EXHIBIT 1.1
UNDERWRITING AGREEMENT
BETWEEN
GURUNET CORPORATION,
MAXIM GROUP LLC
AND
EARLYBIRDCAPITAL, INC.
DATED: ________________, 2004
TABLE OF CONTENTS
Section 1. P urchase and Sale of Shares ................................... 1
Section 1.1 Firm Shares ................................................ 1
Section 1.1.1 Purchase of Firm Shares ................................. 1
Section 1.1.2 Delivery and Payment .................................... 1
Section 1.2 Over-Allotment Option ...................................... 2
Section 1.2.1 Option Shares ........................................... 2
Section 1.2.2 Exercise of Option ...................................... 2
Section 1.2.3 Payment and Delivery .................................... 2
Section 1.3 Underwriters' Purchase Option .............................. 3
Section 1.3.1 Purchase Option ......................................... 3
Section 1.3.2 Payment and Delivery .................................... 3
Section 2. Representations and Warranties of the Company .................. 3
Section 2.1 Filing of Registration Statement ........................... 3
Section 2.1.1 Pursuant to the Act ..................................... 3
Section 2.1.2 Pursuant to the Exchange Act ............................ 4
Section 2.2 No Stop Orders, Etc ........................................ 4
Section 2.3 Disclosures in Registration Statement ...................... 4
Section 2.3.1 Securities Act Representation ........................... 4
Section 2.3.2 Disclosure of Contracts ................................. 5
Section 2.3.3 Prior Securities Transactions ........................... 5
Section 2.4 Changes After Dates in Registration Statement .............. 6
Section 2.4.1 No Material Adverse Change .............................. 6
Section 2.4.2 Recent Securities Transactions, Etc ..................... 6
Section 2.5 Independent Accountants .................................... 6
Section 2.6 Financial Statements ....................................... 6
Section 2.7 Authorized Capital; Options; Etc ........................... 6
Section 2.8 Valid Issuance of Securities; Etc .......................... 7
Section 2.8.1 Outstanding Securities .................................. 7
Section 2.8.2 Securities Sold Pursuant to this Agreement .............. 7
Section 2.9 Registration Rights of Third Parties ....................... 7
Section 2.10 Validity and Binding Effect of Agreements ................. 7
Section 2.11 No Conflicts, Etc ......................................... 8
Section 2.12 No Defaults; Violations ................................... 8
Section 2.13 Corporate Power; Licenses; Consents ....................... 8
Section 2.13.1 Conduct of Business .................................... 8
Section 2.13.2 Transactions Contemplated Herein ....................... 9
Section 2.14 Title to Property; Insurance .............................. 9
Section 2.15 Litigation; Governmental Proceedings ...................... 9
Section 2.16 Good Standing ............................................. 9
Section 2.17 Taxes ..................................................... 9
Section 2.18 Reliability of Industry and Market Data ................... 10
Section 2.19 Transactions Affecting Disclosure to NASD ................. 10
Section 2.19.1 Finder's Fees .......................................... 10
Section 2.19.2 Payments Within Twelve Months .......................... 10
Section 2.19.3 Use of Proceeds ........................................ 10
Section 2.19.4 Insiders' NASD Affiliation ............................. 10
Section 2.20 Foreign Corrupt Practices Act ............................. 11
TABLE OF CONTENTS (CONT.)
PAGE
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Section 2.21 Nasdaq and Boston Stock Exchange Eligibility .............. 11
Section 2.22 Intangibles ............................................... 11
Section 2.23 Relations With Employees .................................. 11
Section 2.23.1 Employee Matters ....................................... 11
Section 2.23.2 Employee Benefit Plans ................................. 12
Section 2.24 Officers' Certificate ..................................... 12
Section 2.25 No Integration ............................................ 12
Section 2.26 Lock-Up Agreements ........................................ 13
Section 2.26.1 Eighteen Month Lock-Up Agreements ...................... 13
Section 2.26.2 Twelve Month Lock-Up Agreements ........................ 13
Section 2.27 Subsidiaries .............................................. 13
Section 2.28 Environmental Matters ..................................... 13
Section 2.29 Product Liability Insurance ............................... 13
Section 2.30 Related Party Transactions ................................ 13
Section 2.31 Conversion and Repayment of Bridge Notes .................. 14
Section 2.32 Standard & Poor's ......................................... 14
Section 2.33 Relationships with Insiders ............................... 14
Section 2.34 Compliance with Sarb-Ox ................................... 14
Section 3. Covenants of the Company ....................................... 14
Section 3.1 Amendments to Registration Statement ....................... 14
Section 3.2 Federal Securities Laws .................................... 15
Section 3.2.1 Compliance .............................................. 15
Section 3.2.2 Filing of Final Prospectus .............................. 15
Section 3.2.3 Exchange Act Registration ............................... 15
Section 3.3 Blue Sky Filings ........................................... 15
Section 3.4 Delivery to the Underwriters of Prospectuses ............... 15
Section 3.5 Events Requiring Notice to the Underwriters ................ 16
Section 3.6 Review of Financial Statements ............................. 16
Section 3.7 Secondary Market Trading and Standard & Poor's ............. 16
Section 3.8 Nasdaq and Boston Stock Exchange Maintenance ............... 17
Section 3.9 Rule 462(b) Compliance ..................................... 17
Section 3.10 Public Relations Firm ...................................... 17
Section 3.11 Reports to the Underwriters and Others ..................... 17
Section 3.11.1 Periodic Reports, Etc .................................. 17
Section 3.11.2 Transfer Sheets and Weekly Position Listings ........... 17
Section 3.11.3 Secondary Market Trading Memorandum .................... 17
Section 3.12 Underwriters' Purchase Option .............................. 18
Section 3.13 Disqualification of Form SB-2 or Form S-1
(or other appropriate form) ................................ 18
Section 3.14 Payment of Expenses ........................................ 18
Section 3.14.1 General Expenses ....................................... 18
Section 3.14.2 Non-Accountable Expenses ............................... 19
Section 3.15 Application of Net Proceeds ................................ 19
Section 3.16 Delivery of Earnings Statements to Security Holders ........ 19
Section 3.17 Key Person Life Insurance .................................. 19
Section 3.18 Stabilization .............................................. 19
Section 3.19 Internal Controls .......................................... 20
Section 3.20 Accountants and Lawyers .................................... 20
Section 3.21 Transfer Agent ............................................. 20
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TABLE OF CONTENTS (CONT.)
PAGE
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Section 3.22 Sale of Shares ............................................. 20
Section 4. Conditions of the Underwriters' Obligations .................... 20
Section 4.1 Regulatory Matters ......................................... 20
Section 4.1.1 Effectiveness of Registration Statement ................. 20
Section 4.1.2 NASD Clearance .......................................... 21
Section 4.1.3 No Blue Sky Stop Orders ................................. 21
Section 4.2 Company Counsel Matters .................................... 21
Section 4.2.1 Effective Date Opinion of Counsel ....................... 21
Section 4.2.2 Closing Date and Option Closing Date Opinion of Counsel . 21
Section 4.2.3 Secondary Market Trading Memorandum ..................... 21
Section 4.2.4 Reliance ................................................ 21
Section 4.3 Cold Comfort Letter ........................................ 21
Section 4.4 Officers' Certificates ..................................... 23
Section 4.4.1 Officers' Certificate ................................... 23
Section 4.4.2 Secretary's Certificate ................................. 23
Section 4.5 No Material Changes ........................................ 23
Section 4.6 Delivery of Agreements ..................................... 24
Section 4.7 Opinion of Counsel for the Underwriters .................... 24
Section 4.8 Unaudited Financials ....................................... 24
Section 5. Indemnification ................................................ 24
Section 5.1 Indemnification of the Underwriters ........................ 24
Section 5.1.1 General ................................................. 24
Section 5.1.2 Procedure ............................................... 25
Section 5.2 Indemnification of the Company ............................. 26
Section 5.3 Contribution ............................................... 26
Section 5.3.1 Contribution Rights ..................................... 26
Section 5.3.2 Contribution Procedure .................................. 27
Section 6. Default by an Underwriter ...................................... 27
Section 7. Additional Covenants ........................................... 27
Section 7.1 Board Designee ............................................. 27
Section 7.2 [Intentionally Omitted] .................................... 28
Section 7.3 [Intentionally Omitted] .................................... 28
Section 7.4 Press Releases ............................................. 28
Section 7.5 Solicitation in Israel ..................................... 28
Section 7.6 No Ownership of Company Securities by Underwriters ......... 28
Section 8. Representations and Agreements to Survive Delivery ............. 28
Section 9. Effective Date of This Agreement and Termination Thereof ....... 28
Section 9.1 Effective Date ............................................. 28
Section 9.2 Termination ................................................ 28
Section 9.3 Notice ..................................................... 29
Section 9.4 Expenses ................................................... 29
Section 9.5 Indemnification ............................................ 29
Section 10. Miscellaneous ................................................. 29
Section 10.1 Notices .................................................... 29
Section 10.2 Headings ................................................... 30
Section 10.3 Amendment .................................................. 30
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TABLE OF CONTENTS (CONT.)
PAGE
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Section 10.4 Entire Agreement ........................................... 30
Section 10.5 Binding Effect ............................................. 31
Section 10.6 Governing Law, Jurisdiction ................................ 31
Section 10.7 Execution in Counterparts .................................. 31
Section 10.8 Waiver, Etc ................................................ 31
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INDEX OF DEFINITIONS
TERM SECTION
---- -------
Act ...................................................................... 2.1.1
Bridge Financing ........................................................ 2.26.1
Bridge Notes .............................................................. 2.31
Closing Date ............................................................. 1.1.2
Code .................................................................... 2.23.2
Commission ............................................................... 2.1.1
Common Stock ............................................................. 1.1.1
Company ........................................................... Introductory
Paragraph
XXXXX .................................................................... 2.1.1
Effective Date ........................................................... 1.2.2
ERISA ................................................................... 2.23.2
ERISA Plans ............................................................. 2.23.2
Exchange Act ............................................................. 2.1.2
Filing Date ............................................................. 2.19.2
Firm Shares .............................................................. 1.1.1
Insiders .................................................................. 3.15
Intangibles ............................................................... 2.22
NASD .................................................................... 2.19.1
Option Closing Date ...................................................... 1.2.2
Option Shares ............................................................ 1.2.1
Over-allotment Option .................................................... 1.2.1
Preliminary Prospectus ................................................... 2.1.1
Prospectus ............................................................... 2.1.1
Public Shares ............................................................ 1.2.1
Registration Statement ................................................... 2.1.1
Regulations .............................................................. 2.1.1
Rule 424(b) .............................................................. 2.1.1
Rule 462(b) Registration Statement ....................................... 2.1.1
Sarb-Ox ................................................................... 2.33
Secondary Market Trading Memorandum ..................................... 3.11.3
Shares ................................................................... 1.3.1
Subsidiary(ies) ........................................................... 2.27
Transfer Agent ............................................................ 3.21
Unaudited Financials ....................................................... 4.8
Underwriters ...................................................... Introductory
Paragraph
Underwriters' Purchase Option ............................................ 1.3.1
Underwriters' Shares ..................................................... 1.3.1
v
GURUNET CORPORATION
2,200,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
New York, New York
_________, 2004
Maxim Group LLC
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
EarlyBirdCapital, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned, GuruNet Corporation, a Delaware corporation (the
"Company"), hereby confirms its agreement with Maxim Group LLC ("Maxim") and
EarlyBirdCapital, Inc. ("EBC" and, together with Maxim, the "Underwriters") as
follows:
Section 1. PURCHASE AND SALE OF SHARES.
Section 1.1 FIRM SHARES.
Section 1.1.1 PURCHASE OF FIRM SHARES. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriters 2,200,000 shares of the Company's common stock, par value $.001 per
share ("Common Stock") at a purchase price (net of discounts and commissions) of
$4.55 per share. Such shares of Common Stock are referred to herein as the "Firm
Shares." The Underwriters, severally and not jointly, agree to purchase from the
Company an equal number of Firm Shares at such purchase price.
Section 1.1.2 DELIVERY AND PAYMENT. Delivery and payment for
the Firm Shares shall be made at 10:00 a.m., New York time, on or before the
third business day following the date that the Firm Shares commence trading or
at such earlier time as the Underwriters shall determine, or at such other time
as shall be agreed upon by the Underwriters and the Company, at the offices of
counsel to the Underwriters or at such other place as shall be agreed upon by
the Underwriters and the Company. The hour and date of delivery and payment for
the Firm Shares are called the "Closing Date." Payment for the Firm Shares shall
be made on the Closing Date at the Underwriters' election by wire transfer or by
certified or bank cashier's check(s) in New York Clearing House funds, payable
to the order of the Company upon delivery to the Underwriters of certificates
(in form and substance satisfactory to the Underwriters) representing the Firm
Shares for the respective accounts of the Underwriters. The certificates
representing the Firm Shares shall be registered in such name or names and in
such authorized
1
denominations as the Underwriters may request in writing at least two full
business days prior to the Closing Date. The Company will permit the
Underwriters to examine and package the Firm Shares for delivery at least one
full business day prior to the Closing Date. The Company shall not be obligated
to sell or deliver the Firm Shares except upon tender of payment by the
Underwriters for all the Firm Shares.
Section 1.2 OVER-ALLOTMENT OPTION.
Section 1.2.1 OPTION SHARES. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Shares,
the Underwriters are hereby granted an option to purchase up to an additional
330,000 shares of Common Stock from the Company ("Over-allotment Option"). Such
additional 330,000 shares of Common Stock are hereinafter referred to as the
"Option Shares." The Firm Shares and the Option Shares are hereinafter referred
to collectively as the "Public Shares." The purchase price to be paid for the
Option Shares will be the same price per Option Shares as the price per Firm
Share set forth in Section 1.1.1 hereof.
Section 1.2.2 EXERCISE OF OPTION. The Over-allotment Option
granted pursuant to Section 1.2.1 hereof may be exercised by the Underwriters as
to all or any part of the Option Shares at any time, from time to time, within
forty-five (45) days after the effective date ("Effective Date") of the
Registration Statement (as hereinafter defined). The Underwriters will not be
under any obligation to purchase any Option Shares prior to the exercise of the
Over-allotment Option. The Over-allotment Option granted hereby may be exercised
by the giving of oral notice to the Company from the Underwriters, which must be
confirmed within one (1) business day by a letter or telecopy setting forth the
number of Option Shares to be purchased, the date and time for delivery of and
payment for the Option Shares and stating that the Option Shares referred to
therein are to be used for the purpose of covering over-allotments in connection
with the distribution and sale of the Firm Shares. If such notice is given at
least two full business days prior to the Closing Date, the date set forth
therein for such delivery and payment will be the Closing Date. If such notice
is given thereafter, the date set forth therein for such delivery and payment
will not be earlier than three full business days after the date of the notice,
unless the Underwriters and the Company agree upon an earlier date. If such
delivery and payment for the Option Shares does not occur on the Closing Date,
the date and time of the closing for such Option Shares will be as set forth in
the notice (hereinafter the "Option Closing Date"). Upon exercise of the
Over-allotment Option, the Company will become obligated to convey to the
Underwriters, and, subject to the terms and conditions set forth herein, the
Underwriters will become obligated to purchase, the number of Option Shares
specified in such notice.
Section 1.2.3 PAYMENT AND DELIVERY. Payment for the Option
Shares will be at the Underwriters' election by wire transfer or by certified or
bank cashier's check(s) in New York Clearing House funds, payable to the order
of the Company at the offices of counsel to the Underwriters or at such other
place as shall be agreed upon by the Underwriters and the Company upon delivery
to the Underwriters of certificates representing such securities for the
Underwriters. The certificates representing the Option Shares to be delivered
will be in such denominations and registered in such names as the Underwriters
request not less than two full business days prior to the Closing Date or the
Option Closing Date, as the case may be. The Company
2
will permit the Underwriters to examine and package the Option Shares for
delivery not less than one full business day prior to such Closing Date.
Section 1.3 UNDERWRITERS' PURCHASE OPTION.
Section 1.3.1 PURCHASE OPTION. The Company hereby agrees to
issue and sell to the Underwriters (and/or their designees) on the Closing Date
for an aggregate purchase price of $100, an option ("Underwriters' Purchase
Option") for the purchase of an aggregate of 220,000 shares of Common Stock
("Underwriters' Shares") at an initial exercise price of 125% of the initial
offering price of a share of common stock (i.e, $6.25 per share of Common
Stock). The Underwriters' Shares are identical to the Firm Shares. The
Underwriters' Purchase Option shall be exercisable for a period of four years
commencing one year from the Effective Date. The Underwriters' Purchase Option
and the Underwriters' Shares are hereinafter referred to collectively as the
"Underwriters' Shares." The Public Shares and the Underwriters' Shares are
hereinafter referred to collectively as the "Shares."
Section 1.3.2 PAYMENT AND DELIVERY. Delivery and payment for
the Underwriters' Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriters, upon payment therefor, certificates for the
Underwriters' Purchase Option in the name or names and in such authorized
denominations as the Underwriters may request.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Underwriters as follows:
Section 2.1 FILING OF REGISTRATION STATEMENT.
Section 2.1.1 PURSUANT TO THE ACT. The Company has filed with
the Securities and Exchange Commission (the "Commission") a registration
statement on Form SB-2 (No. 333-115424), and amendments thereto, and related
preliminary prospectuses for the registration under the Securities Act of 1933,
as amended (the "Act"), of the Shares which registration statement, as so
amended (including post-effective amendments, if any), has been declared
effective by the Commission and copies of which have heretofore been delivered
to the Underwriters. The registration statement, as amended at the time it
became effective, including the prospectus, financial statements, schedules,
exhibits and other information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act, is hereinafter referred to as the "Registration Statement." If
the Company has filed or is required pursuant to the terms hereof to file a
registration statement pursuant to Rule 462(b) under the Securities Act
registering additional shares of Common Stock (a "Rule 462(b) Registration
Statement"), then, unless otherwise specified, any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462(b)
Registration Statement. Other than a Rule 462(b) Registration Statement, which,
if filed, becomes effective upon filing, no other document with respect to the
Registration Statement has heretofore been filed with the Commission. All of the
Shares have been registered under the Securities Act pursuant to the
Registration Statement or, if any Rule 462(b) Registration Statement is filed,
will be duly registered under the Securities Act with the filing of such Rule
462(b) Registration Statement. Based on communications from the Commission, no
stop order suspending the effectiveness of
3
either the Registration Statement or the Rule 462(b) Registration Statement, if
any, has been issued and no proceeding for that purpose has been initiated or
threatened by the Commission. The Company, if required by the Securities Act and
the rules and regulations of the Commission (the "Regulations"), proposes to
file the Prospectus with the Commission pursuant to Rule 424(b) under the
Securities Act ("Rule 424(b)"). The prospectus, in the form in which it is to be
filed with the Commission pursuant to Rule 424(b), or, if the prospectus is not
to be filed with the Commission pursuant to Rule 424(b), the prospectus in the
form included as part of the Registration Statement at the time the Registration
Statement became effective, is hereinafter referred to as the "Prospectus,"
except that if any revised prospectus or prospectus supplement shall be provided
to the Underwriters by the Company for use in connection with the Offering which
differs from the Prospectus (whether or not such revised prospectus or
prospectus supplement is required to be filed by the Company pursuant to Rule
424(b)), the term "Prospectus" shall also refer to such revised prospectus or
prospectus supplement, as the case may be, from and after the time it is first
provided to the Underwriters for such use. Any preliminary prospectus or
prospectus subject to completion included in the Registration Statement or filed
with the Commission pursuant to Rule 424 under the Securities Act is hereafter
called a "Preliminary Prospectus." Any reference herein to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the exhibits incorporated by reference therein pursuant to the
Regulations on or before the effective date of the Registration Statement, the
date of such Preliminary Prospectus or the date of the Prospectus, as the case
may be. Any reference herein to the terms "amend", "amendment" or "supplement"
with respect to the Registration Statement, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include: (i) the filing of any
document under the Securities Exchange Act of 1934, as amended, and together
with the Regulations promulgated thereunder (the "Exchange Act") after the
effective date of the Registration Statement, the date of such Preliminary
Prospectus or the date of the Prospectus, as the case may be, which is
incorporated therein by reference, and (ii) any such document so filed. All
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a Preliminary Prospectus and the Prospectus, or any
amendments or supplements to any of the foregoing shall be deemed to include any
copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System ("XXXXX").
Section 2.1.2 PURSUANT TO THE EXCHANGE ACT. The Company has
filed with the Commission a registration statement on Form 8-A (No. 001-32255)
providing for the registration of the Shares under the Exchange Act. Such
registration of the Shares has been declared effective by the Commission on the
date hereof.
Section 2.2 NO STOP ORDERS, ETC. 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 or has instituted
or, to the Company's knowledge, threatened to institute any proceedings with
respect to such an order.
Section 2.3 DISCLOSURES IN REGISTRATION STATEMENT.
Section 2.3.1 SECURITIES ACT REPRESENTATION. At the time the
Registration Statement became effective and at all times subsequent thereto up
to and including the Closing Date and the Option Closing Date, if any, the
Registration
4
Statement and the Prospectus and any amendment or supplement thereto contained
and will contain all material statements that are required to be stated therein
in accordance with the Act and the Regulations, and conformed and will conform
in all material respects to the requirements of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, during such time period and on such dates, contained or will
contain any untrue statement of a material fact or omitted or will omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. When any Preliminary Prospectus was first
filed with the Commission (whether filed as part of the Registration Statement
or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when
any amendment thereof or supplement thereto was first filed with the Commission,
such Preliminary Prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the Act and
the Regulations and did not 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. The representation and warranty made in this Section 2.3.1
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by the Underwriters expressly for use in the Registration Statement
or Prospectus or any amendment thereof or supplement thereto.
Section 2.3.2 DISCLOSURE OF CONTRACTS. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate in all material respects and presents fairly the information required
to be disclosed and there are no contracts or other documents required to be
described in the Registration Statement or the Prospectus or to be filed with
the Commission as exhibits to the Registration Statement that have not been so
described or filed. Each contract or other instrument (however characterized or
described) to which the Company is a party or by which its property or business
is or may be bound or affected and that is (i) referred to in the Prospectus, or
(ii) material to the Company's business, has been duly and validly executed, is
in full force and effect in all material respects in accordance with its terms
and is enforceable against the Company and, to the Company's knowledge, the
other parties thereto in accordance with its terms, and none of such contracts
or instruments has been assigned by the Company, and neither the Company nor, to
the Company's knowledge, any other party is in default thereunder and, to the
Company's knowledge, no event has occurred that, with the lapse of time or the
giving of notice, or both, would constitute a default thereunder. None of the
material provisions of such contracts or instruments violates or will result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court having jurisdiction over the Company
or any of its assets or businesses, including, without limitation, those
relating to environmental laws and regulations.
Section 2.3.3 PRIOR SECURITIES TRANSACTIONS. No securities of
the Company have been sold by the Company or by or on behalf of, or for the
benefit of, any person or persons controlling, controlled by, or under common
control with the Company within the three years prior to the date hereof, except
as disclosed in the Registration Statement.
5
Section 2.4 CHANGES AFTER DATES IN REGISTRATION STATEMENT.
Section 2.4.1 NO MATERIAL ADVERSE CHANGE. Since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, except as otherwise specifically stated therein, (i) there
has been no material adverse change in the condition, financial or otherwise, or
in the results of operations, business or business prospects of the Company,
including, but not limited to, a material loss or interference with its business
from fire, storm, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, whether or not arising in the ordinary course of business, and (ii)
there have been no transactions entered into by the Company, other than those in
the ordinary course of business, that are material with respect to the
condition, financial or otherwise, or to the results of operations, business or
business prospects of the Company.
Section 2.4.2 RECENT SECURITIES TRANSACTIONS, ETC. Since the
respective dates as of which information is given in the Registration Statement
and the 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; or (ii)
declared or paid any dividend or made any other distribution on or in respect to
its capital stock.
Section 2.5 INDEPENDENT ACCOUNTANTS. KPMG Somekh Xxxxxxx, whose
report is filed with the Commission as part of the Registration Statement, are
independent accountants as required by the Act and the Regulations.
Section 2.6 FINANCIAL STATEMENTS. The financial statements,
including the notes thereto and supporting schedules included in the
Registration Statement and Prospectus, fairly present the financial position and
the results of operations of the Company at the dates and for the periods to
which they apply; and such financial statements have been prepared in conformity
with generally accepted accounting principles, consistently applied throughout
the periods involved; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. The pro
forma financial information set forth in the Registration Statement and
Prospectus reflects all significant assumptions and adjustments relating to the
business and operations of the Company.
Section 2.7 AUTHORIZED CAPITAL; OPTIONS; ETC. The Company had, at
the date or dates indicated in the Prospectus, duly authorized, issued and
outstanding capitalization as set forth in the Registration Statement and the
Prospectus. Based on the assumptions and adjustments stated in the Registration
Statement and the Prospectus, the Company will have on the Closing Date the
adjusted stock capitalization set forth therein. Except as set forth in the
Registration Statement and the Prospectus, on the Effective Date and on the
Closing Date there will be no outstanding or authorized subscriptions, options,
warrants or other rights to purchase or otherwise acquire, or preemptive rights
with respect to the issuance or sale of any Common Stock of the Company,
including any obligations to issue any shares pursuant to anti-dilution
provisions, or any security convertible into shares of Common Stock of the
Company, or any contracts or commitments to issue or sell shares of Common Stock
or any such options, warrants, rights or convertible securities.
6
Section 2.8 VALID ISSUANCE OF SECURITIES; ETC.
Section 2.8.1 OUTSTANDING SECURITIES. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto, 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 holders of any security of the Company
or similar contractual rights granted by the Company. The outstanding options
and warrants to purchase shares of Common Stock constitute valid and binding
obligations of the Company, enforceable in accordance with their terms. The
authorized Common Stock and outstanding options and warrants to purchase shares
of Common Stock conform to all statements relating thereto contained in the
Registration Statement and the Prospectus. The offers and sales by the Company
of the outstanding Common Stock, options and warrants to purchase shares of
Common Stock, and securities convertible into shares of Common Stock, were at
all relevant times registered under the Act and registered or qualified under
the applicable state securities or Blue Sky laws or exempt from such
registration or qualification requirements.
Section 2.8.2 SECURITIES SOLD PURSUANT TO THIS AGREEMENT. The
Shares have been duly authorized and, when issued and paid for, will be validly
issued, fully paid and non-assessable; the holders thereof are not and will not
be subject to personal liability by reason of being such holders; the Shares are
not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Shares has been duly and validly taken. When issued, the
Underwriters' Purchase Option will constitute a valid and binding obligation of
the Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and will be
enforceable against the Company in accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
Section 2.9 REGISTRATION RIGHTS OF THIRD PARTIES. Except as set
forth in the Prospectus, no holders of any securities of the Company or of any
options or warrants of the Company or other rights exercisable for or
convertible or exchangeable into securities of the Company have the right to
require the Company to register any such securities of the Company under the Act
or to include any such securities in a registration statement to be filed by the
Company.
Section 2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS. This
Agreement has been duly and validly authorized by the Company and constitutes,
and the Underwriters' Purchase Option has been duly and validly authorized by
the Company and, when executed and delivered, will constitute, the valid and
binding agreements of the Company, enforceable against the Company in accordance
with their respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency,
7
reorganization or similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
Section 2.11 NO CONFLICTS, ETC. The execution, delivery, and
performance by the Company of this Agreement and the Underwriters' Purchase
Option, the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms hereof and thereof
do not and will not, with or without the giving of notice or the lapse of time
or both, (i) result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, note, loan or credit agreement or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets of the Company is
subject; (ii) result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws of the Company; (iii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or businesses; or (iv) have a material adverse effect on
any permit, license, certificate, registration, approval, consent, license or
franchise of or concerning the Company.
Section 2.12 NO DEFAULTS; VIOLATIONS. Except as described in the
Prospectus, no material default exists in the due performance and observance of
any term, covenant or condition of any material license, contract, indenture,
mortgage, deed of trust, note, loan or credit agreement, or any other 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
may be bound or to which any of the properties or assets of the Company is
subject. Except as described in the Prospectus, the Company is not in violation
of any term or provision of its Certificate of Incorporation or By-Laws or in
violation of any material franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
businesses.
Section 2.13 CORPORATE POWER; LICENSES; CONSENTS.
Section 2.13.1 CONDUCT OF BUSINESS. The Company has all
requisite corporate power and authority, and has all necessary and material
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies to own or lease its
properties and conduct its business as described in the Prospectus, and the
Company is and has been doing business in compliance with all such material
authorizations, approvals, orders, licenses, certificates and permits and all
federal, state and local laws, rules and regulations. The disclosures in the
Registration Statement concerning the effects of federal, state and local
regulation on the Company's business as currently contemplated are correct in
all material respects and do not omit to state a material fact required to be
stated therein or
8
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Section 2.13.2 TRANSACTIONS CONTEMPLATED HEREIN. The Company
has all corporate power and authority to enter into this Agreement and to carry
out the provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been obtained. No
consent, approval, authorization or order of, and no filing with, any court,
government agency or other body is required for the valid authorization,
issuance, sale and delivery of the Shares and the consummation of the
transactions and agreements contemplated by this Agreement, the Underwriters'
Purchase Option and the Prospectus, except with respect to applicable federal
and state securities laws.
Section 2.14 TITLE TO PROPERTY; INSURANCE. The Company has good and
defensible title to, or valid and enforceable leasehold estates in, all items of
real and personal property (tangible and intangible) owned or leased by it, free
and clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus (including the financial statements and notes thereto) and liens
for taxes not yet due and payable. The Company has adequately insured its
properties against loss or damage by fire or other casualty and maintains, in
adequate amounts, such other insurance as is usually maintained by companies
engaged in the same or similar business.
Section 2.15 LITIGATION; GOVERNMENTAL PROCEEDINGS. Except as set
forth in the Prospectus, there is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding pending or, to
the Company's knowledge, threatened against, or involving the properties or
business of, the Company that might materially and adversely affect the
financial position, prospects, value or the operation of the properties or the
business of the Company, or that questions the validity of the capital stock of
the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to, or in connection with, this Agreement. There are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal, domestic or foreign, naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to which
the Company, its properties or business is bound or subject.
Section 2.16 GOOD STANDING. The Company has been duly organized and
is validly existing as a corporation and is in good standing under the laws of
the state of its incorporation. The Company is duly qualified and licensed and
in good standing as a foreign corporation in each jurisdiction in which
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing, except where the failure to qualify
would not have a material adverse effect on the financial position, prospects or
value or the operation of the properties or the business of the Company.
Section 2.17 TAXES. The Company has filed all returns (as
hereinafter defined) required to be filed with taxing authorities prior to the
date hereof or has duly obtained extensions of time for the filing thereof. The
Company has paid all taxes (as hereinafter defined) shown as due on such returns
that were filed and has paid all taxes imposed on or assessed against the
Company. The provisions for taxes payable, if any, shown on the financial
statements filed with or as part of the Registration Statement are
9
sufficient for all accrued and unpaid taxes, whether or not disputed, and for
all periods to and including the dates of such consolidated financial
statements. Except as disclosed in writing to the Underwriters, (i) no issues
have been raised (and are currently pending) by any taxing authority in
connection with any of the returns or taxes asserted as due from the Company,
and (ii) no waivers of statutes of limitation with respect to the returns or
collection of taxes have been given by or requested from the Company. The term
"taxes" mean all federal, state, local, foreign, and other net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments, or charges of any kind whatever,
together with any interest and any penalties, additions to tax, or additional
amounts with respect thereto. The term "returns" means all returns,
declarations, reports, statements, and other documents required to be filed in
respect to taxes.
Section 2.18 RELIABILITY OF INDUSTRY AND MARKET DATA. The
statistical, industry-related and market-related data included in the
Registration Statement and the Prospectus are based on or derived from sources
which the Company reasonably and in good faith believes are reliable and
accurate, and such data agree with the sources from which they are derived.
Section 2.19 TRANSACTIONS AFFECTING DISCLOSURE TO NASD.
Section 2.19.1 FINDER'S FEES. Except as described in the
Prospectus, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's, consulting or
origination fee with respect to the introduction of the Company to the
Underwriters or the sale of the Shares hereunder or any other arrangements,
agreements, understandings, payments or issuances with respect to the Company
that may affect the Underwriters' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
Section 2.19.2 PAYMENTS WITHIN TWELVE MONTHS. Except as set
forth on SCHEDULE 2.19.2, other than payments to the Underwriters, the Company
has not made any direct or indirect payments (in cash, securities or otherwise)
to (i) any person, as a finder's fee, investing fee or otherwise, in
consideration of such person raising capital for the Company or introducing to
the Company persons who provided capital to the Company, (ii) any NASD member,
or (iii) any person or entity that has any direct or indirect affiliation or
association with any NASD member within the 12-month period prior to the date on
which the Registration Statement was filed with the Commission ("Filing Date")
or thereafter.
Section 2.19.3 USE OF PROCEEDS. None of the net proceeds of
the offering will be paid by the Company to any participating NASD member or any
affiliate or associate of any participating NASD member, except as specifically
authorized herein.
Section 2.19.4 INSIDERS' NASD AFFILIATION. Except as set
forth on SCHEDULE 2.19.4, to the Company's knowledge, no (i) officer or director
of the Company, (ii) owner of 5% or more of the Company's unregistered
securities or (iii) owner of any amount of the Company's unregistered securities
acquired within the 180-day period prior to the Filing Date, has any direct or
indirect affiliation or association with any
10
NASD member. The Company will advise the Underwriters and the NASD if any
officer, director or stockholder of the Company is or becomes an affiliate or
associated person of an NASD member participating in the offering.
Section 2.20 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor
any of its officers, directors, 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 or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is, or may
be in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) that (i) might subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had a
material adverse effect on the assets, business or operations of the Company as
reflected in any of the financial statements contained in the Prospectus or
(iii) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
with the Foreign Corrupt Practices Act of 1977, as amended.
Section 2.21 NASDAQ AND BOSTON STOCK EXCHANGE ELIGIBILITY. As of
the Effective Date, the Public Shares have been approved for quotation on the
Nasdaq SmallCap Market and for listing on the Boston Stock Exchange.
Section 2.22 INTANGIBLES. The Company owns or possesses the
requisite licenses or rights to use all trademarks, service marks, service
names, trade names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") described as being licensed to or owned by it in
the Registration Statement. The Company's Intangibles that have been registered
in the United States Patent and Trademark Office have been fully maintained and
are in full force and effect. Except as described in the Prospectus, there is no
claim or action by any person pertaining to, or proceeding pending or, to the
Company's knowledge, threatened relating to, and the Company has not received
any notice of conflict with the asserted rights of others, that challenges the
exclusive right of the Company with respect to, any Intangibles used in the
conduct of the Company's business. To the Company's knowledge, the Intangibles
and the Company's current products, services and processes do not infringe on
any Intangibles held by any third party. To the Company's knowledge, no others
have infringed upon the Intangibles of the Company.
Section 2.23 RELATIONS WITH EMPLOYEES.
Section 2.23.1 EMPLOYEE MATTERS. The Company has generally
enjoyed a satisfactory employer-employee relationship with its employees and is
in compliance in all material respects with all federal, state and local laws
and regulations respecting the employment of its employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. 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 and local
11
laws and regulations. There is no unfair labor practice charge or complaint
against the Company pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company or any predecessor entity, and none has ever
occurred. No question concerning representation exists respecting the employees
of the Company and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company, if any.
Section 2.23.2 EMPLOYEE BENEFIT PLANS. Other than as set
forth in the Registration Statement, the Company neither maintains, sponsors nor
contributes to, nor is it required to contribute to, any program or arrangement
that is an "employee pension benefit plan," an "employee welfare benefit plan,"
or a, "multi-employer 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
to, and has at no time maintained or contributed to, a defined benefit plan, as
defined in Section 3(35) of ERISA. If the Company does maintain or contribute to
a defined benefit plan, any termination of the plan on the date hereof would not
give rise to liability under Title IV of ERISA. 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 of 1986, as
amended ("Code"), that could subject the Company to any tax penalty for
prohibited transactions and that has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters 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 "multi-employer
plan."
Section 2.24 OFFICERS' CERTIFICATE. Any certificate signed by any
duly authorized officer of the Company and delivered to the Underwriters or to
its counsel shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
Section 2.25 NO INTEGRATION. Neither the Company nor any of its
affiliates has, prior to the date hereof, made any offer or sale of any
securities which are required to be "integrated" pursuant to the Act or the
Regulations with the offer and sale of the Shares pursuant to the Registration
Statement. Except as disclosed in the Registration Statement, the Prospectus or
in any public filings relating to the Company filed with the Commission, neither
Company nor any of its affiliates has sold or issued any Common Stock, options
and warrants to purchase shares of Common Stock, or securities convertible into
shares of Common Stock during the six-month period preceding the date of the
Prospectus, including but not limited to any sales pursuant to Rule 144A or
Regulation D or S under the Act, other than shares of Common Stock issued
pursuant to employee benefit plans, qualified stock option plans or employee
compensation plans or pursuant to outstanding options, rights or warrants as
described in the Registration Statement and the Prospectus.
12
Section 2.26 LOCK-UP AGREEMENTS.
Section 2.26.1 EIGHTEEN MONTH LOCK-UP AGREEMENTS. The Company
has caused to be duly executed legally binding and enforceable agreements
pursuant to which the persons set forth on SCHEDULE 2.26.1, constituting all of
the officers and directors of the Company (including their family members and
affiliates) agree not to sell any shares of Common Stock or warrants or options
to purchase, or other securities convertible into Common Stock owned by them
(either pursuant to Rule 144 of the Regulations or otherwise) for a period of 18
months following the Effective Date except with the prior written consent of the
Underwriters and except with respect to the shares of Common Stock issued or
issuable to Israel Seed III Annex Fund, L.P. and Seed Management Associates Ltd.
in connection the securities acquired in the Company's bridge financing ("Bridge
Financing"), which shall be subject to the same lock-up as required pursuant to
Section 2.26.2.
Section 2.26.2 TWELVE MONTH LOCK-UP AGREEMENTS. The Company
has caused to be duly executed legally binding and enforceable agreements
pursuant to which the persons set forth on SCHEDULE 2.26.2 agree not to sell any
shares of Common Stock or warrants or options to purchase, or other securities
convertible into Common Stock owned by them (either pursuant to Rule 144 of the
Regulations or otherwise) for a period of 12 months following the Effective
Date, subject to certain exceptions as provided in such lockup agreements.
Section 2.27 SUBSIDIARIES. Except as set forth on SCHEDULE 2.27,
the Company does not own an interest in any corporation, partnership, limited
liability company, joint venture, trust or other business entity. The Company
has no subsidiaries other than those subsidiaries set forth on SCHEDULE 2.27,
each of which is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation (each a "Subsidiary" and
collectively the "Subsidiaries"). The Company owns all of the capital stock of
the Subsidiaries free and clear of all liens, security interests and other
encumbrances of any nature whatsoever, except as set forth in the Prospectus.
The representations and warranties made by the Company in this Agreement shall
also apply and be true with respect to each Subsidiary, individually and taken
as a whole with the Company and all other Subsidiaries, as if each
representation and warranty contained herein made specific reference to the
Subsidiaries each time the term "Company" was used.
Section 2.28 ENVIRONMENTAL MATTERS. The Company has complied in all
material respects with all applicable environmental laws.
Section 2.29 PRODUCT LIABILITY INSURANCE. To its knowledge, the
Company maintains product liability insurance of the type and in the amounts
typically maintained by similar companies operating in the industry in which the
Company operates.
Section 2.30 RELATED PARTY TRANSACTIONS. There are no business
relationships or related party transactions involving the Company or any other
person required to be described in the Prospectus that have not been described
as required.
13
Section 2.31 CONVERSION AND REPAYMENT OF BRIDGE NOTES. As of the
Closing Date, (i) Convertible Promissory Notes ("Bridge Notes") in the aggregate
principal amount of not less than $2,500,000 will convert into shares of Common
Stock at $3.75 per share and accrued interest thereon will be repaid in cash and
(ii) Bridge Notes in the aggregate principal amount of not more than $2,500,000
plus accrued interest will be repaid.
Section 2.32 STANDARD & POOR'S. The Company has taken all necessary
and appropriate action to achieve accelerated publication in Standard and Poor's
Corporation Records Corporate Descriptions.
Section 2.33 RELATIONSHIPS WITH INSIDERS. No relationship, direct
or indirect, exists between or among any of the Company or any affiliate of the
Company, on the one hand, and any director, officer, shareholder, customer or
supplier of the Company or any affiliate of the Company, on the other hand,
which is required by the Act, the Exchange Act or the Regulations to be
described in the Registration Statement or the Prospectus which is not so
described and described as required. There are no outstanding loans, advances
(except normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company to or for the benefit of
any of the officers or directors of the Company or any of their respective
family members, except as disclosed in the Registration Statement and the
Prospectus. The Company has not, in violation of the Xxxxxxxx-Xxxxx Act of 2002
("Sarb-Ox"), directly or indirectly, including through a Subsidiary (other than
as permitted under the Sarb-Ox for depositary institutions), extended or
maintained credit, arranged for the extension of credit, or renewed an extension
of credit, in the form of a personal loan to or for any director or executive
officer of the Company.
Section 2.34 COMPLIANCE WITH SARB-OX. The Company is in material
compliance with the provisions of Sarb-Ox and the rules and regulations
promulgated thereunder and related or similar rules and regulations promulgated
by NASDAQ or any other governmental or self regulatory entity or agency, except
for such violations which, singly or in the aggregate, would not have a material
adverse effect on the business, condition (financial or otherwise), results of
operations, stockholders' equity, properties or prospects of the Company and the
Subsidiary, taken as a whole. Without limiting the generality of the foregoing:
(i) all members of the Company's board of directors who are required to be
"independent" (as that term is defined under applicable laws, rules and
regulations), including, without limitation, all members of the audit committee
of the Company's board of directors, meet the qualifications of independence as
set forth under applicable laws, rules and regulations and (ii) the audit
committee of the Company's board of directors has at least one member who is an
"audit committee financial expert" (as that term is defined under applicable
laws, rules and regulations).
Section 3. COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:
Section 3.1 AMENDMENTS TO REGISTRATION STATEMENT. The Company will
deliver to the Underwriters, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Underwriters
shall reasonably object.
14
Section 3.2 FEDERAL SECURITIES LAWS.
Section 3.2.1 COMPLIANCE. During the time when a Prospectus
is required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange Act,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Public Shares in accordance with the provisions
hereof, and the Prospectus. If at any time when a Prospectus relating to the
Public Shares is required to be delivered under the Act, any event shall have
occurred as a result of which, in the opinion of counsel for the Company or
counsel for the Underwriters, the Prospectus, as then amended or supplemented,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in 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 Act, the
Company will notify the Underwriters promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
Section 3.2.2 FILING OF FINAL PROSPECTUS. If Rule 430A is
used or the filing of the Prospectus is otherwise required under Rule 424(b),
the Company will file the Prospectus (in form and substance satisfactory to the
Underwriters) with the Commission pursuant to the requirements of Rule 424(b) of
the Regulations within the prescribed time period and will provide evidence
satisfactory to the Underwriters of such timely filing.
Section 3.2.3 EXCHANGE ACT REGISTRATION. For a period of five
years from the Effective Date, the Company will use its best efforts to maintain
the registration of the Shares under the provisions of Section 12 of the
Exchange Act.
Section 3.3 BLUE SKY FILINGS. The Company will endeavor in good
faith, in cooperation with the Underwriters, at or prior to the time the
Registration Statement becomes effective, to qualify the Public Shares for
offering and sale under the securities laws of such jurisdictions as the
Underwriters may reasonably designate, provided that no such qualification shall
be required in any jurisdiction where, as a result thereof, the Company would be
subject to service of general process or to taxation as a foreign corporation
doing business in such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Underwriters agree
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
be required by the laws of such jurisdiction.
Section 3.4 DELIVERY TO THE UNDERWRITERS OF PROSPECTUSES. The
Company will deliver to the Underwriters, without charge, from time to time
during the period when the Prospectus is required to be delivered under the Act
or the Exchange Act such number of copies of each Preliminary Prospectus and the
Prospectus as the Underwriters may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to the Underwriters one original executed Registration Statement,
including exhibits, and all post-effective amendments thereto and copies of all
exhibits filed therewith or incorporated therein by
15
reference and all original executed consents of certified experts. The Company
consents to the use and delivery of the Preliminary Prospectus by the
Underwriters in accordance with Rule 430 and Section 5(b) of the Act.
Section 3.5 EVENTS REQUIRING NOTICE TO THE UNDERWRITERS. The
Company will notify the Underwriters immediately and confirm the notice in
writing (i) of the effectiveness of the Registration Statement and any amendment
thereto, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding for that purpose, (iii) if it
becomes aware of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Shares for offering
or sale in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose, (iv) of the mailing and delivery to the Commission
for filing of any amendment or supplement to the Registration Statement or
Prospectus, including but not limited to Rule 462(b) under the Act, (v) of the
receipt of any comments or request for any additional information from the
Commission, and (vi) of the happening of any event during the period described
in Section 3.4 hereof that, in the judgment of the Company, makes any statement
of a material fact made in the Registration Statement or the Prospectus untrue
or that requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order. The Company will not file any
amendment to the Registration Statement or any amendment of or supplement to the
Prospectus (including the prospectus required to be filed pursuant to Rule
424(b)) that differs from the prospectus on file at the time of the
effectiveness of the Registration Statement or file any document under the
Exchange Act if such document would be deemed to be incorporated by reference
into the Prospectus to which the Underwriters shall object in writing after
being timely furnished in advance a copy thereof. The Company will provide the
Underwriters with copies of all such amendments, filings and other documents a
sufficient time prior to any filing or other publication thereof to permit the
Representatives a reasonable opportunity to review and comment thereon.
Section 3.6 REVIEW OF FINANCIAL STATEMENTS. For a period of five
years from the Effective Date, the Company, at its expense, shall cause its
regularly engaged independent certified public accountants to participate to
review (as described in Statement on Audited Standards No. 71 -- Interim
Financial Information) (but not audit) the Company's financial statements for
each of the first three fiscal quarters prior to the announcement of quarterly
financial information, the filing of the Company's Form 10-Q or Form 10-QSB
quarterly reports and the mailing of any quarterly financial information to
stockholders.
Section 3.7 SECONDARY MARKET TRADING AND STANDARD & POOR'S. The
Company will take all necessary and appropriate actions to achieve accelerated
publication in Standard and Poor's Corporation Records Corporate Descriptions
(within 30 days after the Effective Date) and to maintain such publication with
updated quarterly information for a period of five years from the Effective
Date, including the payment of any necessary fees and expenses. The Company
shall take such action as may be reasonably requested by the Underwriters to
obtain a secondary market trading
16
exemption in such states as may be requested by the Underwriters, including the
payment of any necessary fees and expenses and the filing of requisite forms
(e.g., Form 25101(b) for secondary market trading in the State of California) on
the Effective Date.
Section 3.8 NASDAQ AND BOSTON STOCK EXCHANGE MAINTENANCE. For a
period of five years from the date hereof, the Company will use its best efforts
to maintain the quotation by the Nasdaq SmallCap Market and the listing by the
Boston Stock Exchange of the Shares and, if the Company satisfies the inclusion
standards for the Nasdaq National Market System, to apply for and maintain
quotations by the Nasdaq National Market System of such securities during such
period.
Section 3.9 RULE 462(b) COMPLIANCE. If the Company elects to rely
on Rule 462(b) under the Act, the Company shall both file a Rule 462(b)
Registration Statement with the Commission in compliance with Rule 462(b) and
pay the applicable fees in accordance with Rule 111 of the Act by the earlier
of: (i) 10:00 p.m., New York City time, on the date of this Agreement, and (ii)
the time that confirmations are given or sent, as specified by Rule 462(b)(2).
Section 3.10 PUBLIC RELATIONS FIRM. The Company shall retain a
public relations firm acceptable to Maxim for a period of five years from the
Effective Date.
Section 3.11 REPORTS TO THE UNDERWRITERS AND OTHERS.
Section 3.11.1 PERIODIC REPORTS, ETC. For a period of five
years from the Effective Date, the Company will promptly furnish to the
Underwriters copies of such financial statements and other periodic and special
reports as the Company from time to time files with any governmental authority
or furnishes generally to holders of any class of its securities, and promptly
furnish to the Underwriters (i) a copy of each periodic report the Company shall
be required to file with the Commission, (ii) a copy of every press release and
every news item and article with respect to the Company or its affairs that was
released by the Company, (iii) a copy of each Form 8-K or Schedules 13D, 13G,
14D-1 or 13E-4 received or prepared by the Company, and (iv) such additional
documents and information regarding the Company and the affairs of any future
subsidiaries of the Company as Maxim may from time to time reasonably request.
Section 3.11.2 TRANSFER SHEETS AND WEEKLY POSITION LISTINGS.
For a period of three years from the Closing Date, the Company will furnish to
the Underwriters at the Company's sole expense such transfer sheets and position
listings of the Company's securities as the Underwriters may request, including
the daily, weekly and monthly consolidated transfer sheets of the transfer agent
of the Company and the weekly position listings of the Depository Trust Company.
Section 3.11.3 SECONDARY MARKET TRADING MEMORANDUM. Until
such time as the Public Shares are listed or quoted, as the case may be, on one
of the following: the New York Stock Exchange, the American Stock Exchange or
the Nasdaq National Market System, the Company shall request that the
Underwriters' legal counsel deliver to the Underwriters a written memorandum
detailing those states in which the Shares may be traded in non-issuer
transactions under the Blue Sky laws of the fifty states ("Secondary Market
Trading Memorandum"). The Company shall pay to the Underwriters' legal counsel a
one-time fee of $5,000 for such services at the Closing.
17
Section 3.12 UNDERWRITERS' PURCHASE OPTION. On the Closing Date,
the Company will execute and deliver the Underwriters' Purchase Option to the
Underwriters or its designees in the form filed as an exhibit to the
Registration Statement.
Section 3.13 DISQUALIFICATION OF FORM SB-2 OR FORM S-1 (OR OTHER
APPROPRIATE FORM). For a period equal to five (5) years from the date hereof,
the Company will not take any action or actions that may prevent or disqualify
the Company's use of Form SB-2 or Form S-1 (or other appropriate form) for the
registration of the Underwriters' Shares under the Act.
Section 3.14 PAYMENT OF EXPENSES.
Section 3.14.1 GENERAL EXPENSES. The Company hereby agrees to
pay on the Closing Date and, to the extent not paid on the Closing Date, on the
Option Closing Date, all expenses incident to the performance of the obligations
of the Company under this Agreement, including but not limited to (i) the
preparation, printing, filing, delivery and mailing (including the payment of
postage with respect to such mailing) of the Registration Statement, the
Prospectus and the Preliminary Prospectuses and the printing and mailing of this
Agreement and related documents, including the cost of all copies thereof and
any amendments thereof or supplements thereto supplied to the Underwriters in
quantities as may be required by the Underwriters, (ii) the printing, engraving,
issuance and delivery of the shares of Common Stock and the Underwriters'
Purchase Option, including any transfer or other taxes payable thereon, (iii)
the qualification of the Public Shares under state or foreign securities or Blue
Sky laws, including the filing fees under such Blue Sky laws, the costs of
printing and mailing the "Preliminary Blue Sky Memorandum," and all amendments
and supplements thereto, the fees ($35,000, of which $15,000 has been paid) and
disbursements of the Underwriters' counsel, and fees and disbursements of local
counsel, if any, retained for such purpose and a one-time fee of $5,000 payable
to Underwriters' counsel for the preparation of the Secondary Market Trading
Memorandum pursuant to Section 3.11.3 hereof, (iv) filing fees, costs and
expenses (including fees and disbursements for the Underwriters' counsel)
incurred in registering the offering with the NASD, (v) costs of placing
"tombstone" advertisements in THE WALL STREET JOURNAL, THE NEW YORK TIMES and a
third publication to be selected by the Underwriters, the total costs of such
advertisements not to exceed $25,000, (vi) fees and disbursements of the
transfer and warrant agent, (vii) the Company's expenses associated with "due
diligence" meetings arranged by the Underwriters, (viii) the preparation,
binding and delivery of transaction "bibles," in quantity, form and style
satisfactory to the Underwriters and transaction lucite cubes or similar
commemorative items in a style and quantity as requested by the Underwriters,
(ix) any listing of the Public Shares on Nasdaq SmallCap or National Market
System, as the case may be, and any securities exchange and any listing in
Standard & Poor's and (x) all other costs and expenses incident to the
performance of its obligations hereunder that are not otherwise specifically
provided for in this Section 3.14.1. The Company also agrees to engage and pay
$7,500 for an investigative search firm of the Underwriters' choice
(International Business Research (U.S.A.), Inc.) to conduct an investigation of
the officers and directors of the Company. The Underwriters may deduct from the
net proceeds of the offering payable to the Company on the Closing Date, or the
Option Closing Date, if any, the expenses set forth in this Agreement to be paid
by the Company to the Underwriters and/or to third parties.
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Section 3.14.2 NON-ACCOUNTABLE EXPENSES. The Company further
agrees that, in addition to the expenses payable pursuant to Section 3.14.1, it
will pay to the Underwriters a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Firm Shares, $75,000 of which has been paid to date, and the Company will pay
the balance on the Closing Date by certified or bank cashier's check or, at the
election of the Underwriters, by deduction from the proceeds of the offering
contemplated herein. For the avoidance of doubt, the Underwriters shall not be
entitled to receive such non-accountable allowance from the sale of any Option
Shares. If the offering contemplated by this Agreement is not consummated for
any reason whatsoever then the following provisions shall apply: The Company's
liability for payment to the Underwriters of the non-accountable expense
allowance shall be equal to the sum of the Underwriters' actual out-of-pocket
expenses (including, but not limited to, counsel fees, "road-show" and due
diligence expenses). The Underwriters shall retain such part of the
non-accountable expense allowance previously paid as shall equal such actual
out-of-pocket expenses. If the amount previously paid is insufficient to cover
such actual out-of-pocket expenses, the Company shall remain liable for and
promptly pay any other actual out-of-pocket expenses. If the amount previously
paid exceeds the amount of actual out-of-pocket expenses, the Underwriters shall
promptly remit to the Company any such excess.
Section 3.15 APPLICATION OF NET PROCEEDS. The Company will apply
the net proceeds from the offering received by it in a manner consistent with
the application described under the caption "Use of Proceeds" in the Prospectus.
The Company hereby agrees that, except as so described, without the express
prior written consent of Maxim, the Company will not apply any net proceeds from
the offering to pay (i) any debt for borrowed funds other than pursuant to the
Bridge Notes as described in the Prospectus or (ii) any debt or obligation owed
to any of the Company's officers, directors or any stockholder owning one
percent or more of the outstanding shares of the Company's Common Stock or any
family member or affiliate of any of the foregoing persons ("Insiders")
(excluding salaries or fees payable on a current basis to officers and directors
in the ordinary course of the Company's business).
Section 3.16 DELIVERY OF EARNINGS STATEMENTS TO SECURITY HOLDERS.
The Company will make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent certified public accountants unless required by the Act
or the Regulations, but which shall satisfy the provisions of Rule 158(a) under
Section 11(a) of the Act) covering a period of at least twelve consecutive
months beginning after the Effective Date.
Section 3.17 KEY PERSON LIFE INSURANCE. The Company will maintain
key person life insurance in an amount not less than $1,000,000 on the life of
Xxxxxx Xxxxxxxxxxx, to be in effect as of the Effective Date, and pay the annual
premiums therefor and name the Company as the sole beneficiary thereof.
Section 3.18 STABILIZATION. Neither the Company, nor, to its
knowledge, any of its employees, directors or stockholders has taken or will
take, directly or indirectly, any action designed to or that has constituted or
that might reasonably be expected to cause or result in, under the Exchange Act,
or otherwise, stabilization or
19
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Public Shares.
Section 3.19 INTERNAL CONTROLS. The Company maintains and will
continue to maintain a system of internal accounting controls that comply with
the requirements of Sarb-Ox (and the rules promulgated thereunder) and which are
sufficient to provide reasonable assurances that: (i) transactions are executed
in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary in order to permit preparation of
financial statements in accordance with generally accepted accounting principles
and to maintain accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
Section 3.20 ACCOUNTANTS AND LAWYERS. For a period of five years
from the Effective Date, the Company shall retain independent public accountants
and securities lawyers acceptable to Maxim. KPMG Somekh Xxxxxxx and Xxxxxxxxx
Xxxxxxx, LLP are acceptable to Maxim.
Section 3.21 TRANSFER AGENT. For a period of five years from the
Effective Date, the Company shall retain a transfer agent ("Transfer Agent") for
the Common Stock acceptable to Maxim. American Stock Transfer & Trust Company is
acceptable to the Underwriters.
Section 3.22 SALE OF SHARES. Subject to the exceptions described in
Section 2.26 hereof, the Company agrees not to permit or cause a private or
public sale or private or public offering of any of its securities (in any
manner, including pursuant to Rule 144 under the Act) owned nominally or
beneficially by the Insiders for the time periods set forth in Section 2.26
following the Effective Date without obtaining the prior written consent of
Maxim.
Section 4. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Underwriters to purchase and pay for the Shares, as provided herein,
shall be subject to the continuing accuracy of the representations and
warranties of the Company as of the date hereof and as of each of the Closing
Date and the Option Closing Date, if any, to the accuracy of the statements of
officers of the Company made pursuant to the provisions hereof and to the
performance by the Company of its obligations hereunder and to the following
conditions:
Section 4.1 REGULATORY MATTERS.
Section 4.1.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The
Registration Statement has been declared effective on the date of this Agreement
and, at each of the Closing Date and the Option Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for such 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 Xxxxxxxx Xxxxxx, counsel to the Underwriters.
20
Section 4.1.2 NASD CLEARANCE. By the Effective Date, 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.
Section 4.1.3 NO BLUE SKY STOP ORDERS. No order suspending
the sale of the Shares in any jurisdiction designated by the Underwriters
pursuant to Section 3.3 hereof shall have been issued on or before either the
Closing Date or the Option Closing Date, and no proceedings for that purpose
shall have been instituted or shall be contemplated.
Section 4.2 COMPANY COUNSEL MATTERS.
Section 4.2.1 EFFECTIVE DATE OPINION OF COUNSEL. On the
Effective Date, the Underwriters shall have received the opinion of Xxxxxxxxx
Traurig, LLP, counsel to the Company, dated the Effective Date, addressed to the
Underwriters and in form and substance satisfactory to Xxxxxxxx Xxxxxx, counsel
to the Underwriters. Xxxxxxxxx Traurig, LLP may rely on the opinion of Xxxxxxx,
Xxxxxx & Xxxxx with respect to matters of Israeli law.
Section 4.2.2 CLOSING DATE AND OPTION CLOSING DATE OPINION OF
COUNSEL. On each of the Closing Date and the Option Closing Date, if any, the
Underwriters shall have received the opinion of Xxxxxxxxx Traurig, LLP, counsel
to the Company, dated the Closing Date or the Option Closing Date, as the case
may be, addressed to the Underwriters and in form and substance satisfactory to
Xxxxxxxx Xxxxxx, counsel to the Underwriters, confirming as of the Closing Date
and, if applicable, the Option Closing Date, the statements made by Xxxxxxxxx
Traurig, LLP in their opinion delivered on the Effective Date. Xxxxxxxxx
Xxxxxxx, LLP may rely on the opinion of Xxxxxxx, Xxxxxx & Xxxxx with respect to
matters of Israeli law.
Section 4.2.3 SECONDARY MARKET TRADING MEMORANDUM. On the
Effective Date, the Underwriters shall have received the Secondary Market
Trading Memorandum.
Section 4.2.4 RELIANCE. In rendering such opinion, such
counsel may rely (i) as to matters involving the application of laws other than
the laws of the United States and jurisdictions in which they are admitted, 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
reasonably satisfactory to the Underwriters' counsel) of other counsel
reasonably acceptable to the Underwriters' counsel, familiar with the applicable
laws, and (ii) as to matters of fact, to the extent they deem proper, on
certificates or other written statements of officers of departments of various
jurisdiction 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 the Underwriters' counsel if requested. The
opinion of counsel for the Company shall include a statement to the effect that
it may be relied upon by counsel for the Underwriters in its opinion delivered
to the Underwriters.
Section 4.3 COLD COMFORT LETTER. At the time this Agreement is
executed, and at each of the Closing Date and the Option Closing Date, if any,
you shall
21
have received a letter, addressed to the Underwriters and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to Xxxxxxxx
Xxxxxx, counsel for the Underwriters, from KPMG Somekh Xxxxxxx dated,
respectively, as of the date of this Agreement and as of the Closing Date and
the Option Closing Date, if any:
(i) confirming that they are independent accountants
with respect to the Company within the meaning of the Act and the applicable
Regulations;
(ii) stating that in their opinion the financial
statements and the financial statement schedules of the Company included in the
Registration Statement and Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act and the published
Regulations thereunder;
(iii) stating that, based on the performance of
procedures specified by the American Institute of Certified Public Accountants
for a review of the latest available unaudited interim financial statements of
the Company (as described in Statement on Auditing Standards ("SAS") No. 71 -
"Interim Financial Information"), with an indication of the date of the latest
available unaudited interim financial statements, a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the board of directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
that would lead them to believe that (a) the unaudited financial statements of
the Company included in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the Act and
the Regulations or any material modification should be made to the unaudited
interim financial statements included in the Registration Statement for them to
be in conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial statements of
the Company included in the Registration Statement, (b) at a date not later than
five days prior to the Effective Date, Closing Date or Option Closing Date, as
the case may be, there was any change in the capital stock or long-term debt of
the Company, or any decrease in the stockholders' equity of the Company as
compared with amounts shown in the March 31, 2004 balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any decrease, setting forth the amount
of such decrease, and (c) during the period from March 31, 2004 to a specified
date not later than five days prior to the Effective Date, Closing Date or
Option Closing Date, as the case may be, there was any decrease in revenues, net
earnings or net earnings per share of Common Stock or increase in net loss or
net loss per share of Common Stock, in each case as compared with the
corresponding period in the preceding year and as compared with the
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such decrease,
setting forth the amount of such decrease;
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case
22
to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, and work sheets,
of the Company 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
(v) statements as to such other matters incident to
the transaction contemplated hereby as you may reasonably request.
Section 4.4 OFFICERS' CERTIFICATES.
Section 4.4.1 OFFICERS' CERTIFICATE. At each of the Closing
Date and the Option Closing Date, if any, the Underwriters shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and the Secretary of the Company, dated the Closing Date or the Option Closing
Date, as the case may be, respectively, to the effect that the Company has
performed all covenants and complied with all conditions required by this
Agreement to be performed or complied with by the Company prior to and as of the
Closing Date, or the Option Closing Date, as the case may be, and that the
conditions set forth in Section 4.5 hereof have been satisfied as of such date
and that, as of Closing Date and the Option Closing Date, as the case may be,
the representations and warranties of the Company set forth in Section 2 hereof
are true and correct. In addition, the Underwriters will have received such
other and further certificates of officers of the Company as the Underwriters
may reasonably request.
Section 4.4.2 SECRETARY'S CERTIFICATE. At each of the Closing
Date and the Option Closing Date, if any, the Underwriters shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified, (iii)
all correspondence between the Company or its counsel and the Commission, (iv)
all correspondence between the Company or its counsel and Nasdaq concerning
listing of the Shares on Nasdaq and (vi) as to the incumbency of the officers of
the Company. The documents referred to in such certificate shall be attached to
such certificate.
Section 4.5 NO MATERIAL CHANGES. Prior to and on each of the
Closing Date and the Option Closing Date, if any, (i) there shall have been no
material adverse change or development involving a prospective material change
in the condition or prospects or the business activities, financial or
otherwise, of the Company from the latest dates as of which such condition is
set forth in the Registration Statement and Prospectus, (ii) there shall have
been no 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 which is materially
adverse to the Company, taken as a whole, (iii) the Company shall not be in
default under any provision of any instrument relating to any outstanding
indebtedness which default would have a material adverse effect on the Company,
(iv) no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set
23
forth in the Registration Statement and Prospectus, (v) no action suit or
proceeding, at law or in equity, shall have been pending or threatened against
the Company or affecting any of its property or business before or by any court
or federal or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect the
business, operations, prospects or financial condition or income of the Company,
except as set forth in the Registration Statement and Prospectus, (vi) no stop
order shall have been issued under the Act and no proceedings therefor shall
have been initiated or threatened by the Commission, and (vii) the Registration
Statement and the Prospectus and any amendments or supplements thereto contain
all material statements that are required to be stated therein in accordance
with the Act and the Regulations and conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto contains
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.
Section 4.6 DELIVERY OF AGREEMENTS. The Company has delivered to
the Underwriters an executed copy of the Underwriters' Purchase Option.
Section 4.7 OPINION OF COUNSEL FOR THE UNDERWRITERS. All
proceedings taken in connection with the authorization, issuance or sale of the
Shares as herein contemplated shall be reasonably satisfactory in form and
substance to the Underwriters and to Xxxxxxxx Xxxxxx, counsel to the
Underwriters, and the Underwriters shall have received from such counsel a
favorable opinion, dated the Closing Date and the Option Closing Date, if any,
with respect to such of these proceedings as the Underwriters may reasonably
require. On or prior to the Effective Date, the Closing Date and the Option
Closing Date, as the case may be, counsel for the Underwriters shall have been
furnished such documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Section 4.7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
Section 4.8 UNAUDITED FINANCIALS. The Company shall have furnished
to the Underwriters a copy of the latest available unaudited interim financial
statements for the period ended March 31, 2004 ("Unaudited Financials") of the
Company which have been read by KPMG Somekh Xxxxxxx, as stated in their letter
dated as of the Closing Date to be furnished pursuant to Section 4.3 hereof.
Section 5. INDEMNIFICATION.
Section 5.1 INDEMNIFICATION OF THE UNDERWRITERS.
Section 5.1.1 GENERAL. Subject to the conditions set forth
below, the Company agrees to indemnify and hold harmless each of the
Underwriters, their respective directors, officers, agents and employees and
each person, if any, who controls either Underwriter ("controlling person")
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against any and all loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all legal or other expenses reasonably
incurred in investigating, preparing or defending against any litigation,
24
commenced or threatened, whether arising out of any action between either of the
Underwriters and the Company or between an Underwriter and any third-party or
otherwise) to which they or any of them may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in (i) any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
each may be 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 Underwriters'
Purchase Option; or (iii) any application or other document or written
communication (in this Section 5 collectively called "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Shares under the securities laws thereof or
filed with the Commission, any state securities commission or agency, Nasdaq or
any securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to either Underwriter by or on behalf of such Underwriter expressly for
use in any Preliminary Prospectus, the Registration Statement or Prospectus, or
any amendment or supplement thereof, or in any application, as the case may be.
The Company agrees promptly to notify the Underwriters of the commencement of
any litigation or proceedings against the Company or any of its officers,
directors or controlling persons in connection with the issue and sale of the
Shares or in connection with the Registration Statement or Prospectus.
Section 5.1.2 PROCEDURE. If any action is brought against an
Underwriter or controlling person in respect of which indemnity may be sought
against the Company pursuant to Section 5.1.1, such Underwriter shall promptly
notify the Company in writing of the institution of such action and the Company
shall assume the defense of such action, including the employment and fees of
counsel (subject to the approval of such Underwriter) and payment of actual
expenses. Such Underwriter or controlling person 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 Underwriter or such controlling person
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with the defense of such action, or (ii) the
Company shall not have employed counsel to have charge of the defense of such
action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the Company (in which case the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and expenses of
not more than one additional firm of attorneys selected by the Underwriter or
Underwriters and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if either Underwriter
or controlling person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
25
Section 5.2 INDEMNIFICATION OF THE COMPANY. Each Underwriter,
severally and not jointly, agrees to indemnify and hold harmless the Company,
its directors, each of its officers who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of Section 15
of the Act, against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all legal or other expenses
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, whether arising out of any action between
the Underwriters and the Company or between the Company and any third-party or
otherwise) described in the foregoing indemnity from the Company to the several
Underwriters, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to the
transactions effected by the Underwriters in connection with this offering made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any application in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to such Underwriter by or on behalf of such Underwriter expressly for
use in such Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment or supplement thereto or in any such application. In case any
action shall be brought against the Company based on any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment or supplement thereto
or any application, and in respect of which indemnity may be sought against any
Underwriter, such Underwriter shall have the rights and duties given to the
Company, and the Company shall have the rights and duties given to several
Underwriters by the provisions of Section 5.1.2.
Section 5.3 CONTRIBUTION.
Section 5.3.1 CONTRIBUTION RIGHTS. In order to provide for
just and equitable contribution under the Act in any case in which (i) any
person entitled to indemnification under this Section 5 makes claim for
indemnification pursuant hereto 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 this Section 5 provides for indemnification in such case, or (ii)
contribution under the Act, the Exchange Act or otherwise may be required on the
part of any such person in circumstances for which indemnification is provided
under this Section 5, then, and in each such case, the Company and the
Underwriters shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement
incurred by the Company and the Underwriters, as incurred, in such proportions
that the Underwriters are responsible for that portion represented by the
percentage that the underwriting discount appearing on the cover page of the
Prospectus bears to the initial offering price appearing thereon and the Company
is responsible for the balance; provided, that, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 5.3, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Public Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay in respect of
such losses, liabilities, claims, damages and expenses. For purposes of this
Section, each director,
26
officer and employee of an Underwriter, and each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act, shall have the same
rights to contribution as such Underwriter.
Section 5.3.2 CONTRIBUTION PROCEDURE. Within fifteen days
after receipt by any party to this Agreement (or its representative) of notice
of the commencement of any action, suit or proceeding, such party will, if a
claim for contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability that it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding that was effected
by the party seeking contribution without the written consent of such
contributing party. The contribution provisions contained in this Section are
intended to supersede, to the extent permitted by law, any right to contribution
under the Act, the Exchange Act or otherwise available.
Section 6. DEFAULT BY AN UNDERWRITER. If either Underwriter shall default
in its obligations to purchase Shares hereunder, the non-defaulting Underwriter
may, in its discretion, arrange for itself or another party or parties to
purchase such Shares on the terms contained herein. In the event that within one
business day after such default the non-defaulting Underwriter does not arrange
for the purchase of the Shares as to which such default relates, this Agreement
will thereupon terminate automatically (but only with respect to the obligations
relating to the Option Shares if such default occurs after the Closing Date)
without liability on the part of the Company (except as provided in Sections
3.14 and 5.1 hereof) or the non-defaulting Underwriter, but nothing herein shall
relieve the defaulting Underwriter of its liability, if any, to the
non-defaulting Underwriter and to the Company for damages occasioned by its
default.
Section 7. ADDITIONAL COVENANTS.
Section 7.1 BOARD DESIGNEE. For a period of three years from the
Effective Date, the Company will appoint a designee of Maxim who is reasonably
acceptable to the Company as a member of the Board of Directors of the Company.
Alternatively, Maxim shall have the right to send a representative (who need not
be the same individual from meeting to meeting) to observe each meeting of the
Board of Directors. Such designee or representative, as the case may be, shall
receive no more or less compensation than is paid to other non-management
directors of the Company and shall be entitled to be reimbursed for all
reasonable out-of-pocket expenses incurred in attending such meetings, including
but not limited to food, lodging and transportation. The Company will obtain and
maintain a liability insurance policy affording coverage for the acts of its
officers and directors in an amount not less than $5,000,000 and will include
Maxim's designee as an insured under such policy. The Company agrees to give
Maxim written notice of each such meeting and to provide Maxim with an agenda
and
27
minutes of the meeting no later than it gives such notice and provides such
items to the other directors.
Section 7.2 [Intentionally Omitted].
Section 7.3 [Intentionally Omitted].
Section 7.4 PRESS RELEASES. The Company will not issue a press
release or engage in any other publicity until 25 days after the Effective Date
without the prior written consent of Maxim.
Section 7.5 SOLICITATION IN ISRAEL. The Underwriters shall not
solicit offers to purchase or sell Firm Shares in Israel without the prior
written consent of the Company, which shall not be unreasonably withheld.
Section 7.6 NO OWNERSHIP OF COMPANY SECURITIES BY UNDERWRITERS.
Except for the Underwriters' Purchase Option, neither of the Underwriters or any
of their respective affiliates own, beneficially own or have the right to
acquire any securities of the Company. No security holder of either of the
Underwriters or of either of their respective parent holding companies own,
beneficially own or have the right to acquire securities of the Company, except
for two holders of Series A preferred stock of the parent company of EBC, which
holders own up to an aggregate of 149,414 shares of Common Stock upon conversion
of the Bridge Notes and exercise of warrants issued by the Company in connection
with the issuance of the Bridge Notes.
Section 8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as
the context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriters and Company, including the indemnity agreements
contained in Section 5 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Underwriters,
the Company or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Shares to the several Underwriters
until the earlier of the expiration of any applicable statute of limitations and
the seventh anniversary of the later of the Closing Date or the Option Closing
Date, if any, at which time the representations, warranties and agreements shall
terminate and be of no further force and effect.
Section 9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
Section 9.1 EFFECTIVE DATE. This Agreement shall become effective
on the Effective Date at the time that the Registration Statement is declared
effective.
Section 9.2 TERMINATION. The Underwriters shall have the right to
terminate this Agreement at any time prior to any Closing Date, (i) if any
domestic or international event or act or occurrence has materially disrupted,
or in the Underwriters' opinion will in the immediate future materially disrupt,
general securities markets in the United States, or (ii) if trading on the New
York Stock Exchange, the American Stock Exchange or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for
28
securities shall have been fixed, or maximum ranges for prices for securities
shall have been required on the over-the-counter market by the NASD or by order
of the Commission or any other government authority having jurisdiction, or
(iii) in the event of a material outbreak or escalation of hostilities involving
the United States or the declaration by the United States of a national
emergency or war (including without limitation as a result of an act of
terrorism) if the effect of any such event specified in this clause (iii) in the
reasonable judgment of the Underwriters makes it impracticable or inadvisable to
proceed with the offering or the delivery of the Shares being delivered on the
Closing Date on the terms and in the manner contemplated in the final
prospectus, or (iv) if a banking moratorium has been declared by a New York
State or federal authority, or (v) if a moratorium on foreign exchange trading
has been declared which materially adversely impacts the United States
securities market, or (vi) if the Company shall have sustained a material loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in your opinion, make it inadvisable to proceed with the delivery
of the Shares, or (vii) if Xxxxxx Xxxxxxxxxxx shall no longer serve the Company
in his present capacity, or (viii) if the Company has breached any of its
representations, warranties or obligations hereunder, or (ix) if the
Underwriters shall have become aware after the date hereof of such a material
adverse change in the condition (financial or otherwise), business, or prospects
of the Company, or such adverse material change in general market conditions as
in the Underwriters' judgment would make it impracticable to proceed with the
offering, sale and/or delivery of the Shares or to enforce contracts made by the
Underwriters for the sale of the Shares.
Section 9.3 NOTICE. If the Underwriters elect to prevent this
Agreement from becoming effective or to terminate this Agreement as provided in
this Section 9, the Company shall be notified on the same day as such election
is made by the Underwriters by telephone or telecopy, confirmed by letter.
Section 9.4 EXPENSES. If this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms hereof, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.14 hereof.
Section 9.5 INDEMNIFICATION. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 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.
Section 10. MISCELLANEOUS.
Section 10.1 NOTICES. All communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telecopied and confirmed
If to the Underwriters:
Maxim Group LLC
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
29
EarlyBirdCapital, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
Copy to:
Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
Telecopier: (000) 000-0000
If to the Company:
GuruNet Corporation
Xxxxxxxxx Xxxxxxxxxx Xxxx
Xxxxxxxx 00
Xxxxxxxxx 00000 Xxxxxx
Attention: Xxxxxx Xxxxxxxxxxx
Telecopier: 000-0-0000000
Copy to:
Xxxxxxxxx Traurig, LLP
The MetLife Building
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
Section 10.2 HEADINGS. The headings contained herein are for the
sole purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions of this
Agreement.
Section 10.3 AMENDMENT. This Agreement may be amended only by a
written instrument executed by each of the parties hereto.
Section 10.4 ENTIRE AGREEMENT. This Agreement (together with the
other agreements and documents being delivered pursuant to or in connection with
this Agreement) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
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Section 10.5 BINDING EFFECT. This Agreement shall inure solely to
the benefit of and shall be binding upon, the Underwriters, the Company and the
controlling persons, directors and officers referred to in Section 5 hereof, and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained.
Section 10.6 GOVERNING LAW, JURISDICTION. This Agreement shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflicts of law. The Company hereby
agrees that any action, proceeding or claim against it arising out of or
relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York or the United States District Court for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to Xxxxxxxxx Traurig, LLP, 000 Xxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxx, Esq.
Such mailing shall be deemed personal service and shall be legal and binding
upon the Company in any action, proceeding or claim. The parties agree that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
Section 10.7 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which shall be deemed to be an original, but all
of which taken together shall constitute one and the same agreement, and shall
become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to each of the other parties hereto.
Section 10.8 WAIVER, ETC. The failure of any of the parties hereto
at any time to enforce any of the provisions of this Agreement shall not be
deemed or construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any provision hereof or the right of
any of the parties hereto thereafter to enforce each and every provision of this
Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of
the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, non-compliance or non-fulfillment.
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If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
GURUNET CORPORATION
By:___________________________________
Name: Xxxxxx Xxxxxxxxxxx
Title: Chairman and Chief Executive Officer
Accepted as of the date first
above written.
New York, New York
MAXIM GROUP LLC
By:___________________________
Name: Xxxxxxxx X. Xxxxxx
Title: Managing Director
EARLYBIRDCAPITAL, INC.
By:___________________________
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
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