EXHIBIT 1.1
1,200,000 SHARES OF COMMON STOCK
ACCESS INTEGRATED TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
New York, New York
November __, 2003
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Access Integrated Technologies, Inc., a Delaware corporation
(the "Company"), hereby confirms its agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC
(the "Representative") and with the other members of the underwriting group
named on Schedule A hereto (the "Member" and, together with the Representative,
the "Underwriters") with respect to the sale by the Company, and the purchase by
the Representative, of 1,200,000 shares of the Company's Class A common stock,
$.001 par value per share ("Common Stock") (the "Offering"), as more
specifically set forth on Schedule A hereto. Such shares are hereinafter
referred to as the "Firm Securities." Upon your request, as provided in Section
2(b) of this Agreement, the Company shall also issue and sell to the
Representative up to an additional 180,000 shares of Common Stock solely for the
purpose of covering over-allotments, if any. Such additional shares of Common
Stock are hereinafter referred to as the "Option Securities." The Firm
Securities and the Option Securities, if purchased, are hereinafter referred to
as the "Underwritten Securities."
1. Representations and Warranties of the Company. The Company
represents and warrants to the Underwriters as of the date hereof, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form SB-2 (File No. 333-107711, including the related preliminary
prospectus dated August 6, 2003 and any subsequent preliminary prospectus
subject to completion (a "Preliminary Prospectus"), for the registration of the
Securities, under the Securities Act of 1933, as amended (the "Securities Act"),
which registration statement and amendments have been prepared by the Company in
conformity with the requirements of the Securities Act, and the rules and
regulations (the "Regulations") of the Commission thereunder. The Company has
complied with the conditions for the use of Form SB-2. The Company will promptly
file a further amendment to said registration statement in the form heretofore
delivered to the Representative and will not file any other amendment thereto to
which the Representative shall have reasonably objected in writing after having
been furnished with a copy thereof. Except as the context may otherwise require,
such registration statement, as amended, on file with the Commission at the time
that the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430(A) of the Regulations), is hereinafter
called the "Registration Statement," and the form of prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations, is
hereinafter called the "Prospectus." The Company may also file a related
registration statement with the Commission pursuant to Rule 462(b) of the
Regulations for the purpose of registering certain additional securities, which
registration shall be effective upon filing with the Commission. For purposes
hereof, the "Rule 462 Registration Statement" means any registration statement
filed with the Commission pursuant to Rule 462(b) of the Regulations, including
the Registration Statement and any prospectus incorporated therein at the time
such Registration Statement becomes effective. For purposes hereof, "Rules and
Regulations" mean the rules and regulations adopted by the Commission under
either the Securities Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as applicable.
(b) Neither the Commission nor, to the Company's knowledge,
any state regulatory authority has issued any order preventing or suspending the
use of any Preliminary Prospectus, the Registration Statement or the Prospectus
or any part of any thereof and no proceedings for a stop order suspending the
effectiveness of the Registration Statement has been instituted or are pending
or, to the Company's knowledge, threatened. Each of the Registration Statement
and the Prospectus, as amended, contained all statements required to be stated
therein and complied in all material respects with the requirements of the
Securities Act and the Rules and Regulations, and none of the Registration
Statement or the Prospectus, as amended, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in strict conformity with information furnished to
the Company in writing by or on behalf of the Underwriters expressly for use in
any Preliminary Prospectus, Registration Statement or the Prospectus or any
amendment thereof or supplement thereto (the "Underwriters' Information"). The
Company acknowledges that the Underwriters' Information shall include only such
written information that is contained under the caption "Underwriting" and on
the front cover page.
(c) When the Registration Statement or any amendment thereto
becomes effective and through the last to occur of the Closing Date (as defined
in Section 2(c), the Option Closing Date (as defined in Section 2(b), if any, or
the last date the Prospectus may be required to be delivered in connection with
sales by the Underwriters or a dealer, the Registration Statement and the
Prospectus will contain all statements required to be stated therein, and will
comply in all material respects with the requirements as to form of the
Securities Act and the Rules and Regulations. Neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in strict conformity with the
Underwriters' Information.
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(d) If the Company has elected to rely on Rule 462(b) and the
Rule 462(b) Registration Statement has not been declared effective (i) the
Company has filed the Rule 462(b) Registration Statement in compliance with, and
that is effective upon filing pursuant to, Rule 462(b) and has received
confirmation of its receipt and (ii) the Company has given irrevocable
instructions for transmission of the applicable filing fee in connection with
the filing of the Rule 462(b) Registration Statement, in compliance with Rule
111 promulgated under the Securities Act or the Commission has received payment
of such filing fee.
(e) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its ownership or leasing of
any properties or the conduct of its business requires such qualification or
licensing, except where the failure to be so qualified or licensed would not
have a material adverse effect on the condition (financial or otherwise),
operations, business, prospects or results of operations of the Company (a
"Material Adverse Effect").
(f) The Company has all requisite corporate power and
authority, and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits (collectively, the
"Approvals") of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus, except where the failure to have such Approvals
would not have a Material Adverse Effect; the Company is and has been doing
business in compliance with all such Approvals and all federal, state and local
laws, rules and regulations, except where the failure to so comply would not
have a Material Adverse Effect; and the Company has not received any written
notice of proceedings relating to the revocation or modification of any
Approval. The disclosures in the Registration Statement concerning the effects
of federal, state and local laws, rules and regulations on the Company's
business as currently conducted are correct in all material respects and do not
omit to state a material fact necessary to make the statements contained therein
not misleading in light of the circumstances under which they were made.
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(g) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus and
will have the adjusted capitalization set forth therein on the Closing Date
based upon the assumptions set forth therein. The Company is not a party to or
otherwise bound by any instrument, agreement or other arrangement, including,
but not limited to, any voting trust agreement, stockholders' agreement or other
agreement or instrument, materially affecting the securities or rights or
obligations of securityholders of the Company or providing for any of them to
issue, sell, transfer or acquire any capital stock, rights, warrants, options or
other securities of the Company, except as set forth in the Registration
Statement and the Prospectus. The Securities and all other securities issued or
issuable pursuant to existing plans, agreements or arrangements relating to the
issuance of securities or outstanding options, warrants, rights or other
securities of the Company by the Company conform or, when issued and paid for,
will conform, in all material respects, to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been offered and sold by the Company
in compliance with or pursuant to exemptions from registration under the
Securities Act and applicable state securities law, have been duly authorized
and validly issued and are fully paid and non-assessable and are not subject to
personal liability by reason of being such holders; and none of such securities
were issued in violation of the preemptive rights of any securityholders of the
Company or similar contractual rights granted by the Company. The Underwritten
Securities have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid and
non-assessable. The Warrants have been duly authorized and, when issued, paid
for and delivered in the manner contemplated by the Warrant Agreement, will be
validly issued and outstanding obligations of the Company entitled to the
benefits of the Warrant Agreement. The Warrant Shares issuable upon exercise of
the Warrants will, assuming payment therefor as set forth in the Warrant
Agreement, upon such issuances be duly authorized, validly issued, fully paid
and non-assessable, and the Company has duly authorized and reserved for
issuance of the Warrant Shares. The Securities are not and will not be subject
to any preemptive or other similar rights of any stockholder of the Company
under law or granted by the Company, under the law or granted by the Company;
all corporate action required to be taken for the authorization, issue and sale
of the Securities and, in the case of Warrant Shares, reservation, has been duly
and validly taken; and the certificates representing the Securities will be in
due and legally proper form. Upon the issuance and delivery pursuant to the
terms of this Agreement of the Underwritten Securities to be sold by the Company
hereunder, the Underwriters will acquire validly issued and non-assessable
Underwritten Securities free and clear of any liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever (collectively, the "Liens"), except for Liens
created by the Underwriters or liens on the assets of the Underwriters. Upon the
issuance and delivery pursuant to the terms of the Warrant Agreement, of the
Warrants to be sold by the Company thereunder, the Underwriters will acquire
good and marketable title to the Warrants free and clear of any Liens, except
for Liens created by the Underwriters.
(h) The financial statements, including the related notes and
schedules of the Company included in the Registration Statement and the
Prospectus, as amended, fairly present in all material respects, the financial
position, income, changes in cash flow, changes in stockholder's equity and the
results of operations of the Company at the respective dates and for the
respective periods to which they apply and the as adjusted financial information
included in the Registration Statement and the Prospectus, as amended, presents
fairly and in all material respects, on a basis consistent with that of the
audited financial statements included therein, what the Company's as adjusted
capitalization would have been for the periods and as of the date to which they
apply after giving effect to the adjustments described therein and any quarterly
adjustments. Except as disclosed in the Prospectus, such financial statements
have been prepared in conformity with United States generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved. Except as disclosed in the Prospectus, there
has been no material adverse change or development involving a material adverse
change, in the condition, financial or otherwise, or in the financial position,
prospects, operation, business or results of operations of the Company taken as
a whole, whether or not arising in the ordinary course of business, since the
date of the financial statements included in the Registration Statement, the
Preliminary Prospectus, as amended, and the Prospectus; the outstanding debt,
the property, both tangible and intangible, and the business of the Company
conform in all material respects to the descriptions thereof contained in the
Registration Statement, the Preliminary Prospectus, as amended, and the
Prospectus. Historical financial information set forth in the Preliminary
Prospectus, as amended, and Prospectus under the headings "Summary financial
information," "Selected historical and pro forma financial data,"
"Capitalization," and "Management's discussion and material analysis of
financial condition and results of operations," fairly presents, in all material
respects, on the bases stated in the Preliminary Prospectus, as amended and the
Prospectus, the information set forth therein and has been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Preliminary Prospectus and the Prospectus (except for any
quarterly adjustments).
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(i) The Company (i) has timely filed all federal, state, local
and foreign tax returns that it was required to file through the date hereof or
has timely requested extensions thereof, other than those filings being
contested in good faith, and has timely paid all federal, state, local and
foreign taxes shown to be due on such returns for which it is liable and has
timely furnished all information returns it was required to furnish; (ii) has
established adequate reserves for such taxes that are not due and payable or
that are being contested in good faith; and (iii) does not have any material tax
deficiency or claims outstanding, proposed or assessed against it.
(j) To the knowledge of the Company, the Company maintains
with insurers of recognized financial responsibility insurance policies and
surety bonds, including, but not limited to, general liability and property
insurance, which insures the Company and its employees, against, to the
knowledge of the Company, such losses and risks generally insured against by
comparable businesses in amounts that are prudent and customary for its
business. The Company has not (i) failed to give notice or present any insurance
claim with respect to any matter, including, but not limited to, the Company's
business, property or employees, under the insurance policy or surety bond in a
due and timely manner; (ii) had any disputes or claims against any underwriter
of such insurance policies or surety bonds or has failed to pay any premiums due
and payable thereunder; or (iii) failed to comply with all conditions contained
in such insurance policies and surety bonds wherein such failures or disputes
would have a Material Adverse Effect. To the knowledge of the Company, there are
no facts or circumstances under any such insurance policy or surety bond that
would relieve any insurer of its obligation to satisfy in full any valid claim
of the Company.
(k) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or, to the Company's knowledge,
threatened against (or circumstances that may reasonably be expected to give
rise to the same) or involving the Company, its properties or its business which
(i) questions the validity of the capital stock of the Company, this Agreement,
the Warrant Agreement or of any action taken or to be taken by the Company
pursuant to or in connection with this Agreement or the Warrant Agreement; (ii)
is required under the Securities Act to be disclosed in the Registration
Statement that is not so disclosed (and such proceedings as are summarized in
the Registration Statement are accurately summarized; or (iii) except as
disclosed in the Prospectus, could reasonably be expected to have a Material
Adverse Effect.
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(l) The Company has the corporate power and authority to
authorize, issue, deliver and sell the Securities, enter into this Agreement and
the Warrant Agreement and to consummate the transactions provided for in such
agreements. This Agreement has been duly authorized, executed and delivered by
the Company. This Agreement constitutes, and when the Company has duly executed
and delivered the Warrant Agreement (assuming the due execution and delivery
thereof by the Representative), the Warrant Agreement will constitute, a legal,
valid and binding agreement and obligation of the Company enforceable against
the Company in accordance with its respective terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally; (ii) as enforceability of any indemnification or
contribution provisions may be limited under applicable laws or the public
policies underlying such laws; and (iii) that the remedies of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought, clauses (i), (ii) and (iii), collectively,
the "Equitable Exceptions." None of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Warrant Agreement,
its performance hereunder and thereunder, or its consummation of the
transactions contemplated herein and therein conflicts with or will conflict
with or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any Lien upon any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (i) the certificate of
incorporation or by-laws of the Company; (ii) any material license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other material agreement or
instrument to which the Company is a party or is or may be bound or to which its
properties or assets (tangible or intangible) are or may be subject, or any
indebtedness; or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(m) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for performance by the Company of this
Agreement and the Warrant Agreement and the transactions contemplated hereby and
thereby, except such as (i) have been obtained or (ii) may be required under
state securities or blue sky laws or the Rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the Underwriter's
purchase and distribution of the Underwritten Securities and the Underwriters'
purchase of the Warrants or with respect to listing of the Underwritten
Securities or Warrant Shares on the American Stock Exchange.
(n) All agreements or contracts or other documents or copies
of executed agreements or contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which the Company
is currently bound or to which the Company's assets, properties or businesses
may be subject are in full force and effect, have been executed and delivered by
the Company and constitute legal, valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms
subject to the Equitable Exceptions. The descriptions in the Registration
Statement of agreements, contracts and other documents are accurate and fairly
present the information required to be shown with respect thereto by Form SB-2,
and there are no contracts or other documents that are required by the
Securities Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement that are not described or filed as
required, and the exhibits that have been filed are complete and correct copies
of the documents of which they purport to be copies (except for the absence of
certain schedules).
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(o) Subsequent to the applicable dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money; (ii) entered into any transaction other than in
the ordinary course of business; or (iii) declared or paid any dividend or made
any other distribution on or with respect to its capital stock of any class, and
there has not been any material adverse change in or affecting the management,
financial operations, prospects, or results of operations of the Company.
(p) The Company is not in violation of its certificate of
incorporation or its by-laws and, except as disclosed in the Prospectus, to the
Company's knowledge, no default exists, and no event has occurred that with
notice or lapse of time, or both, would constitute a default in the due
performance and observance of any material term, covenant or condition of any
material license, contract, indenture, mortgage, installment sales agreement,
lease, deed of trust, voting trust agreement, stockholders agreement,
partnership agreement, note, loan or credit agreement, purchase order, or any
other material agreement or instrument evidencing an obligation for borrowed
money, or any other material agreement or instrument to which the Company is a
party or by which the Company or any of its properties is or may be otherwise
bound or that otherwise affects the property (tangible or intangible) of the
Company.
(q) The Company is in material compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours.
There are no pending investigations involving the Company by the U.S. Department
of Labor or any other governmental agency responsible for the enforcement of
such federal, state, local or foreign laws and regulations. There is no unfair
labor practice charge or complaint against either the Company pending before the
National Labor Relations Board or any strike, picketing, boycott, slowdown or
stoppage pending or, to the Company's knowledge, threatened against or involving
the Company. To the Company's knowledge, no union representation question exists
respecting the employees of the Company, and no collective bargaining agreement
or modification thereof is currently being negotiated by the Company. To the
Company's knowledge, no grievance or arbitration proceeding is pending or
threatened under any expired or existing collective bargaining agreement of the
Company. No material labor dispute with the employees of the Company exists, or,
to the Company's knowledge, is imminent.
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(r) Except as described in the Prospectus, the Company does
not maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan" or a
"multiemployer plan", as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute,
now or at any previous time, to a defined benefit plan, as defined in Section
3(35) of ERISA. No "accumulated funding deficiency" (as defined in Section 302
of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than
events with respect to which the 30-day notice under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan which could
reasonably be expected to have a Material Adverse Effect. No ERISA Plan (or any
trust created thereunder) has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code,
which could subject the Company to any tax penalty on prohibited transactions
and which has not adequately been corrected. Each ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), and ERISA as they relate to any
such ERISA Plan. Determination letters (if applicable) have been received from
the Internal Revenue Service with respect to each ERISA Plan that is intended to
comply with Code Section 401(a), stating that such ERISA Plan and the attendant
trust are qualified thereunder. The Company has never completely or partially
withdrawn from a "multiemployer plan."
(s) Neither the Company nor, to the Company's knowledge, any
of its employees, directors, stockholders, affiliates (within the meaning of the
Rules and Regulations) of any of the foregoing, has taken or will take, directly
or indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(t) The Company owns or has the sufficient right to use, free
and clear of all Liens, all patents, trademarks, service marks, trade secrets,
trade names and copyrights, technology and licenses and rights used in the
conduct of its business as now conducted or proposed to be conducted without
infringement upon or otherwise acting adversely to the right or claimed right of
any person, corporation or other entity under or with respect to any of the
foregoing, other than any infringements or adverse actions that would not have a
Material Adverse Effect and, except as set forth in the Prospectus, as amended,
is not obligated or under any liability to make any material payment by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service ▇▇▇▇, trade name, copyright, know-how, technology
or other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise.
(u) The Company has taken reasonable measures to protect the
secrecy, confidentiality and value of its intellectual property in all material
respects.
(v) The Company has good title to, or a valid and enforceable
leasehold estate in, all items of real and personal property stated in the
Prospectus, as amended, as owned or leased by it free and clear of all material
Liens, other than those referred to in the Registration Statement, the
Prospectus, as amended, and Liens for taxes not yet due and payable.
(w) Pricewaterhouse Coopers LLP and BDO ▇▇▇▇▇▇▇, LLP, whose
reports are filed with the Commission as a part of the Registration Statement,
are independent certified public accountants of the Company as required by the
Securities Act and the Rules and Regulations.
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(x) The Company has caused to be duly executed and delivered
agreements, in such form as the Company and Representative have heretofore
mutually agreed (collectively, the "Lock-up Agreements"), pursuant to which the
Company's officers, directors, stockholders and substantially all persons
holding options, warrants, rights or other securities of the Company has agreed
not to, directly or indirectly, offer to sell, sell, grant any option for the
sale of, assign, transfer, pledge, hypothecate or otherwise encumber or dispose
of any shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock (either pursuant to Rule 144 of the Regulations or otherwise) or
dispose of any beneficial interest therein for a period of 18 months following
the date hereof without the prior written consent of the Representative.
However, such period will be 12 months for certain stockholders in certain
circumstances, as set forth in the Prospectus.
(y) Except as set forth in the Prospectus, there are no
claims, payments, issuances, arrangements or understandings, whether oral or
written, for services in the nature of a finder's or origination fee payable by
the Company with respect to the sale of the Securities hereunder or any other
arrangements, agreements, understandings, payments or issuance with respect to
the Company, or, to its knowledge, any of its officers, directors, stockholders,
employees or affiliates that will affect the Underwriter's compensation. Except
as contemplated hereby, since the inception of the Company, no compensation has
been paid by the Company to or on behalf of any member of the NASD, or any
affiliate or employee thereof, in connection with any public offering by the
Company of the Company's securities.
(z) Intentionally omitted.
(aa) The Underwritten Securities and Warrant Shares have been
approved for trading, subject to official notice of issuance, on the American
Stock Exchange, and the Company has received no notice of any de-listing
procedures.
(bb) Neither the Company, nor, to its knowledge, any of its
officers, employees, agents or any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who, to its knowledge, was, is, or may be in a position to help or hinder the
business of the Company (or assist the Company in connection with any actual or
proposed transaction) that (i) subjects the Company or any other such person to
any material damage or penalty in any criminal or governmental litigation or
proceeding (domestic or foreign); (ii) if not given in the past, would have had
a Material Adverse Effect; or (iii) if not continued in the future, would
materially adversely affect the assets, business, operations or prospects of the
Company. The Company believes that its internal accounting controls are
sufficient to enable the Company to comply with the Foreign Corrupt Practices
Act of 1977, as amended.
(cc) Except as set forth in the Prospectus, as amended, to the
Company's knowledge, no officer, director or stockholder of the Company, or any
"affiliate" or "associate" (as these terms are defined in Rule 405 promulgated
under the Rules and Regulations) of any of the foregoing persons or entities has
or has had, either directly or indirectly, (i) a material interest in any person
or entity that (A) furnishes or sells services or products that are furnished or
sold or are proposed to be furnished or sold by the Company, or (B) purchases
from or sells or furnishes to the Company any goods or services; or (ii) a
material beneficial interest in any contract or agreement to which the Company
is a party or by which it may be bound or affected. Except as set forth in the
Prospectus, as amended, under "Related party transactions," there are no
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director or stockholder of the Company, or any
partner, affiliate or associate of any of the foregoing persons or entities
required to be disclosed therein that have not been thus disclosed.
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(dd) Intentionally omitted.
(ee) The minute books of the Company have been made available
to the Representative and its counsel (the "Representative's Counsel"), contain
a summary of meetings and material actions of the directors and stockholders of
the Company since the time of its incorporation, and reflect all transactions
referred to in such minutes accurately.
(ff) Except and to the extent described in the Prospectus, as
amended, or unless waived, no holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
or to require the Company to file a registration statement under the Securities
Act and no person or entity holds any anti-dilution rights with respect to any
securities of the Company.
(gg) Except as described in the Prospectus, the Company is not
aware of any bankruptcy, labor disturbance or other event affecting any of its
trademark licensees, principal suppliers, major clients or customers that is
reasonably likely to have a Material Adverse Effect.
(hh) The Company has not been notified nor is otherwise aware
that it is liable, or is considered liable, under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
any similar law ("Environmental Laws"). To the Company's knowledge, the Company
is in compliance with all applicable existing Environmental Laws, except for
such instances of non-compliance that would not have a Material Adverse Effect.
The term "Hazardous Material" means (i) any "hazardous substance" as defined by
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended; (ii) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act, as amended; (iii) any petroleum or petroleum
product; (iv) any polychlorinated biphenyl; and (v) any pollutant or contaminant
or hazardous, dangerous or toxic chemical, material, waste or substance
regulation under or within the meaning of any other Environmental Laws. Except
as described in the Prospectus, to the Company's knowledge: (i) there has been
no storage, disposal, generation, transportation, handling or treatment of
Hazardous Material by the Company (or to the knowledge of the Company, any of
its predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or that require
remedial action that has not been taken, under any applicable law, ordinance,
rule, regulation, order, judgment, decree or permit, except for such violations
and failures to take remedial action that would not result in, singularly or in
the aggregate, a Material Adverse Effect; and (ii) there has been no material
spill, discharge, leak, emission, injection, escape, dumping or release of any
kind onto such property or into the environment surrounding such property by the
Company of any Hazardous Materials, except for such spills, discharges, leaks,
emissions, injections, escapes, dumping or releases that are in compliance with
Environmental Laws or would not result in, individually or in the aggregate, a
Material Adverse Effect.
10
(ii) The Company is not an "investment company," a company
controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended.
(jj) None of the proceeds of the sale of the Underwritten
Securities or Warrants will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness that was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the
Underwritten Securities or Warrants to be considered a "purpose credit" within
the meanings of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve Board.
2. Purchase by the Underwriters; Delivery and Payment.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, and subject to the terms and conditions herein
set forth, the Company agrees to issue and sell to the Representative, and the
Representative agrees to purchase from the Company, 1,200,000 shares of Common
Stock, in the aggregate, at the initial public offering price less discounts and
commissions not in excess of nine (9%) percent of the public offering price.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, and subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Representative to purchase all or any part of an additional 180,000 shares of
Common Stock at the initial public offering price, less the underwriting
discounts and commissions as set forth on the cover page of the Prospectus. The
option granted hereby will expire 30 days after (i) the date that the
Registration Statement becomes effective, if the Company has elected not to rely
on Rule 430A under the Regulations, or (ii) the date of this Agreement if the
Company has elected to rely upon Rule 430A under the Rules and Regulations (or
if such 30th day shall be a Saturday, Sunday or holiday, on the next day
thereafter when the American Stock Exchange is open for trading), and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments that may be made in connection with the offering and
distribution of the Firm Securities upon notice in writing or by telephone
(confirmed in writing) by the Representative to the Company setting forth the
number of Option Securities as to which the Representative is then exercising
the option and the time and date of payment and delivery for any such Option
Securities. Upon exercise of the option as provided herein, the Company shall
become obligated to sell to the Representative and subject to the terms and
conditions herein set forth, the Representative shall become obligated to
purchase from the Company that number of Option Securities then being purchased.
Any such time and date of delivery (an "Option Closing Date") shall be
determined by the Representative, but shall not be earlier than two nor later
than five full business days after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed upon
by the Representative and the Company. The Representative shall not be under any
obligation to purchase any of the Option Securities prior to the exercise of
such option. No Option Securities shall be delivered unless the Firm Securities
shall be simultaneously delivered or shall theretofore have been delivered as
herein provided.
11
(c) Payment of the purchase price for, and delivery of the
certificates for, the Firm Securities shall be made at the offices of the
Representative, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, or at such
other place as shall be agreed upon by the Representative and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
November ___, 2003 or at such other time and date as shall be agreed upon by the
Representative and the Company (such time and date of payment and delivery being
herein called the "Closing Date"). In addition, in the event that any or all of
the Option Securities are purchased by the Representative, payment of the
purchase price for, and delivery of certificates for, such Option Securities
shall be made at the above mentioned offices of the Representative or at such
other place as shall be agreed upon by the Representative and the Company on
each Option Closing Date as specified in the notice from the Representative to
the Company. Delivery of the certificates for the Firm Securities and Option
Securities, if any, shall be made to the Representative against payment by or on
behalf of the Underwriters of the purchase price for the Firm Securities and the
Option Securities, if any, by wire transfer, certified or official bank check or
checks drawn upon or by a New York Clearing House Bank and payable in same-day
funds to the order of the Company, such payment to be net of all amounts owed to
the Underwriters under the terms of this Agreement upon such date of payment
including the underwriting discount net non-accountable expenses and any
additional amounts owed under Section 5 of this Agreement and such other amounts
as the Company and Representative may agree. Certificates for the Underwritten
Securities shall be in definitive, registered form, shall bear no restrictive
legends and shall be in such denominations and registered in such names as the
Representative may request in writing at least two business days prior to the
Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Underwritten Securities shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging at least one business day prior
to the Closing Date or the relevant Option Closing Date, as the case may be.
Notwithstanding the foregoing, the Underwritten Securities may be delivered via
electronic transfer by the Depository Trust Company or an affiliate thereof.
(d) On the Closing Date, the Company shall issue and sell to
Representative or its designees and/or to bona fide officers of the
Representative or its designees, Warrants to purchase an aggregate of 120,000
shares of Common Stock at a purchase price of $.001 per warrant. The Warrants
shall be exercisable for a period of four years from the date of the Prospectus
and shall not become exercisable until twelve (12) months from the date of the
Prospectus at a price equal to 125% of the initial public offering price of the
Underwritten Securities. The Warrant Agreement and form of Warrant shall be
substantially in the form filed as Exhibit 4.1 to the Registration Statement.
Payment for the Warrants shall be made by the Representative to or upon the
order of the Company on the Closing Date.
3. Public Offering of the Underwritten Securities. As soon
after the effective time of the Registration Statement as the Representative
deems advisable, the Underwriters shall make a public offering of the
Underwritten Securities (other than to residents of any jurisdiction in which
the qualification of the Underwritten Securities is required and has not become
effective) at the price and upon the other terms set forth in the Prospectus.
The Representative may from time to time increase or decrease the public
offering price after the distribution of the Underwritten Securities has been
completed to such extent as the Representative in its sole discretion deems
advisable. The Representative may enter into one or more agreements as the
Representative, in its sole discretion, deem advisable with one or more
broker-dealers who shall act as selected dealers in connection with such public
offering.
12
4. Covenants and Agreements of the Company. The Company
covenants and agrees with the Underwriters as follows:
(a) The Company shall use its reasonable best efforts to cause
the Registration Statement and any amendments thereto, if not effective at the
time of execution of this Agreement, to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Securities Act or
Exchange Act during any time that a prospectus relating to the securities is
required to be delivered under the Securities Act of which the Representative
and Representative's Counsel shall not previously have been advised and
furnished with a copy a reasonable period of time prior to its proposed filing,
or to which the Representative shall have reasonably objected or which is not in
compliance with the Securities Act, the Exchange Act or the Rules and
Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective and,
if the provisions of Rule 430A promulgated under the Securities Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the Registration Statement becomes
effective; (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding, suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose; (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose; (iv) of the receipt of any comments from the
Commission; and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. The Company will use its reasonable best efforts to
prevent the issuance of any stop or suspension order and if the Commission or
any state securities commission authority shall enter a stop order or suspend
such qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting or withdrawal of such order or suspension.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable, pursuant to Rule 424(b)(4)) on or before the
date that it is required to be filed under the Securities Act and the
Regulations.
(d) The Company shall, in cooperation with the Representative,
at or prior to the time the Registration Statement becomes effective, arrange
for the qualification of the Securities for offering and sale under the
securities or Blue Sky laws of such jurisdictions as the Representative may
designate to permit the continuance of sales and dealings therein for as long as
may be reasonably necessary to complete the distribution contemplated hereby and
shall make such applications, file such documents and furnish such information
as may reasonably be required for such purpose; provided, however, the Company
shall not be required to qualify as a foreign corporation, subject itself to
taxation or file a general consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
13
(e) During the time when a Prospectus is required to be
delivered under the Securities Act, the Company shall comply with all
requirements imposed upon it by the Securities Act and the Exchange Act, as now
and hereafter amended, and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Securities Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or Representative's Counsel, the Prospectus, as then amended or
supplemented, would include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Securities Act or the Rules and Regulations, the Company will
notify the Representative promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the
Securities Act that corrects such statement or omission or effects such
compliance, each such amendment or supplement to be satisfactory to
Representative's Counsel, and the Company will furnish to, or at the direction
of, the Representative copies of such amendment or supplement as soon as
available and in such quantities as the Representative may request.
(f) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the first day after the
end of the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is also the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Securities Act and Rule 158(a) of the
Regulations, which statement need not be audited unless required by the
Securities Act.
(g) During the three-year period commencing on the date
hereof, the Company will furnish to its stockholders (i) as soon as practicable,
but in any event not later than 120 days after the last day of each annual
fiscal period, its audited statements of operations, stockholders' equity and
cash flows for such period and its audited balance sheet as of the end of such
period as to which the Company's independent accountants have rendered an
opinion; and (ii) as soon as practicable, but in any event not later than 60
days after each of the first three quarterly fiscal periods, its unaudited
statements of operations, stockholders' equity and cash flows, for such period
and its unaudited balance sheet as of the end of such period. In addition,
during the three-year period commencing on the date hereof, the Company will
deliver to the Representative:
14
(1) concurrently with furnishing such quarterly reports to its
stockholders, summary financial information of the Company, together with a
letter from the Company's President or Chief Executive Officer, for each quarter
in the form furnished to the Company's stockholders and certified by the
Company's principal financial or accounting officer;
(2) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company at the end of the preceding fiscal
year, together with statements of operations, stockholders' equity and cash
flows of the Company for such fiscal year, accompanied by a copy of the report
thereon of the Company's independent certified public accountants;
(3) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(4) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD or any
securities exchange;
(5) within a reasonable amount of time prior to its release,
every press release and every material news item or article of interest to the
financial community with respect to the Company or its affairs which was
released or prepared by or on behalf of the Company; provided, however, that the
Representative will not use or disclose any such information prior to its
release and will comply with all applicable securities law requirements in
respect thereto, including Regulation F-D; and
(6) any additional information of a public nature concerning
the Company (and any future subsidiaries) or its businesses which the
Representative may reasonably request.
During such three-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries are required
to be consolidated under GAAP, and will be accompanied by similar financial
statements for any significant subsidiary that is not so consolidated.
(h) The Company will maintain a transfer agent for the Common
Stock.
(i) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may reasonably
request.
(j) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of the
Lock-up Agreements duly executed and delivered by the Company's officers,
directors, stockholders and persons holding warrants, options, rights or other
securities of the Company.
15
(k) Neither the Company, nor any of its officers, directors,
nor any of their respective affiliates (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or which
might reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale of
the Shares in substantially the manner, and subject to the conditions, set forth
under "Use of proceeds" in the Prospectus. No portion of the net proceeds will
be used, directly or indirectly, to acquire any securities issued by the
Company.
(m) The Company shall, until December 31, 2006, timely file
all such reports, forms or other documents as may be required from time to time,
under the Securities Act, the Exchange Act and the Rules and Regulations, and
all such reports, forms and documents filed will materially comply as to form
and substance with the applicable requirements under the Securities Act, the
Exchange Act and the Rules and Regulations.
(n) The Company shall furnish to the Representative as early
as practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than 30 days prior
to the date of the Registration Statement) that have been read by the Company's
independent public accountants, as stated in their letters to be furnished
pursuant to Section 6(j) hereof. The foregoing information shall be kept
confidential by the Representative.
(o) The Company shall use its reasonable best efforts to
maintain the American Stock Exchange listing of the Common Stock to the extent
outstanding.
(p) For a period of two years from the Closing Date, the
Company shall cause to be furnished to the Representative directly from the
Company's transfer agent, at the Company's sole expense, consolidated transfer
sheets relating to the Common Stock. Such consolidated transfer sheets shall be
furnished to the Representative daily for 60 days following the Closing Date,
and weekly beginning on the 61st day following the Closing Date.
(q) Within 30 days from the effective date of the Registration
Statement, take all necessary and appropriate actions to be included in Standard
and Poor's Corporation descriptions and endeavor to continue such inclusion for
a period of not less than five years from the effective date of the Registration
Statement.
(r) Except as contemplated by the Warrant Agreement, without
the consent of the Representative, the Company hereby agrees that it will not
for a period of six (6) months from the effective date of the Registration
Statement, adopt or propose to adopt any employee, officer, director, consultant
or similar compensation plan or arrangement permitting (i) the grant, issue,
sale or entry into any agreement to grant, issue or sell any option, warrant or
other contract right at an exercise price that is less than the fair market
value on the date of grant or sale except for up to 600,000 shares of Common
Stock issuable upon exercise of stock options granted pursuant to the Company's
2000 Stock Option Plan as of the effective date of the Registration Statement
which have an exercise price below the initial public offering price (provided,
that the holders of such options shall be subject to the terms of the Lock-Up
Agreements); (ii) the maximum number of shares of Common Stock or other
securities of the Company purchasable at any time pursuant to options or
warrants issued by the Company to exceed 1,718,243 shares; (iii) the payment for
such securities with any form of consideration other than cash; or (iv) the
existence of stock appreciation rights, phantom options or similar arrangements.
16
(s) Until the completion of the distribution of the
Underwritten Securities, if any, the Company shall not without the prior written
consent of the Representative and Representative's Counsel, issue, directly or
indirectly, any press release or other communication or hold any press
conference with respect to the Company or its activities or the Offering, other
than releases issued in the ordinary course of the Company's business consistent
with past practices with respect to the Company's operations that have been
approved by Representative's Counsel.
(t) For a period equal to the lesser of (i) seven years from
the date hereof and (ii) the resale to the public of the Warrant Shares, the
Company will not take any action or actions that would prevent or disqualify the
use by the Company of Form S-1, Form SB-2 or Form S-3 (or other appropriate
forms) for the registration under the Securities Act of the Warrant Shares.
(u) For a period of two years following the Closing Date, the
Company will permit a designee of the Representative to observe meetings of the
Company's board of directors and shall provide to such designee, at the same
time provided to the members of the Company's board of directors, all notices,
minutes, documents, information and other materials generally provided to the
members of the Company's board of directors; provided, however, that such
designee of the Representative will agree in writing to be bound by such duties
of confidentiality, care and loyalty as if he were a member of the Company's
board of directors. The Company will reimburse the designee directly for
reasonable out-of-pocket expenses incurred in attending board meetings,
including, but not limited to, expenses for food, transportation and lodging,
and shall pay that designee the same cash attendance fee (if any) that the
Company pays to its outside directors. During such two-year period, the Company
will hold no less than two formal, in person meetings of its board of directors
each year.
(v) Prior to the 90th day after the Closing Date, the Company
will provide the Representative and its designees with five sets of bound
volumes of the transaction documents relating to the Offering, in form and
substance reasonably satisfactory to the Representative.
(w) For the period of 12 months subsequent to the Closing
Date, the Company will retain the Representative in an investment banking
advisory capacity and will pay the Representative a fee of $4,167 per month. In
consideration for such fees, during such period, the Representative (i) shall
devote such time and attention as the Company shall reasonably request to the
performance of general advisory services related to corporate finance, corporate
transaction and corporate development matters and (ii) shall stand ready, upon
mutually acceptable terms on a case-by-case-basis, to provide initial analysis
of transactions involving joint ventures, business combinations, equity
financing, shareholder rights offerings, credit facilities, debt financing and
such other transactions relating to the financing of the Company, its capital
structure and its operations as customarily involve investment banking services.
(x) Prior to the Closing Date, the Company will deliver to the
Representative a reasonably detailed budget covering the period from the Closing
Date to the end of the Company's first fiscal year following the Closing Date.
In addition, during each of the next two succeeding fiscal years, the Company
will provide to the Representative, not less than 45 days prior to the beginning
of such fiscal year, a reasonably detailed budget covering such fiscal year
approved by the Board of Directors. For each budget period, the Company will
also provide to the Representative financial statements prepared in sufficient
detail so as to allow comparison to the budgets.
17
5. Payment of Expenses and Other Fees.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not payable by the Closing Date)
all expenses and fees (other than fees of Representative's Counsel, except as
provided in clause (v) below) incident to the performance of the obligations of
the Company under this Agreement and the Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company; (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement, each Preliminary Prospectus, the
Prospectus and any amendments and supplements thereto, and the printing, mailing
(including the payment of postage with respect thereto) and delivery of this
Agreement, the Selected Dealer Agreements, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Representative and
such dealers as the Representative may reasonably request; (iii) the printing,
engraving, issuance and delivery of the Securities, including, but not limited
to, (A) the purchase from the Company of the Underwritten Securities by the
Underwriters, (B) the purchase from the Company of the Warrants by the
Underwriters, (C) the consummation by the Company of any of its obligations
under this Agreement and the Warrant Agreement and (D) the resale of the
Underwritten Securities by the Underwriters in connection with the distribution
contemplated hereby; (iv) any qualification of the Securities under state or
foreign securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum" and the "Supplemental Blue Sky
Memorandum," and the reasonable fees and disbursements of counsel incurred in
connection therewith; (v) the reasonable expenses of Representative's counsel up
to $25,000 (excluding any reasonable expenses of such counsel in connection with
state securities law filings), all of which have already been paid; (vi)
reasonable advertising costs and expenses, including, but not limited to, costs
and expenses in connection with the "road show," information the reasonable
meetings and presentations (including reasonable travel and hotel expenses of
the Representative), up to five copies of bound volumes, prospectus memorabilia
and expenses relating to "tomb-stone" advertisements, which expenses shall not
exceed $5,000; (vii) reasonable costs and expenses in connection with due
diligence investigations by the Company, including, but not limited to, the
reasonable fees of any independent counsel or consultant retained by the
Company; (viii) reasonable fees and expenses of the transfer agent and
registrar; (ix) the fees payable to the Commission and the NASD; and (x) the
fees and expenses incurred in connection with the inclusion of the Underwritten
Securities and Warrant Shares on the American Stock Exchange, or any other
exchange.
18
(b) The Company agrees that, in addition to the expenses
payable pursuant to Section 5(a), it will pay to the Representative on the
Closing Date by certified or bank cashier's check or, at the Representative's
election, by deduction from the proceeds of the Offering, a non-accountable
expense allowance equal to 2% of the gross proceeds received by the Company from
the sale of the Firm Securities, net of $25,000 that has already been paid by
the Company. In the event the Representative elects to exercise the
over-allotment option described in Section 2 hereof, the Company further agrees
to pay to the Representative, on each Option Closing Date, by certified or bank
cashier's check or, at the Representative's election, by deduction from the
proceeds of the Offering, a non-accountable expense allowance equal to 2% of the
gross proceeds received by the Company from the sale of the Option Securities on
such Option Closing Date.
(c) The Company agrees that all payments and reimbursements
due pursuant to this Section 5 will be promptly and fully made. If the Company
shall fail to promptly and fully pay all amounts due pursuant to this Section 5,
the Company shall be liable to the Representative for all attorneys' fees and
costs incurred in connection with the collection of such amounts.
(d) The Company also agrees to sell to the Representative or
its designees, for nominal consideration, warrants (the "Warrants") pursuant to
a warrant agreement (the "Warrant Agreement") for the purchase, during the
period commencing one year after the date of the Prospectus (as defined below)
and expiring on the fourth anniversary of the date of the Prospectus, of 120,000
shares of Common Stock, subject to adjustment as provided in the Warrant
Agreement (the "Warrant Shares"), at an initial exercise price of $6.25 per
share, subject to adjustment as provided in the Warrant Agreement. The
Underwritten Securities and the Warrant Shares (collectively, the "Securities")
are more fully described in the Registration Statement and the Prospectus
referred to below.
6. Conditions to the Underwriters' Obligations. The
obligations of the Underwriters hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they had been made on and as of the Closing Date or each Option Closing Date,
as the case may be (it being understood that any failure of the Company's
representations and warranties to be accurate on an Option Closing Date shall
not affect the Closing that occurred on the Closing Date if such representations
and warranties were then accurate); the accuracy on and as of the Closing Date
or Option Closing Date, if any, of the statements of the officers of the Company
made on certificates delivered pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option Closing
Date, if any, of its covenants and obligations hereunder and to the following
further conditions:
19
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date hereof or such later date and
time as shall be approved in writing by the Representative, and, at the Closing
Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Representative's Counsel. If the Company has elected to rely
upon Rule 430A of the Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Regulations within the
prescribed time period, and prior to the Closing Date the Company shall have
provided evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Regulations.
(b) No order suspending the sale of the Securities in any
jurisdiction shall have been issued on either the Closing Date or the relevant
Option Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall, to the knowledge of the Representative, be threatened.
(c) At Closing Date, the Representative shall have received
the opinion of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to the Company (the
"Company's Counsel"), dated the Closing Date, addressed to the Representative
and in form and substance reasonably satisfactory to Representative's Counsel,
substantially to the effect that:
(1) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware; and (B) has the corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus; without
investigation, at the date of this opinion letter, there is no action or
proceeding pending before any court, governmental agency or arbitrator, or
overtly threatened in writing against the Company that seeks to enjoin the
performance or affect the enforceability of this Agreement or the issuance and
sale of shares of Common Stock hereunder;
(2) the Company's authorized capitalization is as set forth in
the Prospectus or any amendment or supplement thereto, under the caption
"Capitalization," (except for subsequent issuances, if any, pursuant to this
Agreement or employee benefit plans, or the exercise of convertible securities
or options referred to in the Prospectus). The Securities and all other
securities issued or issuable by the Company conform, or when issued and paid
for, will conform in all material respects to the descriptions thereof with
respect thereto contained in the Registration Statement and the Prospectus. All
issued and outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable. To such counsel's
knowledge, none of such securities was issued in violation of preemptive rights
of any holders of any security of the Company. The Securities to be sold by the
Company hereunder and under the Warrant Agreement, to such Counsel's knowledge,
are not and will not be subject to any preemptive rights of any stockholder,
have been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof and thereof, will be validly issued, fully paid and
non-assessable; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been taken; the form of certificate used by
the Company to represent the Securities complies in all material respects with
any applicable requirement of the General Corporation Law of the State of
Delaware and the Company's Certificate of Incorporation and By-Laws;
20
(3) the Registration Statement shall have become effective
under the Securities Act, and, if applicable, filing of any pricing information
has been timely made in the appropriate form under Rule 430A, and, to the
knowledge of the Company's Counsel's, no stop order suspending the use of the
Registration Statement or the Prospectus, as amended, or any part of any thereof
or suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are pending or, to
such Counsel's knowledge, threatened or contemplated under the Securities Act;
(4) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements thereto (other
than the financial statements and other financial and statistical data included
therein, as to which no opinion need be rendered) complies as to form in all
material respects with the requirements of the Securities Act and the
Regulations;
(5) to the knowledge of Company's Counsel, (A) there are no
agreements, contracts or other documents required by the Securities Act to be
described in the Registration Statement and the Prospectus and filed as exhibits
to the Registration Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits thereto; (B) the descriptions
in the Registration Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company is a party or by
which it is otherwise bound, including any document to which the Company is a
party or by which it is otherwise bound, incorporated by reference into the
Prospectus and any supplement or amendment thereto, are correct in all material
respects; and (C) without investigation, at the date of this opinion letter,
there is no action or proceeding pending before any court, governmental agency
or arbitrator, or overtly threatened in writing against the Company that seeks
to enjoin the performance or affect the enforceability of this Agreement or the
issuance and sale of shares of Common Stock hereunder;
(6) the Company has the corporate power and authority to enter
into each of this Agreement and the Warrant Agreement and to consummate the
transactions provided for herein and therein; and each of this Agreement and the
Warrant Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement and the Warrant Agreement, constitutes a legal,
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by general
equitable principles, bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting creditors' rights
generally, except that the remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought and
except as to those provisions relating to indemnity or contribution for
liabilities arising under the Act, as to which no opinion need be expressed; and
none of the Company's execution or delivery of this Agreement and the Warrant
Agreement, its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, conflicts with or will conflict
with or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company, except as
disclosed in the Prospectus, pursuant to the terms of, (A) the certificate of
incorporation or by-laws (each, as amended) of the Company; (B) to our
knowledge, the express terms of any agreement or instrument filed as an exhibit
to the Registration Statement; or (C) a New York or federal statute, judgment,
decree, order, rule or regulation applicable to the Company of any arbitrator,
court, regulatory body or administrative agency or other governmental agency or
body (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having jurisdiction over
the Company or any of its respective activities or properties;
21
(7) no consent, approval, authorization or order of, and no
filing with, any court, regulatory body, governmental agency or body (other than
such as may be required under Blue Sky laws or Rules of the NASD, as to which no
opinion need be rendered) is required to be made or obtained by the Company in
connection with the issuance of the Underwritten Securities, the issuance of the
Warrants and the Warrant Shares, the execution and delivery of the Registration
Statement, the performance of this Agreement and the Warrant Agreement, and the
transactions contemplated hereby and thereby (except consents, approvals,
authorizations or orders and filings that have been properly made or obtained);
(8) the statements in the Prospectus under "Description of
Securities," have been reviewed by the Company's Counsel, and insofar as they
refer to statements of law, descriptions of statutes, rules or regulations or
legal conclusions, fairly present the information called for with respect to
those legal matters, and fairly summarize in all material respects the matters
referred to in those statements;
(9) the Underwritten Securities and Warrant Shares have been
accepted for quotation, subject to official notice of issuance, on the American
Stock Exchange;
(10) neither the execution and delivery by the Company of, nor
the performance of its obligations under this Agreement and the Warrant
Agreement nor the sale, issuance, execution or delivery by the Company of the
Underwritten Securities or Warrants will violate Regulation G, T, U or X of the
Federal Reserve Board; and
(11) the Company is not an "investment company," a company
controlled by, under common control with, or controlling an "investment company"
or a "promoter" or "principal underwriter" for an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended. In
rendering such opinion, the Company's Counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted and to the extent such Counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Representative's Counsel) of
other counsel acceptable to Representative's Counsel, familiar with the
applicable laws; and (B) as to matters of fact, to the extent they deem proper,
on certificates and written statements of responsible officers of the Company
and certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company; provided, that copies of any such
statements or certificates shall be delivered to Representative's Counsel. The
opinion of such counsel for the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and it believes that the
Representative and it are justified in relying thereon. Such counsel shall state
that such counsel has participated in conferences with officers and other
representatives of the Company, and representatives of the independent public
accountants for the Company, at which conferences the contents of the
Preliminary Prospectus, the Registration Statement, the Prospectus and related
matters were discussed and, although such counsel is not passing upon, and does
not assume any responsibility for, the accuracy, completeness or fairness of any
of the statements contained in the Registration Statement, on the basis of the
foregoing, no facts have come to the attention of such counsel that has led such
counsel to believe that either the Registration Statement or any amendment
thereto, at the time such Registration Statement or amendment became effective
or the Prospectus or amendment or supplement thereto as of the date of such
opinion contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading (it being understood that such counsel need express no
opinion with respect to the financial statements and schedules and other
financial, statistical and accounting data included in the Registration
Statement or the Prospectus or excluded therefrom).
22
At each Option Closing Date, if any, the Representative shall
have received the favorable opinion of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to
the Company, dated the Option Closing Date, addressed to the Representative and
in form and substance reasonably satisfactory to Representative's Counsel
confirming as of the Option Closing Date the opinions made by ▇▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, in its opinion delivered on the Closing Date.
(d) On and as of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change in the
condition, financial or otherwise, prospects, or the business of the Company,
whether or not in the ordinary course of business, from the latest dates as of
which such condition was set forth in the Registration Statement and Prospectus;
(ii) there shall not have been any transaction, not in the ordinary course of
business, entered into by the Company, from the latest date as of which the
financial condition of the Company is set forth in the Registration Statement
and Prospectus that is materially adverse to the Company; (iii) the Company
shall not be in default under any provision of any instrument relating to any
material outstanding indebtedness of the Company; (iv) since the latest date set
forth in the Registration Statement, the Company shall not have issued any
securities (other than the Underwritten Securities and Warrants) or declared or
paid any dividend or made any distribution with respect to its capital stock of
any class and there has not been any change in the capital stock or any change
in the debt (long or short term), or liabilities or obligations of the Company
(contingent or otherwise), except in the ordinary course of business; (v) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus;
(vi) no action, suit or proceeding, at law or in equity, shall have been pending
or overtly threatened against the Company, or affecting any of its properties or
business before or by any court or federal, state or foreign commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding could reasonably be expected to materially adversely affect the
condition, financial or otherwise, results of operations, business or prospects
of the Company, except as set forth in the Registration Statement and
Prospectus; and (vii) no stop order shall have been issued under the Securities
Act and no proceedings therefor shall have been initiated or overtly threatened
by the Commission or any state regulatory authority.
(e) At each of the Closing Date and each Option Closing Date,
if any, the Representative shall have received a certificate of the Company
signed by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that such person has reviewed the
Registration Statement, the Prospectus and this Agreement, and that:
23
(1) The representations and warranties of the Company
contained in this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the Company has
complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at or prior
to such Closing Date or Option Closing Date, as the case may be;
(2) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no proceedings
for that purpose have been instituted or are pending or, to each such person's
knowledge, are contemplated or threatened under the Securities Act;
(3) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, nor any amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and neither
the Prospectus nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(4) Subsequent to the latest dates as of which information is
given in the Registration Statement and the Prospectus through the Closing Date
or the Option Closing Date, as the case may be:
(e) the Company has not incurred, other than in the ordinary
course of its business, any material liabilities or obligations, direct or
contingent, except as disclosed in the Prospectus; (b) the Company has not paid
or declared any dividends or other distributions on its capital stock, except as
disclosed in the Prospectus; (c) the Company has not entered into any
transactions not in the ordinary course of business, except as disclosed in the
Prospectus; (d) there has not been any change in the capital stock or long-term
debt or any increase in the short-term borrowings (other than any increase in
the short-term borrowings in the ordinary course of business) of the Company,
except as disclosed in the Prospectus; (e) the Company has not sustained any
material loss or damage to its property or assets, whether or not insured; (f)
there is no litigation that is pending or, to the Company's knowledge,
threatened (or circumstances giving rise to same) against the Company or any
affiliated party of any of the foregoing that is required to be set forth in an
amended or supplemented Prospectus that has not been set forth; and (g) there
has occurred no other event required to be set forth in an amended or
supplemented Prospectus. References to the Registration Statement and the
Prospectus in this subsection (e) are to such documents as amended and
supplemented at the date of such certificate.
(f) On or prior to the date hereof, the Underwriters shall
have received clearance from the NASD as to the amount of compensation allowable
or payable to the Underwriters, as described in the Registration Statement
24
(g) At the time this Agreement is executed, and on the Option
Closing Date, the Representative shall have received a letter, dated such date,
addressed to the Representative in form and substance satisfactory (including
the nature of the changes or decreases, if any, referred to in clauses (3) (B)
and (C) below, in all respects to the Representative and Representative's
Counsel, from Pricewaterhouse Coopers LLP:
(1) confirming that they are independent certified
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable Regulations;
(2) stating that it is their opinion that the
financial statements of the Company audited by them and included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the Rules and
Regulations thereunder;
(3) stating that, on the basis of procedures, but not
an audit in accordance with G.A.A.S., which included a reading of the latest
available unaudited interim financial statements of the Company (with an
indication of the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of meetings and actions
of the stockholders, the board of directors and the Audit Committee of the board
of directors of the Company, inquiries of officers and other employees of the
Company responsible for financial and accounting matters, nothing has come to
their attention which would lead them to believe that (A) the unaudited
financial statements contained in the Registration Statement and Prospectus do
not comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the Rules and Regulations or any material
modifications should be made to the unaudited interim financial statements for
them to be in conformity with generally accepted accounting principles; or (B)
at a specified date not more than five days prior to the date of delivery of
such letter, there has been any change in the capital stock or long-term debt of
the Company, or any decrease in the shareholders' equity or net current assets
or net assets of the Company as compared with amounts shown in the June 30, 2003
balance sheet included in the Registration Statement, other than as set forth in
the Registration Statement, or, if there was any change or decrease, setting
forth the amount of such change or decrease; and (C) during the period from July
1, 2003 to a specified date not more than five days prior to the date of
delivery of such letter, there was any decrease in gross revenue, gross profit,
operating income, or increase in net loss or net loss per share of the Company,
in each case as compared with the corresponding period beginning July 1, 2003
other than as set forth in the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(4) stating that they have compared specific dollar
amounts, percentages of revenues and losses, and other financial information
pertaining to the Company set forth (in the Prospectus in each case to the
extent that such amounts, numbers, percentages, statements and information may
be derived from the general accounting records, of the Company and excluding any
questions requiring an interpretation by legal counsel), with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement; and
25
(5) providing statements as to such other procedures
as the Representative may reasonably request and PwC LLP are willing to perform
and report upon.
At the time this Agreement is executed, the Representative
shall have also received a letter, dated such date, from BDO ▇▇▇▇▇▇▇ LLP, with
respect to Hollywood Software, Inc., including all of the confirmations,
statements and assurances set forth in clauses (1) through (5) of this Section
6(g).
(h) At the Closing Date and each Option Closing Date, if any,
the Representative shall have received from Pricewaterhouse Coopers LLP and BDO
▇▇▇▇▇▇▇, LLP, letters, dated as of the Closing Date or the Option Closing Date,
as the case may be, to the effect that they reaffirm that statements made in the
letters furnished pursuant to Section 6(h) hereof, except that the specified
date referred to therein shall be a date not more than five days prior to the
Closing Date or the Option Closing Date, as the case may be, and, if the Company
has elected to rely on Rule 430A of the Regulations, to the further effect that
they have carried out procedures as specified in clause (5) of Section 6(g) with
respect to certain amounts, percentages and financial information as specified
by the Representative and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (5).
(i) On each of the Closing Date and the Option Closing Date,
if any, there shall have been duly tendered to, or at the direction of, the
Representative the appropriate number of Underwritten Securities.
(j) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters shall have been issued on the
Closing Date or the Option Closing Date, if any, and no proceedings for that
purpose shall have been instituted.
(k) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Warrant Agreement
substantially in the form filed as Exhibit 4.1 to the Registration Statement and
(ii) the Warrants in such denominations and to such designee as shall have been
provided by the Representative to the Company.
(l) On or before the Closing Date, the Underwritten Securities
and Warrant Shares shall have been duly approved for quotation on the American
Stock Exchange, subject to official notice of issuance.
(m) On or before the Closing Date, there shall have been
delivered to the Representative, Lock-up Agreements from the Company's
directors, officers, stockholders, and persons holding warrants, options, rights
or other securities of the Company, in the form previously provided to
Representative's Counsel.
(n) Trading in the Common Stock shall not have been suspended
by the American Stock Exchange at any time after the date hereof.
(o) Prior to the Closing Date, the Representative shall have
received from the Company a reasonably detailed budget covering the period from
the Closing Date to the end of the Company's first fiscal year following the
Closing Date together with financial statements of the Company prepared in
sufficient detail so as to allow comparison to the budget.
26
(p) On the Closing Date, the closing of the Company's
acquisition of Hollywood Software, Inc. shall be likely to occur immediately
after the other conditions of this Section 6 have been satisfied.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to the Representative.
If any condition to the Representative's obligations hereunder
to be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representative may terminate
this Agreement or, if the Representative so elects, it may waive any such
condition(s) that have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Representative, the Underwriters (for purposes of this Section 7, "Underwriters"
shall include the officers, directors, members and employees of the
Underwriters), and each person, if any, who controls the Underwriters
("controlling person") within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, from and against any and all losses, claims,
damages, expenses or liabilities, joint or several (and actions, proceedings,
suits and litigation with respect thereto), whatsoever (including, but not
limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any action, suit, proceeding or
litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which any Underwriter or any such controlling person may become
subject under the Securities Act, the Exchange Act or any other statute or at
common law or otherwise, insofar as such losses, claims, damages, expenses or
liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained (i) in any Preliminary Prospectus,
the Registration Statement or the Prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included securities of the
Company issued or issuable upon exercise of the Securities; or (iii) in any
application or other document or written communication (in this Section 7
collectively called an "application") executed by the Company or based upon
written information furnished by the Company in any jurisdiction in order to
qualify the Securities under the securities laws thereof or filed with the
Commission, any state securities commission or agency, the American Stock
Exchange, Nasdaq or any other securities exchange; or arise out of or are based
upon the omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not misleading (in
the case of the Preliminary Prospectus and Prospectus, in the light of the
circumstances under which they were made), unless such statement or omission was
made in reliance upon and in conformity with the Underwriters' Information and;
provided, further, that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any Preliminary Prospectus or the
Prospectus, the indemnification provided for herein shall not apply to any loss,
liability, claim, damage or expense to the extent the same results from the sale
of Securities to a person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the Prospectus, or in the case
of an untrue statement or omission or alleged untrue statement or omission in
the Prospectus, a copy of the amended Prospectus or supplement thereto, if the
Company has previously furnished sufficient copies thereof, based upon the
number of copies requested by the Representative, to the Representative a
reasonable time in advance and the claim, damage or expense of such person
results from an untrue statement or alleged untrue statement or omission or
alleged omission of a material fact contained in a Preliminary Prospectus or
Prospectus that was corrected in the Prospectus or amendment or supplement
thereto.
27
The indemnity agreements in this Section 7(a) and in Section
7(b) shall be in addition to any liability that the Company, the Representative
or the Underwriters may have at common law or otherwise.
(b) The Underwriters agree to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement and each other person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act, to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with the Underwriters' Information and is covered by the last proviso of Section
7(a).
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim with respect thereto is to be made against
one or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from: any
liability that it may have under this Section 7(a) or (b) hereof unless and to
the extent that it has been prejudiced in any material respect by such failure
or from the forfeiture of substantial rights and defenses. In case any such
action, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them that are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent unless a complete
release is obtained; provided, however, that such consent shall not be
unreasonably withheld or delayed.
28
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case; or (ii) contribution under the Securities Act may be required on the part
of any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or liabilities
(or actions, suits, proceedings or litigation with respect thereto) (A) in such
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified on
the other hand, from the offering of the Securities; or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by of the Company on
the one hand, and the Underwriters, on the other, shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Securities
(before deducting expenses other than the Representative's expenses) bear to the
total underwriting discounts received by the Underwriters hereunder, in each
case as set forth in the table on the cover page of the Prospectus. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, or by the Underwriters, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, expenses or liabilities (or actions,
suits, proceedings or litigation with respect thereto) referred to above in this
Section 7(d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action, claim, suit, proceeding or litigation. Notwithstanding the
provisions of this Section 7(d), an Underwriter shall not be required to
contribute any amount in excess of the underwriting discounts applicable to the
Securities purchased by the Underwriter hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7,
each person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who has signed the Registration
Statement, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to this Section 7(d). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party with respect
to which a claim for contribution may be made against another party or parties
under this Section 7(d), notify such party or parties from whom contribution may
be sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this Section 7(d) to the
extent that such party or parties were not adversely affected by such omission.
The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
29
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company delivered pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company, as the case may be, and the respective
indemnity agreements contained in Section 7 hereof, shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
the Representative, the Underwriters, the Company, any controlling person of the
Representative, the Underwriters or the Company, and shall survive termination
of this Agreement or the issuance and delivery of the Underwritten Securities
and Warrants to the Representative; provided, however, that the representations
and warranties contained in this Agreement or in any certificates of the
Company's officers shall survive only until the third (3rd) anniversary of the
Closing Date.
9. Effective Date. This Agreement shall become effective at
10:00 a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Representative, in its discretion, shall release the
Underwritten Securities for the sale to the public; provided, however, that the
provisions of this Section 9 and Sections 5, 7 and 10 of this Agreement shall,
subject to the terms thereof, at all times be effective. For purposes of this
Section 9, the Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Representative of electronic
communications (facsimile or e-mail) to securities dealers releasing such shares
for offering or the release by the Representative for publication of the first
newspaper advertisement that is subsequently published relating to the
Underwritten Securities.
10. Termination.
(a) This agreement may be terminated with respect to the Firm
Securities or Option Securities, if any, by the Representative by notice to the
Company given prior to the Closing Date or the relevant Option Closing Date,
respectively, in the event that all conditions set forth in Section 6 have not
been satisfied or the Company shall have failed, refused or been unable to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder (after a reasonable opportunity to cure) at or prior
thereto or if at or prior to the Closing Date or such Option Closing Date,
respectively:
(1) the Company sustains a loss by reason of explosion, fire,
flood, accident or other calamity, which, in the reasonable opinion of the
Representative, substantially affects the value of the properties of the Company
or which materially interferes with the operation of the business of the Company
regardless of whether such loss shall have been insured; there shall have been a
Material Adverse Effect (including, without limitation, a change in management
or control of the Company), in the business, operations, condition, financial or
otherwise, prospects, stockholders' equity, properties, business or results of
operations of the Company, except in each case as described in or contemplated
by the Prospectus (exclusive of any amendment or supplement thereto); or Mr. A.
▇▇▇▇ ▇▇▇▇ shall have suffered any injury or disability of a nature that could
materially adversely affect his ability to function as the President and Chief
Executive Officer of the Company;
30
(2) any material action, suit or proceeding shall be overtly
threatened, instituted or pending, at law or in equity, against the Company or
any of its directors or executive officers, by any person or by any federal,
state or other governmental or regulatory commission, board or agency that could
reasonably be expected to have a Material Adverse Effect;
(3) trading in the Common Stock shall have been suspended by
the Commission, the NASD or the American Stock Exchange or trading in securities
generally on the New York Stock Exchange, American Stock Exchange or the
over-the-counter market shall have been suspended or minimum or maximum prices
shall have been established on either such exchange or quotation system;
(4) a moratorium on banking activities shall have been
declared by New York State or United States authorities; or
(5) following the date hereof, there shall have been (A) an
outbreak of hostilities between the United States and any foreign power (or, in
the case of any ongoing hostilities, a material escalation thereof); (B) an
outbreak of any other insurrection or armed conflict involving the United
States, or a major terrorist attack in the United States; or (C) any other
calamity or crisis or material change in financial, political or economic
conditions, having an effect on the financial markets that, in the reasonable
judgment of the Representative, makes it impracticable or inadvisable to proceed
with the Offering or the delivery of the Securities as contemplated by the
Registration Statement, as amended.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) or Section 12 hereof, or if this
Agreement shall not be carried out by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied after a reasonable cure period (including,
without limitation, pursuant to Section 6, Section 10(a) or Section 12 hereof),
the Company shall promptly reimburse and indemnify the Representative for all of
its reasonable actual out-of-pocket expenses, including the fees and
disbursements of Representative's Counsel (less amounts previously paid pursuant
to Section 5(c) above). Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 10(a) and 12 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
31
11. [Intentionally Omitted]
12. Default by the Company. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the
Representative may at its option, by notice from the Representative to the
Company, terminate the Representative's obligation to purchase Option Securities
from the Company on such date) without any liability on the part of the
non-defaulting party other than pursuant to Section 5, Section 7 and Section 10
hereof. No action taken pursuant to this Section 12 shall relieve the Company
from liability, if any, with respect to such default.
13. Notices. All notices and communications hereunder, except
as herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given when delivered in person, by facsimile or
recognized courier. Notices to the Representative shall be directed to it at
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, with a copy (that shall not constitute notice) to
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to
the Company at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Chief Executive Officer, with a copy (that shall not constitute
notice) to ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
14. Parties. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Representative, the Underwriters, the Company
and the controlling persons, directors, officers, and other persons referred to
in Section 7 hereof, and their respective successors, legal representatives and
permitted assigns, and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or with respect to or by virtue
of this Agreement or any provisions herein contained. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase. Neither this Agreement nor any rights or obligations hereunder may be
assigned or delegated by a party without the prior written consent of the other
party.
15. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
16. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Warrant Agreement constitute the entire agreement of the parties hereto and
supersede all prior and/or contemporaneous written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed on behalf of the
Underwriters and the Company.
If the foregoing correctly sets forth the understanding
between the Representative and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall, subject to Section
9 hereof, constitute a binding agreement between us.
32
Very truly yours,
ACCESS INTEGRATED TECHNOLOGIES, INC.
By:
-----------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., LLC
By:
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: A Member
33
SCHEDULE A
Number of Firm
Securities to
Name of Underwriter be Purchased
------------------- ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC 1,020,000
Maxim Group, LLC 180,000
34