement is and shall be in full force and effect
at the Closing Date or shall have been terminated in accordance with its terms or as set forth in
the Registration Statement and Pricing Prospectus, and no party to any such contract has given
notice to the Company of the cancellation of or, to the Knowledge of the Company, has threatened to
cancel, any such contract, and except as described in the Registration Statement and Pricing
Prospectus, the Company is not in material default thereunder. Except as described in the
Registration Statement and the Pricing Prospectus, there is no voting or other stockholder
agreement between the Company and any of its stockholders or, to the Knowledge of the Company,
between or by and among any stockholders of the Company. There are and, as of the Closing Date,
there will be, no loans to the Company from any officers, directors, securityholders or
consultants, or any affiliates thereof, except as described in the Registration Statement and
Pricing Prospectus.
(m) The Company does not own any real property. The Company has good title to all of its
personal property (tangible and intangible) and assets reflected as owned in the financial
statements referred to in Section 1(h) above, including any licenses, trademarks and copyrights,
described in the Registration Statement and Pricing Prospectus as owned by it, free and clear of
all security interests, liens, charges, mortgages, encumbrances and restrictions other than as
disclosed in the Registration Statement and the Pricing Prospectus and other than such security
interests, liens, charges, mortgages, encumbrances and restrictions that do not materially affect
the value of such property or materially interfere with the use made or proposed to be made of such
property by the Company. The material leases, subleases and
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licenses under which the Company is entitled to lease, hold or use any real or personal
property, are valid and enforceable by the Company, all rentals, royalties or other payments
accruing thereunder which became due prior to the date of this Agreement have been duly paid except
where such non payment would not reasonably be expected to have a Material Adverse Effect; none of
the Company or, to the Knowledge of the Company, any other party, is in default in respect of any
of the terms or provisions of any such material leases, subleases and licenses and no claim of any
sort has been asserted in writing by anyone against the Company under any such leases, subleases or
licenses affecting or questioning the rights of the Company to the continued use or enjoyment of
the rights and property covered thereby. The Company has not received notice of any violation of
any applicable law, ordinance, regulation, order or requirement relating to its owned or leased
properties, except for any such violation that would not reasonably be expected to result in a
Material Adverse Effect. The Company owns or leases all such properties as are necessary to its
operations as now conducted and as proposed to be conducted as set forth in the Registration
Statement and Prospectus.
(n) The Company has filed with the appropriate federal, state and local governmental agencies,
and all appropriate foreign countries and political subdivisions thereof, all tax returns,
including franchise tax returns, which are required to be filed by it or has duly obtained
extensions of time for the filing thereof and has paid all material taxes required to be paid by it
as shown on such returns and all other material assessments against it, to the extent that the same
have become due and are not being contested in good faith; and the provisions for income taxes
payable, if any, shown on the financial statements filed as part of the Registration Statement and
the Pricing Prospectus are sufficient for all accrued and unpaid foreign and domestic taxes,
whether or not disputed, and for all periods to and including the dates of such consolidated
financial statements. The Company has not executed or filed with any taxing authority, foreign or
domestic, any agreement extending the period for assessment or collection of any income taxes and,
to the Knowledge of the Company, is not a party to any pending action or proceeding by any foreign
or domestic governmental agency for assessment or collection of material taxes; and no claims for
assessment or collection of material taxes have been asserted in writing against the Company. To
the Company’s Knowledge, there is no material tax deficiency that has been or might be asserted or
threatened against the Company.
(o) The Company is insured by recognized, financially sound and reputable institutions with
policies in such amounts, with such deductibles and covering such risks as reasonably adequate and
customary, in the Company’s judgment, for its business including, but not limited to, policies
covering real and personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism, general liability and directors and officers liability. The
Company believes that it will be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted without incurring a material additional
cost to the Company. The Company has not been denied any insurance coverage which it has sought or
for which it has applied. To the Knowledge of the Company, there are no facts or circumstances
which would require it to notify its insurers of any material claim of which notice has not been
made or will not be made in a timely manner. To the Knowledge of the Company, there are no facts
or circumstances under any of its existing insurance policies which would relieve any insurer of
its obligation to satisfy in full any existing valid claim of the Company under any such policies.
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(p) Except as disclosed in the Registration Statement and the Pricing Prospectus, the Company
owns or otherwise possesses adequate, and to the Knowledge of the Company, enforceable, and
unrestricted rights to use all patents, patent applications, patent rights, licenses, inventions,
collaborative research agreements, trade secrets, know-how, trademarks, trademark registrations,
service marks, service ▇▇▇▇ registrations, trade names, copyrights, works of authorship, formulae,
customer lists, designs, technical data and other proprietary rights and intellectual property
(including other unpatented and/or unpatentable proprietary or confidential information, systems or
procedures) which are necessary to or used in the conduct of its businesses as now conducted or as
proposed to be conducted as described in the Registration Statement and Pricing Prospectus
(collectively, the “Intellectual Property”) except where the failure to so own or possess such
rights could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
Except as described in the Registration Statement and Pricing Prospectus, (i) the Company is the
beneficial and record owner of all right, title and interest in, to and under the Intellectual
Property, free and clear of all liens, security interests, charges, encumbrances or other adverse
claims and has the right to use the Intellectual Property without payment to a third party; (ii)
there is no pending or, to the Knowledge of the Company, threatened action, suit, proceeding or
claim by others challenging the Company’s rights in or to, or the validity or scope of, any
Intellectual Property, nor, to the Knowledge of the Company, do there exist any facts which would
form a reasonable basis for any such claim; (iii) to the Knowledge of the Company, the Company has
not infringed, is not infringing upon, or is not otherwise in conflict with the intellectual
property rights of others; (iv) the Company has not received any notice that it has or may have
infringed, is infringing upon, or is in conflict with the intellectual property rights of others;
(v) there is no pending or, to the Knowledge of the Company, threatened action, suit, proceeding or
claim by others alleging that the Company infringes, is in conflict with, or otherwise violates any
patent, trademark, copyright, trade secret or other proprietary rights of others, nor, to the
Knowledge of the Company, do there exist any facts which would form a reasonable basis for any such
claim; (vi) to the Knowledge of the Company, no others have infringed upon the Intellectual
Property of the Company; (vii) the Company is not obligated or under any liability whatsoever to
make any payment by way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, intellectual property rights not owned or controlled by the Company or in connection
with the conduct of the Business; (viii) the expiration of any patents, patent rights, trade
secrets, trademarks, service marks, trade names or copyrights would not result in a Material
Adverse Effect that is not otherwise disclosed in the Pricing Prospectus; (ix) none of the patents
owned or licensed by the Company is unenforceable or invalid, and the Company is unaware of any
facts which would form a reasonable basis for any claim that the patent applications owned or
licensed by the Company would be unenforceable or invalid if issued as patents except where any
noncompliance would not reasonably be expected to result in a Material Adverse Effect; (x) the
Company has taken commercially reasonable security measures (it being recognized that not taking
any action may be commercially reasonable in respect to an item of information) to protect the
secrecy, confidentiality and value of all material proprietary technical information developed by
and belonging to the Company which has not been patented; and (xi) the Company is not obligated to
pay a royalty, grant a license or provide other consideration to any third person in connection
with the Intellectual Property.
(q) Except as described in the Registration Statement and Pricing Prospectus, neither the
Company nor any officer, director or any other affiliate of the Company (as such
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term is defined in Rule 405 promulgated under the Rules and Regulations) has incurred any
liability for or entered into any agreement providing for a finder’s fee or similar fee in
connection with the transactions contemplated by this Agreement.
(r) Neither the Company nor any of its officers, directors, or, to the Knowledge of the
Company, other affiliates (as such term is defined in Rule 405 promulgated under the Rules and
Regulations) has taken, and each officer or director has agreed that he will not take, and the
Company has used reasonable efforts to cause each of its affiliates not to have taken or take,
directly or indirectly, any action designed to constitute or which has constituted or which might
cause or result in the stabilization or manipulation of the price of any security of the Company or
other violation under Regulation M promulgated under the 1934 Act or otherwise, to facilitate the
sale or resale of the Shares.
(s) Except as disclosed in the Registration Statement and Pricing Prospectus under the caption
“Certain Relationships and Related Party Transactions,” no person related to the Company as
described in Item 404(a) of Regulation S-B promulgated under the Act has or has had since the
beginning of the most recently completed fiscal year of the Company, either directly or indirectly,
(i) a material interest in any person or entity which (A) furnishes or sells products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B) purchases from or
sells or furnishes to the Company any goods or services, or (ii) a beneficial interest in any
contract or agreement to which the Company is a party or by which it may be bound or affected.
There are no existing agreements, arrangements, or transactions, between or among the Company and
any officer, director of the Company which are required to be described in the Registration
Statement and the Pricing Prospectus under the caption “Certain Relationships and Related Party
Transactions” and which are not so described.
(t) The minute books of the Company have been provided to the Underwriters through counsel to
the Underwriters (“Underwriters’ Counsel”) and contain accurate summaries of all meetings and
actions of the directors, all committees of the Board of Directors and stockholders of the Company
since [ ], and reflect all transactions referred to in such minutes accurately in all
material respects.
(u) The Company had at the date or dates indicated in the Registration Statement and Pricing
Prospectus a duly authorized, issued and outstanding capitalization as set forth in the
Registration Statement and the Pricing Prospectus. Based on the assumptions stated in the
Registration Statement and the Pricing Prospectus, the Company will have on the Closing Date the
as-adjusted stock capitalization set forth therein. Except as set forth in the Registration
Statement or the Pricing Prospectus, on the Effective Date and on the Closing Date, there will be
no options to purchase, warrants or other rights to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments or preemptive rights or rights of first refusal
to issue or sell shares of the Company’s capital stock or any such warrants, convertible securities
or obligations. Except as set forth in the Registration Statement or the Pricing Prospectus, no
holder of any of the Company’s securities has any rights, “demand,” “piggyback” or otherwise, to
have such securities registered under the Act, and all holders with any such rights have agreed not
to exercise such rights with respect to the Registration Statement. The Company has the right
under the terms of its agreements with the holders of its
9
securities to exclude from the Registration Statement (by amendment or otherwise) any
securities held by such holders.
(v) The Shares and the other securities of the Company conform in all material respects to all
descriptions and statements in relation thereto in the Registration Statement and Pricing
Prospectus; the outstanding shares of Common Stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable; the outstanding options and warrants to
purchase Common Stock have been duly authorized and validly issued and constitute the valid and
binding obligations of the Company, and none of such outstanding shares of Common Stock or
outstanding warrants or options to purchase Common Stock were issued in violation of the pre
emptive rights, rights of first refusal or similar rights to subscribe for or purchase securities
of the Company or any stockholder of the Company. The offers and sales of the outstanding Common
Stock and outstanding options and warrants to purchase Common Stock were at all relevant times
either registered under the Act and the applicable state securities or “blue sky” laws or exempt
from such registration requirements. None of the offers and sales of the outstanding Common Stock
or outstanding options or warrants to purchase Common Stock are required to be integrated (within
the meaning of the Act) with the offered sale of the Shares. The Underwriter’s Warrant is validly
authorized for issuance and the Warrant Shares are validly authorized and validly reserved for
issuance, and when issued and delivered upon the exercise of the Underwriter’s Warrant in
accordance with the terms of such warrant, will be validly issued, fully paid, and nonassessable,
and will not be issued in violation of any preemptive, rights of first refusal, or similar rights
to subscribe for or purchase securities of the Company or any stockholder of the Company. Upon
exercise of the Underwriter’s Warrant, the holders of the Underwriter’s Warrants will receive good
title to the Warrant Shares free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders’ agreements, and voting trusts. The Underwriter’s Warrant and the
Warrant Shares conform to all statements relating thereto in the Registration Statement and Pricing
Prospectus.
(w) The issuance and sale of the Shares to be purchased by the Underwriters from the Company
have been duly authorized and, upon delivery against payment therefor as contemplated by this
Agreement, will be validly issued, fully paid and nonassessable and will conform in all material
respects to the description of the Shares contained in the Pricing Prospectus.
(x) Each officer and director of the Company and certain owners of record of capital stock or
options or warrants to acquire capital stock of the Company has agreed to sign an agreement
substantially in the form attached hereto as Exhibit A (the “Lock-up Agreements”). The
Company has provided to Underwriters’ Counsel true, accurate and complete copies of all of the
Lock-up Agreements presently in effect or effected hereby.
(y) Neither the Company nor any agent of the Company, acting on behalf of the Company, has at
any time (i) made any contributions to any candidate for political office in violation of law, or
failed to disclose fully any such contributions in violation of law, (ii) made any payment to any
state, federal or foreign governmental officer or official, or any other person charged with
similar public or quasi public duties, other than payments required or allowed by applicable law or
(iii) made any payment of funds of the Company or received or retained any funds in violation of
any law, rule or regulation and under circumstances requiring the
10
disclosure of such payment, receipt or retention of funds in the Registration Statement and
Pricing Prospectus. The Company’s internal accounting controls and procedures are sufficient to
cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(z) The Company is not an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended. After giving
effect to the offering and sale of the Shares and the application of the proceeds thereof as
described in the Registration Statement and Pricing Prospectus, the Company will not be an
“investment company” within the meaning of the Investment Company Act of 1940, as amended, and the
rules and regulations of the Commission thereunder.
(aa) The confidentiality agreements between the Company and its officers, employees and
consultants are binding and enforceable obligations upon the other parties thereto in accordance
with their terms, except to the extent enforceability may be limited by any applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors’
rights generally and to the extent that the remedy of specific performance and injunction or other
forms of equitable relief may be subject to equitable defenses and the discretion of the court
before which any proceeding therefor may be brought.
(bb) Except as set forth in the Registration Statement and Pricing Prospectus, the Company
does not have any employee benefit plans (including, without limitation, profit sharing and welfare
benefit plans) or deferred compensation arrangements that are subject to the provisions of the
United States Employee Retirement Income Security Act of 1974 (“ERISA”), it being understood that
neither the Registration Statement nor the Pricing Prospectus disclose that such employee benefit
plans are subject to ERISA. The Company has fulfilled its obligations, if any, under the minimum
funding standards of Section 302 of ERISA and the regulations and published interpretations
thereunder with respect to each “plan” (as defined in Section 3(3) of ERISA and such regulations
and published interpretations) in which employees of the Company are eligible to participate and
each such plan subject to ERISA is in compliance in all material respects with the presently
applicable provisions of ERISA and such regulations and published interpretations. The Company has
not incurred any unpaid liability to the Pension Benefit Guaranty Corporation (other than for the
payment of premiums in the ordinary course) or to any such plan under Title IV of ERISA.
(cc) The Company has filed a registration statement on Form 8-A with respect to its Common
Stock under Section 12(b) of the 1934 Act and such registration statement has been declared
effective by the Commission. The Company has filed listing applications with respect to its Common
Stock with the American Stock Exchange (“AMEX”), such listing applications have been accepted by,
and the Shares have been approved for listing on, AMEX, subject to official notices of issuance.
The Company has taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the 1934 Act, nor has the Company received any notification
that the Commission or AMEX is contemplating terminating such registration or listing.
(dd) The Company is not involved in any labor disputes with any of its employees and, to the
Knowledge of the Company, no employee has threatened the
11
commencement of any labor disputes with the Company, which would reasonably be expected to
result in a Material Adverse Effect, nor has the Company received any notice of any bankruptcy,
labor disturbance or other event affecting any of its principal suppliers or customers, which would
reasonably be expected to result in a Material Adverse Effect. The Company is in compliance in all
material respects with all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and wages and hours that
are applicable to them. The Company has not received notice of any pending investigations
involving the Company, by the U.S. Department of Labor or any other governmental agency responsible
for the enforcement of such federal, state, local, or foreign laws and regulations. There is no
unfair labor practice charge or complaint against the Company pending before the National Labor
Relations Board or, to the Knowledge of the Company, any strike, picketing, boycott, labor dispute,
slowdown or stoppage pending or threatened against or involving the Company and none has ever
occurred. No collective bargaining representation question exists respecting the employees of the
Company, and no collective bargaining agreement or modification thereof is currently being
negotiated by the Company. The Company has not received notice that any grievance or arbitration
proceeding is pending under any expired or existing collective bargaining agreements of the
Company.
(ee) The Company has provided to Underwriters’ Counsel, complete and accurate copies of all
agreements, certificates, correspondence and other items, documents and information requested by
such counsel.
(ff) The Company’s board of directors has validly appointed an audit committee whose
composition satisfies the requirements of the 1934 Act and the rules and regulations of the
Commission adopted thereunder, and Sections 121 and 803 of the AMEX Company Guide. The Company’s
audit committee has adopted a charter that satisfies the 1934 Act and the rules and regulations of
the Commission adopted thereunder, and Sections 121 and 803 of the AMEX Company Guide.
(gg) The Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The Company has taken
all necessary actions to ensure that, upon and at all times after effectiveness of the Registration
Statement, it has established and maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15 and 15d-15 under the ▇▇▇▇ ▇▇▇) that: (A) are designed to ensure that
material information relating to the Company is made known to the Company’s principal executive
officer and its principal financial officer by others within those entities and (B) are effective
to perform the functions for which they are established at each quarter end. The Company is not
aware of (x) any material weakness in the design or operation of internal controls over financial
reporting that could adversely affect the Company’s ability to record, process, summarize and
report financial data; or (y) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal controls over financial reporting.
Since the date of the Company’s most
12
recent audited fiscal year, there has been no change in the Company’s internal controls (as
such term is defined in Item 307(b) of the Regulation S-B of the Rules and Regulations) that has
materially affected, or is reasonably likely to materially affect, the Company’s internal controls.
(hh) The Company is in material compliance with all provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002 and the rules and regulations promulgated by the Commission thereunder that are applicable, or
will be applicable as of the date of payment for and delivery of the Firm Shares and Option Shares
pursuant hereto, to the Company.
(ii) Except as set forth in the Registration Statement and Pricing Prospectus (exclusive of
any supplement thereto), the Company (A) is in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants
applicable to its Business (“Environmental Laws”), except where any non-compliance would not
reasonably be expected to result in a Material Adverse Effect, (B) has received and is in
compliance with all Permits required under applicable Environmental Laws to conduct its Business,
except where any non-compliance would not reasonably be expected to result in a Material Adverse
Effect, and (C) has not received notice of any actual or potential liability for the investigation
or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or
contaminants. The Company has not received written notice and, to the Knowledge of the Company,
has not been named as a “potentially responsible party” under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
(jj) To the Knowledge of the Company, there are no affiliations or associations between any
member of the NASD and any Company officer, director or holder of five percent (5%) or more of the
Company’s securities, except as set forth in the Registration Statement and the Pricing Prospectus.
(kk) There are no material off-balance sheet arrangements (as defined in Item 303 of
Regulation S-B) that have or are reasonably likely to have a current or future effect on the
Company’s financial condition, changes in financial condition, results of operations, liquidity,
capital expenditures or capital resources or components or revenue or expenses.
(ll) Any certificate signed by an officer of the Company in his capacity as such and delivered
to the Underwriters or Underwriters’ Counsel pursuant to this Agreement shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters set forth in such
certificate.
(mm) The issue and sale of the Shares and the compliance by the Company with this Agreement
and the consummation of the transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a default under (i) any
indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of the property or assets of
the Company is subject; (ii) the provisions of the Certificate of Incorporation or By laws of the
Company; or (iii) any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its
13
properties, except, in the case of clauses (i) and (iii) above, for such conflicts, breaches
or violations as would not, individually or in the aggregate, be reasonably expected to result in a
Material Adverse Effect.
(nn) The Company is not (i) in violation of its charter or by-laws or (ii) in default in the
performance or observance of any material obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties may be bound, or (iii) in violation of
any statute or any judgment, order, rule or regulation of any court of arbitrator or governmental
authority, except, in the case of clauses (ii) or (iii) above, for any such default or violation
that would not, individually or in the aggregate, have a Material Adverse Effect.
(oo) The Company (A) is in compliance, in all material respects, with any and all applicable
foreign, federal, state and local laws, rules, regulations, treaties, statutes and codes
promulgated by any and all governmental authorities (including pursuant to the Occupational Health
and Safety Act) relating to the protection of human health and safety in the workplace
(“Occupational Laws”); (B) has received all material permits, licenses or other approvals required
of it under applicable Occupational Laws to conduct its business as currently conducted; and (C) is
in compliance, in all material respects, with all terms and conditions of such permit, license or
approval. No action, proceeding, revocation proceeding, writ, injunction or claim is pending or,
to the Company’s Knowledge, threatened against the Company relating to Occupational Laws, and to
the Company’s Knowledge there are no facts, circumstances or developments relating to its
operations that could reasonably be expected to form the basis for or give rise to such actions,
suits, investigations or proceedings.
(pp) Except as set forth in the Registration Statement and the Pricing Prospectus, the Company
has not granted rights to develop, manufacture, produce, assemble, distribute, license, market or
sell its products to any other person and is not bound by any agreement that affects the Company’s
exclusive right to develop, manufacture, produce, assemble, distribute, license, market or sell its
products.
(qq) Nothing has come to the attention of the Company that has caused the Company to believe
that the statistical and market-related data included in the Registration Statement and the Pricing
Prospectus is not based on or derived from sources that are reliable and accurate in all material
respects.
2. Purchase, Delivery and Sale of the Shares.
(a) Upon the basis of the representations, warranties and agreements of SMH Capital herein
contained, and subject to the terms and conditions herein set forth, the Company agrees to issue
and sell to the several Underwriters the respective number of Firm Shares set forth opposite the
name of such Underwriter in Schedule A hereto. On the basis of the representations,
warranties and agreements of the Company herein contained, and upon the terms but subject to the
conditions herein set forth, the Underwriters agree, severally and not jointly, to purchase from
the Company the respective number of Firm Shares set forth opposite their names on Schedule
A, subject to adjustment in accordance with Section 8 hereof. The
14
purchase price per Share to be paid by the several Underwriters to the Company shall be
U.S.$[___] per share.
Payment for the Firm Shares to be sold by the Company shall be made at the First Closing Date
(and, in the case of the Option Shares, if applicable, at the Option Closing Date) by wire transfer
of immediately available funds to the order of the Company.
(b) Delivery by the Company of the Firm Shares to be purchased by the Underwriters and payment
therefor by the Underwriters shall be made by the Company and the Underwriters at 10:00 a.m. New
York time, at the offices of [ ] (the “[ ] Office”), or at such
other place as may be agreed upon among the Underwriters and the Company, on the third
(3rd) full business day following the date of this Agreement, or, if this Agreement is
executed and delivered after 1:30 P.M., New York time, on the fourth (4th) full business
day following the date of this Agreement, or at such other time and date not later than seven (7)
full business days following the first day that Shares are traded as the Underwriters and the
Company may determine (or at such time and date to which payment and delivery shall have been
postponed pursuant to this Section 3), such time and date of payment and delivery being herein
called the “First Closing Date”; provided, however, that if the Company has not made available to
the Underwriters copies of the Prospectus within the time provided in this Agreement, the
Underwriters may, in their sole discretion, postpone the Closing Date until no later than two (2)
full business days following delivery of copies of the Prospectus to the Underwriters.
(c) The Company shall deliver, or cause to be delivered, a credit representing the Firm Shares
to an account or accounts at The Depository Trust Company (“DTC”) for the accounts of the
Underwriters at the First Closing Date, against the irrevocable release of a wire transfer of
immediately available funds for the amount of the purchase price therefor. The Company shall also
deliver, or cause to be delivered, a credit representing the Option Shares to an account or
accounts at DTC for the accounts of the Underwriters, at the First Closing Date or the Option
Closing Date, as the case may be, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. Time shall be of the essence, and
delivery at the time and place specified in this Agreement is a further condition to the
obligations of the Underwriters. Not later than 12:00 noon, New York time, on the second business
day following the date the Shares are released by the Underwriters for sale to the public, the
Company shall deliver or cause to be delivered copies of the Prospectus in such quantities and at
such places as the Underwriters shall request.
(d) Subject to the terms and conditions of this Agreement, and on the basis of the
representations, warranties and agreements contained herein, for the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Shares as described in the
Registration Statement and Pricing Prospectus, the Underwriters are hereby granted an option to
purchase all or any part of the Option Shares from the Company for up to [ ] Option Shares.
The purchase price to be paid per share for the Option Shares will be the same price as the price
per Firm Share set forth in Section 2(a) hereof. The option granted hereby may be exercised by
notice from the Underwriters to the Company in accordance with Section 2(e) hereof solely by the
Underwriters as to all or any part of the Option Shares at any time within thirty (30) days after
the Effective Date. The Underwriters will not be under any
15
obligation to purchase any Option Shares prior to the exercise by the Underwriters of such
option in accordance with Section 2(e) hereof.
(e) The option granted pursuant to Section 2(d) hereof may be exercised by SMH Capital by
giving notice to the Company, which must be confirmed by a letter or facsimile setting forth the
number of Option Shares to be purchased by the Underwriters, the date and time for delivery of and
payment for the Option Shares to be purchased and stating that the Option Shares referred to
therein are to be used for the sole purpose of covering over-allotments in connection with the
distribution and sale of the Firm Shares by the Underwriters. If such notice is given prior to the
First Closing Date, the date set forth therein for such delivery and payment will be the First
Closing Date. If such notice is given on or after the First Closing Date, the date set forth
therein for such delivery and payment will not be earlier than two (2) full business days
thereafter. In either event, the date so set forth will not be more than fifteen (15) full
business days after the date of such notice. The date and time set forth in such notice is herein
called the “Option Closing Date.” Upon exercise of such option, through the Underwriters’ delivery
of the aforementioned notice, the Company will become obligated to convey to the Underwriters, and,
subject to the terms and conditions set forth in this Section 3(e), the Underwriters will become
obligated to purchase, the number of Option Shares specified in such notice. If any Option Shares
are to be purchased, (i) each Underwriter agrees, severally and not jointly, to purchase the number
of Option Shares (subject to such adjustments to eliminate fractional shares as the Underwriters
may determine) that bears the same proportion to the total number of Option Shares to be purchased
as the number of Firm Shares set forth on Schedule A opposite the name of such Underwriter
bears to the total number of Firm Shares, subject to any adjustment in accordance with Section 10
hereof and (ii) the Company agrees to sell up to [ ] Option Shares. The Underwriters may
cancel the option at any time prior to its expiration by giving written notice of such cancellation
to the Company.
(f) Payment for any Option Shares purchased will be made to the Company by wire transfer in
immediately-available funds to the order of the Company and the Custodian, respectively, against
delivery of the Option Shares purchased by the Underwriters at the [ ] Office (or at
such other location as the Underwriters and the Company may agree).
(g) Unless the Shares are to be delivered by a “fast” transfer, the Company will make the
certificates for the Shares to be purchased by the Underwriters hereunder available to the
Underwriters for inspection, checking and packaging at the office of the Company’s transfer agent
or correspondent in New York, NY, not less than one (1) full business day prior to the First
Closing Date and the Option Closing Date, as the case may be (both of which are collectively
referred to herein as the “Closing Dates”). The certificates representing the Shares shall be in
such names and denominations as the Underwriters may request at least two (2) full business days
prior to the respective Closing Dates. In the event that the Underwriters determine to utilize
DTC, the parties will use their best efforts to make the offering of the Shares “DTC eligible” and
to comply with the procedures thereof.
(h) At the First Closing, the Company shall grant to the Representative the Underwriter’s
Warrant to purchase the Warrant Shares for a five-year period, at an exercise
16
price per share equal to [$___] (110% of the offering price of the Shares) and will not be
redeemable by the Company.
3. Public Offering by the Underwriters. The Underwriters propose to make a public
offering of their respective portions of the Shares as soon after the Registration Statement and
this Agreement have become effective as in the judgment of the Underwriters is advisable and
initially to offer the Shares upon the terms set forth in the Pricing Prospectus and Prospectus.
4. Agreements of the Company. The Company covenants and agrees with the Underwriters
that:
(a) If the Registration Statement has not been declared effective prior to the time of
execution of this Agreement, the Company will use its best efforts to cause the Registration
Statement to become effective as promptly as possible, or, if the procedure in Rule 430A of the Act
is followed, to prepare and timely file with the Commission under Rule 424(b) under the Act a
Prospectus in a form approved by the Underwriters containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of the Act, and will
not at any time, whether before or after the Effective Date, file any amendment or supplement to
the Registration Statement, (i) which shall not have been previously submitted to, and approved by,
the Underwriters or Underwriters’ Counsel within a reasonable time prior to the filing thereof,
(ii) to which the Underwriters or Underwriters’ Counsel shall have reasonably objected as not being
in compliance with the Act or the Rules and Regulations or (iii) which is not in compliance with
the Act or the Rules and Regulations. If the Company elects to rely on Rule 462(b) under the Act,
the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) under the Act prior to the time confirmations are sent or given, as specified by Rule
462(b)(2) under the Act, and shall pay the applicable fees in accordance with Rule 111 under the
Act. The Company further agrees to file promptly all material required to be filed by the Company
with the Commission pursuant to Rule 433(d) under the Act.
(b) The Company will, promptly after it shall have received notice, notify the Underwriters
(i) of the receipt of any comments on, or requests for amendment of, the Registration Statement,
for supplement of the Prospectus, or for additional or supplemental information, by or from the
Commission, and (ii) of the time and date when the Registration Statement or any post effective
amendment thereto has become effective or any supplement to the Prospectus has been filed.
(c) The Company will advise the Underwriters promptly of any request of the Commission for an
amendment or supplement to the Registration Statement or the Prospectus, or for any additional
information, or of the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement, or of any judgment, order, injunction or decree preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, or of the institution of any
proceedings for any of such purposes, of which it has Knowledge, and will use its best efforts to
prevent the issuance of any stop order, and, if issued, to obtain as promptly as possible the
lifting thereof.
17
(d) If at any time when a Prospectus relating to the Shares is required, in the opinion of
Underwriters’ Counsel, to be delivered under the Act by the Underwriters (the “Prospectus Delivery
Period”), any event shall have occurred as a result of which, in the reasonable opinion of counsel
for the Company or Underwriters’ Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which
they were made when the Prospectus is delivered, not misleading, or if it is necessary at any time
to amend the Prospectus to comply with the Act, the Company will notify the Underwriters promptly
and, at the request of SMH Capital, prepare and file with the Commission an appropriate amendment
or supplement in accordance with Section 10 of the Act, which will correct such statement or
omission, or effect such compliance, each such amendment or supplement to be reasonably
satisfactory to Underwriters’ Counsel, and the Company will furnish to the Underwriters copies of
such amendment or supplement as soon as available and in such quantities as the Underwriters may
reasonably request, provided that, if any Underwriter is required to deliver a Prospectus in
connection with sales of Shares at any time more than nine (9) months after the date hereof, all
costs and expenses in connection with the furnishing of copies of such amended or supplemented
Prospectus will be at the expense of such Underwriter.
(e) Within the Prospectus Delivery Period, or pursuant to the undertakings of the Company in
the Registration Statement, the Company, at its own expense, will comply in all material respects
with all requirements imposed upon it by the Act, the Rules and Regulations, the 1934 Act and the
rules and regulations of the Commission promulgated under the 1934 Act, each as now or hereafter
amended or supplemented, and by any order of the Commission so far as necessary to permit the
continuance of sales of, or dealings in, the Shares.
(f) The Company will furnish to the Underwriters, without charge, a signed copy of the
Registration Statement and of any amendment or supplement thereto which has been filed prior to the
date of this Agreement, together with each exhibit filed therewith, and three (3) conformed copies
of such Registration Statement and as many amendments thereto (unsigned and exclusive of exhibits)
as the Underwriters may reasonably request. The signed copies of the Registration Statement so
furnished to the Underwriters will include signed copies of any and all consents and reports of the
independent public auditors as to the financial statements included in the Registration Statement
and Pricing Prospectus, and signed copies of any and all consents and certificates of any other
person whose profession gives authority to statements made by them and who are named in the
Registration Statement or Pricing Prospectus as having prepared, certified or reviewed any parts
thereof.
(g) The Company will deliver to the Underwriters, without charge, (i) prior to the Effective
Date, copies of each Preliminary Prospectus filed with the Commission bearing in red ink the
statement required by Item 501 of Regulation S-B of the Rules and Regulations; (ii) on and from
time to time after the Effective Date, copies of the Prospectus; and (iii) as soon as they are
available, and from time to time thereafter, copies of each amended or supplemented Prospectus, and
the number of copies to be delivered in each such case will be such as the Underwriters may
reasonably request. The Company has consented and hereby consents to the use of each Preliminary
Prospectus for the purposes permitted by the Act and the Rules and Regulations. The Company
authorizes the Underwriters to use the Prospectus in connection
18
with the sale of the Shares during the Prospectus Delivery Period. Notwithstanding the
foregoing, the Underwriters shall not use any Preliminary Prospectus or the Prospectus if the
Company has given the Underwriters written notice of the occurrence, or imminently potential
occurrence, of any development that could cause such Preliminary Prospectus or Prospectus, as the
case may be, to include an untrue statement of a material fact or to omit to state any material
fact required to be stated therein or necessary to make the statements therein, in the light of the
circumstances, not misleading.
(h) The Company shall promptly from time to time take such action as the Underwriters may
reasonably request to qualify or register the Shares, the Underwriter’s Warrant, and the Warrant
Shares for offering and sale under (or obtain exemptions from the application of) the securities
laws of such U.S. jurisdictions as the Underwriters may request and comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Shares; provided that, notwithstanding the foregoing,
the Company will not be required to (i) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this paragraph or where it would be subject
to taxation as a foreign corporation, or (ii) consent to general service of process in any such
jurisdiction. The Company will advise SMH Capital promptly of receipt by the Company of any notice
regarding the suspension of the qualification or registration of (or any such exemption relating
to) the Shares for offering, sale or trading in any jurisdiction or any initiation of threat of any
proceeding for any such purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its reasonable best efforts to
obtain the withdrawal thereof at the earliest possible date.
(i) During the period commencing on the date hereof and ending 120 days after the date of the
Prospectus (the “Lock-Up Period”), the Company shall not (1) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (2) enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or
such other securities, in cash or otherwise, without the prior written consent of SMH Capital (such
consent not to be unreasonably withheld) and the prior consent of a majority of the Company’s
independent directors.
The foregoing paragraph shall not apply (i) to the issuance of securities pursuant to the
Company’s stock option plans in the form and amount approved for issuance as described in the
Registration Statement and the Prospectus, (ii) the exercise of options or warrants or the
conversion of a security outstanding on the date of the Prospectus and which is described in the
Registration Statement, or (iii) the issuance of securities in connection with a merger or
acquisition by the Company of the assets or capital stock of another person or entity, so long as
the securities so issued by the Company may not be resold during the Lock-Up Period; provided,
however, that the Company agrees that such issuances may be made subject to the terms of the form
of Lock-Up Agreement attached hereto as Exhibit A. The Company also agrees that during
such period, the Company will not file any registration statement, preliminary prospectus or
19
prospectus, or any amendment or supplement thereto, under the Act for any such transaction
described in the foregoing paragraph or which registers, or offers for sale, Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, except for a
registration statement on Form S-8 relating to employee benefit plans; provided, however, that the
Company may amend and supplement Registration Statement Nos. 333-137971 and 333-140869 during the
Lock-Up Period. The Company agrees that if (a) during the last 17 days of the Lock-Up Period, the
Company issues an earnings release or material news or a material event relating to the Company
occurs, or (b) prior to the expiration of the Lock-Up Period, the Company announces that it will
release earnings results during the 16-day period beginning on the last day of the Lock-Up Period,
the restrictions set forth herein shall continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the occurrence of the material news or
material event, as applicable, unless SMH Capital waives, in writing, such extension.
(j) As soon as practicable, but in any event not later than forty five (45) days after the end
of the 12 month period beginning on the day after the end of the fiscal quarter of the Company
during which the effective date of the Registration Statement is deemed to occur pursuant to Rule
158(c), the Company will make generally available to its security holders (within the meaning of
Section 11(a) of the Act) an earnings statement of the Company meeting the requirements of Rule
158(a) under the Act covering a period of at least twelve (12) months beginning after the Effective
Date, and advise the Underwriters that such statement has been so made available.
(k) The Company will apply the net proceeds (“Proceeds”) it realizes from the sale of the
Shares in the manner set forth under the caption “Use of Proceeds” in the Pricing Prospectus.
(l) During the course of the distribution of the Shares, the Company will not and the Company
will cause its officers and directors not to take, directly or indirectly, any action designed to
or which might, in the future, cause or result in stabilization or manipulation of the price of the
Shares.
(m) The Company will use its best efforts, at its cost and expense, to take all necessary and
appropriate action to list the Shares on AMEX and maintain such listing for as long as the Shares
are so qualified.
(n) The Company will file with the Commission such information on Form 10-Q or Form 10-K as
may be required by Rule 463 under the Act.
(o) The Company will, upon request of any Underwriter, furnish, or cause to be furnished, to
such Underwriter an electronic version of the Company’s trademarks, servicemarks and corporate logo
for use on the website, if any, operated by such Underwriter for the purpose of facilitating the
on-line offering of the Shares (the “License”); provided, however, that the License shall be used
solely for the purpose described above, shall be granted without any fee and shall not be assigned
or transferred.
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(p) On the Closing Dates, all transfer or other taxes (other than income taxes) which are
required to be paid in connection with the sale and transfer of the Shares will have been fully
paid by the Company and the Selling Stockholders, as the case may be, and all laws imposing such
taxes, if any, will have been fully complied with.
(q) Subsequent to the dates as of which information is given in the Registration Statement and
Pricing Prospectus and prior to the Closing Dates, except as disclosed in or contemplated by the
Registration Statement and Pricing Prospectus, (i) the Company will not have incurred any
liabilities or obligations, direct or contingent, or entered into any material transactions other
than in the ordinary course of business; (ii) there shall not have been any change in the capital
stock, funded debt (other than regular repayments of principal and interest on existing
indebtedness) or other securities of the Company (except as contemplated in the Registration
Statement), or any Material Adverse Effect; and (iii) the Company shall not have paid or declared
any dividend or other distribution on its Common Stock or its other securities or redeemed or
repurchased any of its Common Stock or other securities.
(r) The Company agrees that it has not made and, without the prior written consent of SMH
Capital, it will not make any offer relating to the Shares that would constitute a “free writing
prospectus” as defined in Rule 433 under the Act.
(s) The Company has complied with and will comply with the requirements of Rule 433 under the
Act applicable to any Issuer Free Writing Prospectus, including timely filing with the Commission
or retention where required and legending.
(t) The Company agrees that if at any time following issuance of an Issuer Free Writing
Prospectus any event occurred or occurs as a result of which such Issuer Free Writing Prospectus
would conflict with the information in the Registration Statement, the Pricing Prospectus or the
Prospectus or would include an untrue statement of material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances then prevailing,
not misleading, the Company will give prompt notice thereof to SMH Capital, will prepare and
furnish without charge to each Underwriter an Issuer Free Writing Prospectus that will correct such
statement or omission.
(u) Prior to the latest of the First Closing Date and the Option Closing Date, the Company
will not issue any press release or other communication directly or indirectly or hold any press
conference with respect to the Company, its condition, financial or otherwise, or earnings,
business affairs or business prospects (except for routine oral communications in the ordinary
course of business and consistent with past practices of the Company and of which SMH Capital are
notified in advance), without the prior written consent of SMH Capital, unless in the judgment of
the Company and its counsel, and after notification of SMH Capital, such press release or
communication is required by law.
SMH Capital, on behalf of the several Underwriters, may, in its sole discretion, waive in
writing the performance by the Company of any one or more of the foregoing covenants or extend the
time for their performance. Notwithstanding the foregoing, SMH Capital, for the benefit of each of
the other Underwriters, agrees not to consent to any action proposed to be
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taken by the Company or any other holder of the Company’s securities that would otherwise be
prohibited by, or to waive compliance by the Company or any such other security holder with the
provisions of, any Lock-Up Agreement delivered in accordance with Section 5(i) hereof without
giving each of the other Underwriters at least 17 days prior notice (or such shorter notice as each
of the other Underwriters may deem acceptable to permit compliance with applicable provisions of
NASD Conduct Rule 2711(f) restricting publication and distribution of research and public
appearance by research analysts before and after the expiration, waiver or termination of a lock-up
agreement).
5. Indemnity and Contribution by the Company and the Underwriters.
(a) The Company shall indemnify, defend and hold harmless each Underwriter and any person who
controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the 1934 Act,
from and against any loss, expense, liability, damage or claim (including the reasonable cost of
investigation) which the Underwriters or any such controlling person may incur insofar as such
loss, expense, liability, damage or claim arises out of or, is based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment thereof by the Company) or the
Prospectus (the term Prospectus for the purpose of this Section 5 being deemed to include any
Preliminary Prospectus, Pricing Prospectus, Issuer Free Writing Prospectus, the Prospectus and any
Prospectus supplements, in each case as amended or supplemented by the Company), (ii) any
application or other document, or any amendment or supplement thereto, executed by the Company or
based upon written information furnished by or on behalf of the Company filed in any jurisdiction
(domestic or foreign) in order to qualify the Shares under the securities or “blue sky” laws
thereof or filed with the Commission or any securities association or securities exchange (each an
“Application”), or (iii) any omission or alleged omission to state a material fact required to be
stated in any such Registration Statement, Prospectus or Application or necessary to make the
statements made therein in light of the circumstances under which they were made, not misleading;
except, in the case of each of clauses (i), (ii) or (iii), to the extent that any such loss,
expense, liability, damage or claim arises out of or is based upon (x) any such untrue statement or
omission of a material fact contained in and in conformity with information furnished in writing by
or on behalf of the Underwriters to the Company expressly for use in such Registration Statement or
such Prospectus or (y) sales to any person asserting any such loss, expense, liability, damage or
claim incurred from purchasing the Shares, if a copy of the Disclosure Package or the Prospectus
(in each case, as then amended or supplemented if the Company shall have timely furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to
such person, if required by law to have been delivered, at or prior to the written confirmation of
the sale of the Shares to such person, and if the Disclosure Package or the Prospectus (in each
case, as so amended or supplemented), as applicable, would have cured the defect giving rise to
such loss, expense, liability, damage or claim, unless such failure is the result of noncompliance
by the Company.
(b) Each of the Underwriters shall, severally and not jointly, indemnify, defend and hold
harmless the Company and its directors, officers, employees and agents, each person who controls
the Company, as the case may be, within the meaning of Section 15 of the Act or Section 20 of the
1934 Act from and against any loss, expense, liability, damage or claim
22
(including the reasonable cost of investigation) which, jointly or severally, the Company, or
any such person may incur but only insofar as such loss, expense, liability, damage or claim arises
out of or is based upon (i) any untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any post-effective amendment thereof by
the Company) or the Prospectus in reliance upon and in conformity with information furnished in
writing by or on behalf of such Underwriter to the Company expressly for inclusion in the
Registration Statement (or in the Registration Statement as amended by any post-effective amendment
thereof by the Company) or the Prospectus, as specified in the last sentence of this Section 5(b),
or (ii) any omission to state a material fact regarding such Underwriter required to be stated in
such Registration Statement or the Prospectus or necessary to make such statement not misleading.
The obligation of each of the Underwriters to indemnify the Company (including any director,
officer, employee, agent or control person thereof) shall only relate to any untrue statement or
omission which applies to the Underwriter. The Company and the Underwriters acknowledge that the
information set forth (x) on the cover page of the Prospectus concerning the Underwriters, relating
to the delivery of the Shares, and (y) under the caption “Underwriting” in the Prospectus with
respect to (1) the concession and reallowance figures and (2) passive market and stabilization
activities by the Underwriters, constitute the only information furnished by or on behalf of the
Underwriters to the Company for purposes of this Section 5.
(c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice
of any claims or the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under such subsection, notify in
writing each party against whom indemnification is to be sought of the claim or the commencement
thereof (but the failure so to notify an indemnifying party shall not (i) relieve the indemnifying
party from any liability which it may have under this Section 7, to the extent that it did not
otherwise learn of such action and such failure does not materially prejudice the indemnifying
party as a result thereof, and (ii) 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). The
indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the
indemnifying party’s expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be reasonably satisfactory
to the indemnified party. The indemnifying party may participate in the defense of such action at
its own expense, 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, the indemnifying
party may assume the defense thereof with counsel reasonably 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 reasonably satisfactory counsel to have charge of
the defense of such action within a reasonable time after notice of commencement of the action,
(iii) the
23
indemnifying party does not diligently defend the action after assumption of the defense, or
(iv) such indemnified party or parties shall have reasonably concluded based on the advice of the
advice of counsel 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 the fees and expenses of one counsel selected
by all of the indemnified parties to represent them all (in addition to one local counsel selected
by all of the indemnified parties to represent them all in each applicable jurisdiction) shall be
borne by the indemnifying parties. In the case of any separate counsel for the Company and its
officers, directors and control persons, such counsel shall be designated in writing by the
Company. In the case of any separate counsel for the Underwriters and their respective officers,
directors and control persons, such counsel shall be designated in writing by SMH Capital. 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 litigation,
or any investigation or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could have been sought
under this Section 5 (whether or not the indemnified parties are actual or potential parties
thereto), unless (x) such settlement, compromise or consent (I) includes an unconditional release
of the indemnified party from all liability arising out of such litigation, investigation,
proceeding or claim and (II) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of the indemnified party, and (y) the indemnifying
party reaffirms its indemnification obligations pursuant to this Agreement.
(d) If the indemnification provided for in this Section 5 is unavailable to an indemnified
party under subsections (a) or (b) of this Section 5 in respect of any losses, expenses,
liabilities, damages or claims referred to therein, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, expenses, liabilities, damages or claims (i) in such
proportion as is appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Shares or (ii) if (but only
if) the allocation provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the Underwriters on the other
with respect to the statements or omissions which resulted in such losses, expenses, liabilities,
damages or claims, as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total proceeds (net of underwriting
discounts and commissions but before deducting expenses) received by the Company from the Shares
sold under this Agreement, on the one hand, and the total underwriting discounts and commissions
received by the Underwriters with respect to the Shares purchased under this Agreement, on the
other hand, bear to the total gross proceeds from the offering of the Shares under this Agreement,
in each case as set forth in the table on the cover page of the Prospectus. The relative fault of
the Company on the one hand and the Underwriters on the other shall be determined by reference to,
among other things, (i) whether the untrue statement or alleged untrue statement of a material fact
or omission or alleged omission relates to information supplied by the Company or by the
Underwriters, (ii) the intent of the parties, and (iii) their relative knowledge, access to
24
information and opportunity to correct or prevent such statement or omission. The amount paid
or payable by a party as a result of the losses, claims, damages and liabilities referred to above
shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any claim or action.
(e) The Company and the Underwriters agree that it would not be just and equitable if
contribution pursuant to Section 5(d) were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations referred to in Section
5(d)(i) and, if applicable, Section 5(d)(ii), above. Notwithstanding the provisions of this
Section 5, (i) none of the Underwriters shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by the Underwriters and,
(ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters’ obligations in Section 5(d) shall be several in proportion to
their respective underwriting obligations and not joint.
The indemnity and contribution contained in this Section 5 shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement and (ii) any investigation
made by or on behalf of the Underwriters or the Company and such party’s officers or directors or
any person controlling such parties.
6. Survival of Agreements, etc. All statements contained in any certificate delivered
by or on behalf of the parties in connection with this Agreement shall be deemed to be
representations and warranties hereunder. Notwithstanding any investigations made by or on behalf
of the parties to this Agreement, all representations, warranties, indemnities and agreements made
by the parties to this Agreement or pursuant hereto shall remain in full force and effect and will
survive delivery of and payment for the Shares. The provisions of Sections 4, 11, and 15 shall
survive the termination or cancellation of this Agreement.
7. Conditions of Underwriters’ Obligations. The respective obligations of the
Underwriters to purchase and pay for the Firm Shares as provided herein on the First Closing Date
and, with respect to the Option Shares, the Option Closing Date, shall be subject to the accuracy
of the representations and warranties on the part of the Company set forth in Section 1 hereof as
of the date hereof and as of the First Closing Date as though then made and, with respect to the
Option Shares, as of the Option Closing Date as though then made, to the timely performance by the
Company of its covenants and obligations hereunder, and to each of the following additional
conditions:
(a) The Registration Statement shall have become effective prior to the execution of this
Agreement, or at such later date as shall be consented to in writing by the Underwriters; no stop
order suspending the effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the Knowledge of the Company or any Underwriter,
threatened by the Commission; any request of the Commission for additional information (to be
included in the Registration Statement, any Preliminary Prospectus, any Pricing Prospectus, the
Prospectus or otherwise) shall have been complied with to the satisfaction of Underwriters’
Counsel; the NASD shall have raised no objection to the fairness and reasonableness of the
underwriting terms and arrangements; and no amendment to the
25
Registration Statement, any Preliminary Prospectus, any Pricing Prospectus, or the Prospectus
to which the Underwriters or Underwriters’ Counsel shall have reasonably objected, after having
received reasonable notice of a proposal to file the same, shall have been filed.
(b) All corporate proceedings and other legal matters in connection with this Agreement, the
form of Registration Statement, any Preliminary Prospectus, any Pricing Prospectus, and the
Prospectus and the registration, authorization, issue, sale and delivery of the Shares, shall have
been reasonably satisfactory to Underwriters’ Counsel, and such counsel shall have been furnished
with such papers and information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section 9.
(c) Subsequent to the execution and delivery of this Agreement and prior to the First Closing
Date, and on the Option Closing Date, as the case may be, there shall not have occurred any change,
or any development involving a prospective change, in the condition, financial or otherwise, or in
the earnings, business or operations of the Company, taken as a whole, from that set forth in the
Disclosure Package that, in the sole judgment of SMH Capital, is material and adverse and that
makes it, in the sole judgment of SMH Capital, impracticable or inadvisable to market the Shares on
the terms and in the manner contemplated in the Disclosure Package.
(d) At the First Closing Date and on the Option Closing Date, as the case may be, the
Underwriters shall have received from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the Company (“Company
Counsel”), a signed opinion dated as of such Closing Date, reasonably satisfactory to Underwriters’
Counsel, in the form and substance of Exhibit B annexed hereto, including a signed negative
assurance statement dated as of such Closing Date, reasonably satisfactory to Underwriters’
Counsel, in the form and substance reflected in Exhibit B.
(e) At the First Closing Date, and on the Option Closing Date, as the case may be, the
Underwriters shall have received from Underwriters’ Counsel a signed opinion dated as of such
Closing Date in a form and substance reasonably satisfactory to the Underwriters.
(f) The Underwriters shall have received, on each of the date hereof and the Closing Date, a
letter dated the date hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Underwriters, from ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, Inc., independent public accountants,
containing statements and information of the type ordinarily included in accountants’ “comfort
letters” with respect to the financial statements and certain financial information contained in
the Registration Statement, any Preliminary Prospectus, any Pricing Prospectus, and the Prospectus;
provided, however, that the letter delivered on the Closing Date shall use a “cut-off date” not
earlier than two business days before the Closing Date.
(g) The Underwriters shall have received on the First Closing Date and on the Option Closing
Date, as the case may be, a certificate of the Company, dated the First Closing Date or the Option
Closing Date, as the case may be, signed by the Chief Executive Officer and Chief Financial Officer
of the Company, to the effect that, and SMH Capital shall be satisfied that:
26
(i) The representations and warranties of the Company in this Agreement are true and correct,
as if made on and as of the First Closing Date or the Option Closing Date, as the case may be, and
the Company has complied with all the agreements and satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to the First Closing Date or the Option Closing Date,
as the case may be;
(ii) When the Registration Statement became effective and at all times subsequent thereto up
to the delivery of such certificate, the Registration Statement, the Pricing Prospectus and the
Prospectus, and any amendments or supplements thereto, contained all material information required
to be included therein by the Act and the applicable rules and regulations of the Commission
thereunder, as the case may be, and in all material respects conformed to the requirements of the
Act and the applicable Rules and Regulations thereunder, the Registration Statement, any
Preliminary Prospectus, any Pricing Prospectus, and the Prospectus, and any amendments or
supplements thereto, did not and does not include any 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 light of the circumstances under which they were made (except with respect to the Registration
Statement), not misleading; and, since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iii) Subsequent to the respective dates as of which information is given in the Registration
Statement, any Preliminary Prospectus, any Pricing Prospectus, and the Prospectus, there has not
been or occurred, as the case may be: (A) any Material Adverse Effect; (B) any transaction that is
material to the Company, except transactions entered into in the ordinary course of business; (C)
any obligation, direct or contingent, that is material to the Company incurred by the Company,
except obligations incurred in the ordinary course of business; (D) any change in the capital stock
or outstanding indebtedness of the Company that is material to the Company; (E) any dividend or
distribution of any kind declared, paid or made on the capital stock of the Company; or (F) any
loss or damage (whether or not insured) to the property of the Company which has been sustained or
will have been sustained which has a Material Adverse Effect.
(h) At the First Closing Date, the Underwriters shall have received from the Company the
Underwriter’s Warrant in such form reasonably satisfactory to the Underwriters and Underwriters’
Counsel.
(i) The Company shall have obtained and delivered to the Underwriters an agreement,
substantially in the form of Exhibit A attached hereto, from each officer and director of
the Company and certain owners of record of capital stock or options or warrants to acquire capital
stock of the Company. All of the certificates representing the Shares to be sold by the Selling
Stockholders hereunder shall have been tendered for delivery in accordance with the terms and
provisions of this Agreement.
(j) The Company shall have complied with the provisions of this Agreement with respect to the
furnishing of Prospectuses.
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(k) On or before each of the First Closing Date and the Option Closing Date, as the case may
be, the Underwriters and Underwriters’ Counsel shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance
and sale of the Shares as contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or agreements, herein
contained.
If any condition specified in this Section 7 is not satisfied when and as required to be
satisfied, this Agreement may be terminated by the Underwriters by written notice to the Company at
any time on or prior to the First Closing Date and, with respect to the Option Shares, at any time
prior to the Option Closing Date, which termination shall be without liability on the part of any
party to any other party, except for the expenses described in Section 11 of this Agreement.
8. Default of One or More of the Underwriters. Subject to Sections 7 and 10 hereof,
if, on the First Closing Date or the Option Closing Date, as the case may be, any one or more of
the Underwriters shall fail or refuse to purchase Shares that it or they have agreed to purchase
hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be obligated, severally,
in the proportions that the number of Firm Shares set forth opposite their respective names on
Schedule A bears to the aggregate number of Firm Shares set forth opposite the names of all
such non-defaulting Underwriters, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on the First Closing Date
or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or
refuse to purchase Shares and the aggregate number of Shares with respect to which such default
occurs exceeds 10% of the aggregate number of Shares to be purchased on such date, and arrangements
satisfactory to the Company and the other Underwriters for the purchase of such Shares are not made
within 48 hours after such default, this Agreement shall terminate without liability of any
non-defaulting Underwriter or the Company, except that the provisions of Sections 5, 11, and 15
shall at all times be effective and shall survive such termination. In any such case either the
Underwriters or the Company shall have the right to postpone the First Closing Date or the Option
Closing Date, as the case may be, but in no event for longer than seven (7) days in order that the
required changes, if any, to the Registration Statement and the Prospectus or any other documents
or arrangements may be effected.
As used in this Agreement, the term “Underwriter” shall be deemed to include any person
substituted for a defaulting Underwriter under this Section 8. Any action taken under this Section
10 shall not relieve any defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
9. Effective Date. This Agreement will become effective upon the later of when (i)
the Underwriters and the Company shall have received notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement.
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10. Termination. The Underwriters shall have the right by written notice to the
Company (which may be delivered electronically through email or facsimile) to terminate this
Agreement at any time prior to the First Closing Date or, with respect to the obligations of the
Underwriters to purchase the Option Shares, at any time prior to the Option Closing Date, as the
case may be, if (i) the Company shall have failed or refused to fully perform or comply with any of
the provisions of this Agreement on its part to be performed and complied with by it prior to the
applicable Closing Date; (ii) any of the conditions of Underwriters’ obligations as set forth in
Section 9 herein shall not have been satisfied on or prior to the First Closing Date or the Option
Closing Date, as the case may be; (iii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ Global Market will have been suspended; (iv)
minimum or maximum prices will have been established on such exchanges by the Commission or the
NASD; (v) a general banking moratorium will have been declared either by federal or New York state
authorities; (vi) any other restrictions on transactions in securities materially affecting the
free market for securities or the payment for such securities or adversely affecting the
distribution of the Firm Shares or the Option Shares, as the case may be, will be established by
any of such exchanges, by the Commission, by any other federal or state agency, by action of the
Congress or by Executive Order; (vii) the Company will have sustained a material loss, whether or
not insured, by reason of fire, flood, accident or other calamity of such character as in the sole
judgment of SMH Capital may interfere materially with the conduct of the Business and operations of
the Company or make it impracticable to proceed with the offering, sale and delivery of the Firm
Shares or the Option Shares, as the case may be, on the terms contemplated by any Preliminary
Prospectus, any Pricing Prospectus, or the Prospectus; (viii) any action has been taken by the
government of the United States or any department or agency thereof which, in the sole judgment of
SMH Capital, has had a material adverse effect upon the general market for securities and has made
it impracticable to proceed with the offering, sale and delivery of the Firm Shares or the Option
Shares, as the case may be, on the terms set forth in any Preliminary Prospectus, any Pricing
Prospectus, or the Prospectus; (ix) there shall have occurred the outbreak of any new war or any
other event or calamity, including without limitation as a result of terrorist activities, which,
in the sole judgment of SMH Capital, materially disrupts the financial markets of the United States
and makes it impracticable to proceed with the offering, sale and delivery of the Firm Shares or
the Option Shares, as the case may be, on the terms set forth in the Prospectus; (x) the general
market for securities or political, legal or financial conditions should deteriorate so materially
from that in effect on the date of this Agreement that, in the sole judgment of SMH Capital, it
becomes impracticable for the Underwriters to commence or proceed with the public offering of the
Shares and with the payment for or acceptance thereof; (xi) trading of any securities of the
Company shall have been suspended, halted or delisted on any exchange or in any over the counter
market or by the Commission; or (xii) in the sole judgment of SMH Capital, any change that could
result in a Material Adverse Effect shall have occurred since the date as of which information is
given in the Registration Statement, any Preliminary Prospectus, any Pricing Prospectus, or the
Prospectus. Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise
carried out, the provisions of Sections 5, 11, and 15 hereof shall not be in any way affected by
such election or termination or failure to carry out the terms of this Agreement or any part
hereof.
29
12. Expenses.
(a) Whether or not the offering of the Shares is consummated, the Company agrees to pay all
costs and expenses incident to the performance of the obligations of the Company hereunder,
including without limiting the generality of the foregoing: (i) the preparation, printing, filing
with the Commission, and copying of the Registration Statement, each Preliminary Prospectus, the
Prospectus, this Agreement and other underwriting documents, if any, and any drafts, amendments or
supplements thereto, including the cost of all copies thereof supplied to the Underwriters in such
quantities as reasonably requested by the Underwriters and the costs of mailing Prospectuses to
offerees and purchasers of the Shares; (ii) the printing, engraving, issuance and delivery of
certificates representing the Shares, including any transfer or other taxes payable thereon; (iii)
the reasonable fees, expenses and other costs related to the registration or qualification of the
Shares under state securities or “blue sky” laws, in accordance with the provisions of Section
11(c) below; (iv) the reasonable fees, costs and disbursements of Underwriters’ Counsel in
connection with the review and analysis of certain “blue sky” matters related to the offering; (v)
all reasonable fees and expenses of Company Counsel and accountants; (vi) the fees and expenses of
Underwriters’ Counsel, inclusive of all NASD filing fees, in connection with obtaining clearance of
the offering with the NASD; (vii) all costs and expenses of any listing of the Shares on AMEX or
any other stock exchange or over-the-counter market, or in Standard and Poor’s Corporation Records
or any other securities manuals; (viii) the cost of “tombstone” advertisements to be placed in one
or more daily or weekly periodicals as the Underwriter may request; (ix) travel expenses of the
Company in connection with the “road show” presentations; (x) all other costs and expenses incident
to the performance of the Company’s obligations hereunder which are not otherwise specifically
provided for in this Section 11(a). The obligations of the Company under this Section 11(a) shall
survive any termination or cancellation of this Agreement.
(b) If the sale of the Firm Shares provided for herein is not consummated because the
Underwriters elect to terminate this Agreement in accordance with clauses (i) or (ii) of Section
10(a) hereof, then the Company shall reimburse the Underwriters for their actual accountable out of
pocket expenses incurred in connection with the proposed purchase and sale of the Firm Shares
(including, without limitation, the fees and disbursements of Underwriters’ Counsel) provided,
however, that such amount shall not exceed fifty thousand dollars ($50,000.00). Notwithstanding
the foregoing, in the event the offering is terminated, each Underwriter will not be entitled to
retain or receive more than an amount equal to its actual accountable out-of-pocket expenses and
shall reimburse the Company for the remainder, if any. The Underwriters hereby acknowledge and
agree that their expenses in connection with the “road show” presentations shall be paid from the
non-accountable expense allowance.
(c) Subject to Section 3(h) hereof, the Underwriters shall determine in which states or
jurisdictions the Shares shall be registered or qualified for sale.
13. Notices. Any notice hereunder shall be in writing, unless otherwise expressly
provided herein, and if to the respective persons indicated, will be sufficient if mailed by
certified mail, return receipt requested, postage prepaid, delivered by national overnight courier
service or hand delivered, addressed as respectively indicated or to such other address as will be
indicated by a written notice similarly given, to the following persons:
30
(a) If to the Underwriters — addressed to SMH Capital, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Senior Vice President; with a copy
to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇, Esq.; provided, however, that such copy to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP shall not constitute
notice delivered to the Underwriters.
(b) If to the Company — addressed to Firepond, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: Chief Financial Officer, with a copy to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.; provided, however, that such copy to ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP shall not constitute notice delivered to the Company.
14. Successors. This Agreement will inure to the benefit of and be binding upon the
Underwriters, the Company and their respective successors and assigns. Nothing expressed or
mentioned in this Agreement is intended, or will be construed, to give any person, corporation or
other entity other than the controlling persons, directors, officers, employees and agents referred
to in Section 7 hereof (to the extent provided for in Section 7), and their respective successors
and assigns, any legal or equitable right, remedy, or claim under or in respect to this Agreement
or any provisions herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and for the benefit of
no other persons. Notwithstanding anything contained herein to the contrary, no purchaser of any
of the Shares from the Underwriters will be deemed a successor or assign solely because of such
purchase.
15. Finders and Holders of First Refusal Rights.
(a) Except as set forth in Schedule 16 to this Agreement, the Company hereby represents and
warrants to the Underwriters that it has not paid any compensation for services as a finder in
connection with any prior financing of the Company during the twelve-month period immediately
preceding the date hereof and that no person is entitled, directly or indirectly, to compensation
for services as a finder in connection with the proposed transactions. The Company further
represents and warrants, that no person holds a right of first refusal or similar right in
connection with the proposed offering which has not been waived. In addition, the Company hereby
agrees to indemnify and hold harmless the Underwriters, their officers, directors, agents and each
person, if any, who controls such Underwriters within the meaning of Section 15 of the Act, from
and against any loss, liability, claim, damage or expense whatsoever arising out of a claim by an
alleged finder or alleged holder of a right of first refusal or similar right in connection with
the proposed offering by the Company, insofar as such loss, liability, claim, damage or expense
arises out of any action or alleged action of the Company, as the case may be.
(b) Each of the Underwriters hereby represents and warrants to the Company that no person is
entitled, directly or indirectly, to compensation for services as a finder in connection with the
proposed transactions contemplated by this Agreement; and the Underwriters hereby agree to
indemnify and hold harmless, severally and not jointly, the Company and its officers, directors and
agents, from and against any loss, liability, claim, damage or expense whatsoever arising out of a
claim by an alleged finder in connection with the
31
proposed offering, insofar as such loss, liability, claim, damage or expense arises out of any
action or alleged action of the Underwriters.
16. Applicable Law. This Agreement shall be a deemed to be a contract made under the
laws of the State of New York and for all purposes shall be governed by and construed in accordance
with the laws of said State applicable to contracts made and to be performed entirely within such
State. Each of the Company and the Underwriters (i) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted exclusively in the
State courts of the State of New York, County of New York, or in the United States District Court
for the Southern District of New York, (ii) waives any objection which the Company or the
Underwriters, as the case may be, may have now or hereafter to the venue of any such suit, action
or proceeding, and (iii) irrevocably consents to the jurisdiction of the State courts of the State
of New York, County of New York, or in the United States District Court for the Southern District
of New York in any such suit, action or proceeding. Each of the Company and the Underwriters
further agrees to accept and acknowledge service of any and all process which may be served in any
suit, action or proceeding in the State courts of the State of New York, County of New York, or in
the United States District Court for the Southern District of New York, and agrees that service of
process upon the Company or the Underwriters, as the case may be, mailed by certified mail to such
party’s address as set forth in Section 12 hereof shall be deemed in every respect effective
service of process upon such party in any such suit, action or proceeding. In the event of
litigation between the parties arising hereunder, the prevailing party shall be entitled to costs
and reasonable attorney’s fees.
17. No Fiduciary Duty. The Company hereby acknowledges that (a) the Underwriters are
acting as principals and not as agents or fiduciaries of the Company and (b) the Company’s
engagement of the Underwriters in connection with the offering of Shares contemplated by the
Prospectus is as independent contractors and not in any other capacity. Furthermore, the Company
agrees that it is solely responsible for making its own judgments in connection with the offering
of Shares contemplated by the Prospectus (irrespective of whether the Underwriters have advised or
is currently advising the Company on related or other matters).
18. Headings. The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect any of the terms or provisions hereof.
19. Counterparts. This Agreement may be executed in any number of counterparts which,
taken together, shall constitute one and the same instrument.
20. Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the Underwriters and the Company with respect to the subject matter hereof,
and supersedes all prior agreements, arrangements and understandings, written or oral, between
them.
21. Terminology. All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders and the singular shall
include the plural, and vice versa.
[SIGNATURE PAGE FOLLOWS]
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If the foregoing correctly sets forth our understanding, please indicate the Underwriters’
acceptance thereof, as of the day and year first above written, in the spaces provided below for
that purpose, whereupon this letter with the Underwriters’ acceptance shall constitute a binding
agreement among us.
| Very truly yours, FIREPOND, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
33
Confirmed and accepted on the
day and year first above written.
day and year first above written.
| THE UNDERWRITERS: SMH CAPITAL INC. Acting severally on behalf of itself and as representative of the several Underwriters |
||||
| By: | SMH CAPITAL INC. | |||
| By: | ||||
| Name: | ||||
| Title: | ||||
34
EXHIBIT A
(Lock-Up Letter Agreement)
EXHIBIT B
(Form of Opinion of Company Counsel)
SCHEDULE A
Underwriters
| Name of Underwriter | Number of Firm Shares Purchased | |
SMH Capital Inc.
|
[ ] | |
| [ ] | ||
| [ ] | ||
Total
|
[ ] |
SCHEDULE B
Pricing Information
SCHEDULE C
List of Issuer Free Writing Prospectuses and Other Supplemental Materials