EXHIBIT 1.1
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Bridgeline Software, Inc.
Underwriting Agreement
___________ __, 2007
Xxxxxx Xxxxxx & Co., LLC
As Representative of the several
Underwriters named in Schedule I hereto
Dear Sirs:
Bridgeline Software, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions contained herein, to sell to you
and the other underwriters named on Schedule I to this Agreement (the
"Underwriters") for whom you are acting as Representative (the
"Representative"), an aggregate of 3,000,000 shares of the Company's common
stock, $0.001 par value per share (the "Common Stock") (the "Firm Shares"). The
Firm Shares and the Option Shares (as defined below) are collectively called the
"Shares".
The Company has prepared and filed in conformity with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the published
rules and regulations thereunder (the "Rules") adopted by the Securities and
Exchange Commission (the "Commission"), a Registration Statement (as hereinafter
defined) on Form SB-2 (No. 333-139298), including a Preliminary Prospectus (as
hereinafter defined) relating to the Shares, and such amendments thereof as may
have been required to the date of this Underwriting Agreement (the "Agreement").
The Company has heretofore delivered copies of the Registration Statement
(including all amendments thereto) and of the related Preliminary Prospectus to
you. The term "Preliminary Prospectus" means any preliminary prospectus included
at any time as a part of the Registration Statement or filed with the Commission
by the Company pursuant to Rule 424(a) of the Rules. The term "Registration
Statement" as used in this Agreement means the initial registration statement
(including all exhibits, all financial schedules and all documents and
information deemed to be a part of the Registration Statement through
incorporation by reference or otherwise), as amended at the time and on the date
it becomes effective (the "Effective Date"), including the information (if any)
contained in the form of final Prospectus (as hereinafter defined) filed with
the Commission pursuant to Rule 424(b) of the Rules and deemed to be part
thereof at the time of effectiveness pursuant to Rule 430A of the Rules. If the
Company has filed an abbreviated registration statement to register additional
Shares (as hereinafter defined) pursuant to Rule 462(b) under the Rules (the
"462(b) Registration Statement"), then any reference herein to the Registration
Statement shall also be deemed to include such 462(b) Registration Statement.
The term "Prospectus" as used in this Agreement means the Prospectus in the form
included in the Registration Statement at the time of effectiveness or, if Rule
430A of the Regulations is relied on, the term Prospectus shall also include the
final Prospectus filed with the Commission pursuant to Rule 424(b) of the Rules.
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus (the
"Offering"), as soon after the Effective Time and the date of this Agreement as
the Representative deems advisable. The Company
hereby confirms that the Underwriters and dealers have been authorized to
distribute or cause to be distributed each Preliminary Prospectus and are
authorized to distribute the Prospectus (as from time to time amended or
supplemented if the Company furnishes amendments or supplements thereto to the
Underwriters).
1. Sale, Purchase, Delivery, and Payment for the Shares. On the basis of
the representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company agrees to issue and sell to each of the Underwriters,
and each of the Underwriters agrees, severally and not jointly, to purchase from
the Company, at a purchase price of $___ per Share (the "Initial Price"), the
number of Shares set forth opposite the name of such Underwriter under the
column "Number of Shares to be Purchased" on Schedule I to this Agreement,
subject to adjustment in accordance with Section 6 hereof.
(b) For the sole purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Shares, the Company hereby grants to
the Underwriters, severally and not jointly, an option to purchase up to an
additional 450,000 Shares from the Company ("Over-allotment Option"). Such
additional 450,000 Shares are hereinafter referred to as "Option Shares." The
purchase price to be paid for the Option Shares will be the same price per
Option Share as the price per Firm Share set forth in Section 1(a) hereof.
The Over-allotment Option granted pursuant to Section 1(b) hereof may be
exercised by the Representative as to all (at any time) or any part (from time
to time) of the Option Shares within forty-five (45) days after the Effective
Date. 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 by the Representative, which must be confirmed in writing by overnight
mail or facsimile transmission setting forth the number of Option Shares to be
purchased and the date and time for delivery of and payment for the Option
Shares (the "Option Closing Date"), which will not be later than five (5) full
business days nor earlier than two (2) full business days after the date of the
notice or such other time as shall be agreed upon by the Company and the
Representative, at the offices of the Representative or at such other place as
shall be agreed upon by the Company and the Representative. 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.
(c) Payment of the purchase price for, and delivery of the
certificates for, the Firm Shares shall be made at 10:00 A.M., Eastern time, on
_____, or such other date, not later than the fifth (5th) business day
thereafter, or at such earlier time as shall be agreed upon by the
Representative and the Company at the offices of the Representative or at such
other place as shall be agreed upon by the Representative 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 Representative's election by wire transfer in Federal (same day) funds or by
certified or bank cashier's check(s) in New York Clearing House funds, paid to
the order of the Company upon delivery to you of certificates (in form and
substance satisfactory
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to the Underwriters) representing the Firm Shares (or through the facilities of
the Depository Trust Company ("DTC")) for the account of the Underwriters. The
Firm Shares shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two (2) full
business days prior to the Closing Date. The Company will permit the
Representative to examine and package the Firm Shares for delivery at least one
(1) 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 Representative for all the Firm Shares.
In addition, in the event that any or all of the Option Shares are
purchased by the Underwriters, payment of the purchase price for, and delivery
of the certificates representing, the Option Shares shall be made on the Option
Closing Date at the Representative's election by wire transfer in Federal (same
day) funds or by certified or bank cashier's check(s) in New York Clearing House
funds, payable to the Company at the offices of the Representative or at such
other place as shall be agreed upon by the Representative and the Company upon
delivery to you of certificates representing such securities (or through the
facilities of DTC) for the account of the Underwriters. The certificates
representing the Option Shares to be delivered will be in such denominations and
registered in such names as the Representative request not less than two (2)
full business days prior to the Option Closing Date, and will be made available
to the Representative for inspection, checking and packaging at the aforesaid
office of the Company's transfer agent or correspondent not less than one (1)
full business day prior to the Option Closing Date.
(d) On the Closing Date, the Company shall sell and issue to the
Representative (and/or its designees) for a total purchase price of $ _____,
options entitling the Representative or its assigns to purchase up to 150,000
Shares at a price of $_____ per Share, which is equal to 150% of the public
offering price of the Shares (the "Representative's Warrants"). The terms of the
Representative's Warrants, including exercise period, anti-dilution provisions,
exercise price, exercise provisions, transferability, and registration rights,
shall be in the form filed as an exhibit to the Registration Statement of the
Company.
The Representative's Warrants shall be exercisable, in whole or in part,
commencing one hundred eighty (180) days from the Effective Date and expiring on
the five-year anniversary of the Effective Date. The Representative's Warrants
may not be may not be sold, transferred, assigned, pledged or hypothecated until
180 days after the Effective Date, except that they may be transferred, in whole
or in part, (i) to one or more officers or partners of the Representative (or
the officers or partners of any such partner); (ii) to a member of the
underwriting syndicate and/or its officers or partners; or (iii) by reason of
reorganization.
Payment of the purchase price of, and delivery of the certificates for, the
Representative's Warrants shall be made on the Closing Date. The Company shall
deliver to the Representative, upon payment therefor, certificates for the
Representative's Warrants in the name or names and in such authorized
denominations as the Representative may request. The Representative's Warrants
and the Common Stock underlying the Representative's Warrants are referred to
herein as the "Representative's Securities."
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2. Representations and Warranties of the Company. For your own independent
business reasons, you have required the Company to make the following
representations and warranties as a condition to agreeing to execute this
Agreement. You understand, and anyone reviewing this Agreement should
understand, that disclosure regarding the Company and its business is contained
in the Prospectus or Registration Statement, and that no representation,
warranty, covenant or agreement contained in this Agreement is intended or
construed to modify the disclosure about the Company and its business contained
in the Prospectus or the Registration Statement. The Company represents and
warrants to each Underwriter, as of the date hereof, as of the Closing Date and
as of each Option Closing Date (if any), as follows:
(a) At the time the Registration Statement became effective and at all
times subsequent thereto up to the Closing Date and the Option Closing Date, if
any, the Registration Statement and the Prospectus will contain all material
statements that are required to be stated therein in accordance with the
Securities Act and the Rules, and will in all material respects conform to the
requirements of the Securities Act and the Rules; neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, on such
dates, will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. When any Preliminary Prospectus was first filed with the Commission
(whether filed as part of the Registration Statement for the registration of the
Shares or any amendment thereto or pursuant to Rule 424(a) of the Rules) 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 or will comply in all material respects with the
applicable provisions of the Securities Act and the Rules and did not and will
not contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, none of the representations and
warranties made in this Section 2(a) shall apply to statements made or
statements omitted from the Registration Statement, Prospectus or any
Preliminary Prospectus (or any amendments or supplements thereto) in reliance
upon and in conformity with written information furnished to the Company with
respect to the Underwriters by the Representative expressly for use in the
Registration Statement, Prospectus or any Preliminary Prospectus (or any
amendment thereof or supplement thereto).
(b) The Company has filed with the Commission a Form 8-A registration
statement providing for the registration of the Shares under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which registration
statement complies in all material respects with the Exchange Act. The
registration of the Shares under the Exchange Act has been declared effective by
the Commission on the date hereof. Neither the Commission nor, to the best of
the Company's knowledge, any state regulatory authority has issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
(c) The agreements and documents described in the Registration
Statement and the Prospectus conform to the descriptions thereof contained
therein and there are no agreements or other documents required to be described
in the Registration Statement or the
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Prospectus or to be filed with the Commission as exhibits to the Registration
Statement that have not been so described or filed. With respect to each
agreement or other instrument (however characterized or described) to which the
Company is a party or by which its property or business is bound or affected and
(i) that is referred to in the Prospectus, or (ii) is material to the Company's
business, has been duly and validly executed by the Company, is in full force
and effect and is enforceable against the Company and, to the Company's
knowledge, the other parties thereto, in accordance with its terms, except (x)
as such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, (y) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (z) 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; and none of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach or default thereunder and, to the best
of the Company's knowledge, no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company's knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of 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 assets or businesses, including,
without limitation, those relating to environmental laws and regulations. The
statistical and related data included in the Registration Statement are based on
or derived from sources that the Company believes to be reliable and accurate.
(d) 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 business of the Company; (ii) there have been no
material transactions entered into by the Company, other than as contemplated
pursuant to this Agreement; and (iii) no member of the Company's senior
management has resigned from any position with the Company.
(e) Subsequent to 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 equity securities.
(f) UHY, LLP ("UHY"), whose report is filed with the Commission as
part of the Registration Statement, are independent accountants as required by
the Securities Act and the Rules, and such accountants, to the best of the
Company's knowledge, in the performance of their work for the Company, are not
in violation of the auditor independence requirements of the Xxxxxxxx-Xxxxx Act
of 2002.
(g) The financial statements, including the notes thereto and
supporting schedules included in the Registration Statement and Prospectus,
fairly present in all material respects the financial position, the results of
operations and the cash flows of the Company at the dates and for the periods to
which they apply; such financial statements have been prepared in
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conformity with generally accepted accounting principles, consistently applied
throughout the periods involved. The Registration Statement discloses all
material off-balance sheet transactions, arrangements, obligations (including
contingent obligations), and other relationships of the Company with
unconsolidated entities or other persons that could reasonably be expected to
have a material current or, to the Company's knowledge, a material future effect
on the Company's financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or significant
components of revenues or expenses. The summary financial data included in the
Registration Statement and Prospectus present fairly the information shown
therein as at the respective dates and for the respective periods specified and
have been presented on a basis consistent with the consolidated financial
statements set forth in the Registration Statement and the Prospectus and other
financial information.
(h) The Company had at the date or dates indicated in the Prospectus
the duly authorized, issued and outstanding capitalization as set forth in the
Registration Statement and the Prospectus. Based on the assumptions 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, or contemplated by, the Registration Statement and the Prospectus, on
the Effective Date and on the Closing Date, there will be no options, warrants,
or other rights to purchase or otherwise acquire any authorized but unissued
shares of Common Stock of the Company 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.
(i) All issued and outstanding securities of the Company have been
duly authorized and validly issued and are fully paid and non-assessable; except
as described in or expressly contemplated by the Registration Statement, there
are no outstanding rights (including, without limitation, pre-emptive rights),
warrants or options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock or other equity interest in the Company, or any
contract, commitment, agreement, understanding or arrangement of any kind
relating to the issuance of any capital stock of the Company, any such
convertible or exchangeable securities or any such rights, warrants or options.
The authorized Common Stock conforms in all material respects to all statements
relating thereto contained in the Registration Statement and the Prospectus. The
offers and sales of the outstanding Common Stock were at all relevant times
either registered under the Securities Act and the applicable state securities
or Blue Sky laws or, based in part on the representations and warranties of the
purchasers of such shares of Common Stock, exempt from such registration
requirements.
(j) 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.
The Shares conform in all material respects to all statements with respect
thereto contained in the Registration Statement.
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(k) Except as set forth in the Prospectus, no holders of any
securities of the Company or any 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 Securities Act
or to include any such securities in a registration statement to be filed by the
Company.
(l) Each of this Agreement and the Representative's Securities has
been duly and validly authorized by the Company and constitutes (or will
constitute when issued) the valid and binding agreement of the Company,
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.
(m) The execution, delivery, and performance by the Company of this
Agreement and the Representative's Securities, 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 agreement or instrument to which the Company is a party; (ii)
result in any violation of the provisions of the Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") or the Bylaws
of the Company, each as amended to date; or (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 business.
(n) Except as would not have reasonably be expected to have a material
adverse effect on the Company, the Company is not in default 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 is bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of the Certificate of Incorporation or Bylaws. Except
as would not have reasonably be expected to have a material adverse effect on
the Company, the Company is not 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.
(o) Except as disclosed in the Prospectus, the Company has all
requisite corporate power and authority and has all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies that it needs as of the date hereof
to conduct its business as described in the Prospectus.
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(p) 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, authorization or order of, and no filing with,
any court, government agency or other body is required for the valid issuance,
sale and delivery, of the Shares and the Representative's Warrants and the
consummation of the transactions and agreements contemplated by this Agreement,
and the Prospectus, except with respect to applicable federal and state
securities laws and the rules of the National Association of Securities Dealers,
Inc. (the "NASD") and the Nasdaq National Market.
(q) To the best of the Company's knowledge, all information contained
in the questionnaires ("Questionnaires") completed by each of the Company's
officers, directors, and 5% or greater stockholders ("Initial Stockholders") and
provided to the Underwriters is true and correct in all material respects, and
the Company has not become aware of any information which would cause the
information disclosed in the Questionnaires completed by each Initial
Stockholder to become inaccurate and incorrect in all material respects.
(r) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or involving the
Company which is required to be described in the Registration Statement or the
Prospectus and which is not described therein or which, if determined adversely
to the Company, would reasonably be expected to have a material adverse effect
on the Company or would prevent or adversely affect the ability of the Company
to perform its obligations under this Agreement; and to the best of the
Company's knowledge, no such action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding is threatened against the
Company.
(s) The Company has been duly organized and is validly existing as a
corporation and is in good standing under the laws of its state of
incorporation, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the Company.
(t) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or Prospectus or any part thereof.
(u) Except as described in the Prospectus, there are no claims,
payments, arrangements, agreements or understandings relating to the payment of
a finder's, consulting or origination fee by the Company with respect to the
sale of the Shares hereunder or any other arrangements, agreements or
understandings of the Company or, to the best of the Company's knowledge, any
Initial Stockholder that may affect the Underwriters' compensation, as
determined by the NASD.
(v) The Company has not made any direct or indirect payments (in cash,
securities or otherwise) (i) to any person, as a finder's fee, consulting fee or
otherwise, in consideration of such person raising capital for the Company or
introducing to the Company persons who raised or provided capital to the
Company; (ii) to any NASD member; or (iii) to any person or entity that has any
direct or indirect affiliation or association with any NASD member,
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within the twelve (12) months prior to the date on which the Registration
Statement was filed with the Commission or thereafter, other than as disclosed
in the Prospectus.
(w) Except for the repayment of indebtedness as disclosed in the
Registration Statement, the Company will not pay any of the net proceeds of the
Offering to any participating NASD member or its affiliates.
(x) Based on the Questionnaires, and except as set forth in the
Prospectus, no officer, director or any beneficial owner of the Company's
unregistered securities has any direct or indirect affiliation or association
with any NASD member. The Company will advise the Representative and its counsel
if it learns that any officer, director, or owner of at least 5% of the
Company's outstanding Common Shares is or becomes an affiliate or associated
person of an NASD member participating in the Offering.
(y) Neither the Company nor, to the Company's knowledge, any of the
Initial Stockholders 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.
(z) To the best of the Company's knowledge, no employee, officer, or
director of the Company is subject to any non-competition agreement or
non-solicitation agreement with any employer or prior employer that could
materially adversely affect his ability to be an employee, officer and/or
director of the Company.
(aa) The Company does not own an interest in any corporation,
partnership, limited liability company, joint venture, trust, or other business
entity which is required to be described in the Registration Statement or the
Prospectus and which is not described therein.
(bb) 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.
(cc) Except as may have been otherwise agreed in writing by the
Representative, the Company has obtained the agreement (the "Lock-up
Agreements") from all persons who are on the date of such agreements officers,
directors and holders of any outstanding
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securities of the Company that he will not, without the prior written consent of
the Representative, during the twelve (12) month period (or six (6) month period
in the case of the holders of certain warrants) after the date of the
Prospectus, offer, sell, contract to sell, make short sales of, loan, grant any
option or contract to purchase, or otherwise dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, whether these shares or any such securities are
then owned by the person or are thereafter acquired, directly from the Company;
provided, however, that such persons may sell, convey or transfer all or any
portion of such securities to the Corporation.
(dd) Except as would not have reasonably be expected to have a
material adverse effect on the Company, (i) The Company is in compliance in all
material respects with all rules, laws and regulations relating to the use,
treatment, storage and disposal of toxic substances and protection of health or
the environment ("Environmental Laws") which are applicable to its business;
(ii) the Company has not received any notice from any governmental authority or
third party of an asserted claim under Environmental Laws; (iii) the Company has
received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and is in compliance with
all terms and conditions of any such permit, license or approval; (iv) to the
Company's knowledge, no facts currently exist that will require the Company to
make future material capital expenditures to comply with Environmental Laws; and
(v) to the Company's knowledge, no property which is or has been owned, leased
or occupied by the Company has been designated as a Superfund site pursuant to
the Comprehensive Environmental Response, Compensation of Liability Act of 1980,
as amended (42 U.S.C. Section 9601, et. seq.) ("CERCLA") or otherwise designated
as a contaminated site under applicable state or local law. To the Company's
knowledge, the Company has not been named as a "potentially responsible party"
under CERCLA.
(ee) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of proceeds thereof as described in the
Prospectus, will not be required to register as an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(ff) At the time of filing of the Registration Statement and at the
date hereof, the Company was not and is not an "ineligible issuer," as defined
in Rule 405 under the Securities Act.
(gg) As of ______ A.M. on the date hereof (the "Applicable Time"), the
Issuer Free Writing Prospectus(es) (as listed on Schedule IV to this Agreement)
and the Preliminary Prospectus, considered together (collectively, the "General
Disclosure Package"), did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The preceding sentence does not apply to statements in or omissions
from the Preliminary Prospectus or any Issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Company by the
Representative on behalf of the several Underwriters specifically for use
therein. As used in this paragraph and elsewhere in this Agreement, "Issuer Free
Writing Prospectus" means any "issuer free writing prospectus" as defined in
Rule 433, relating to the Shares, that (A) is required to be filed with the
Commission by the Company, (B) is a "road show that is a written communication"
within the meaning of
10
Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or
(C) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a
description of the Shares or of the offering of the Shares pursuant to this
Agreement.
(hh) Each Issuer Free Writing Prospectus listed on Schedule IV to this
Agreement, as of its issue date and at all subsequent times through each Closing
Date, did not, does not and will not include any information that conflicted,
conflicts or will conflict with the information contained in the Registration
Statement. If at any time following issuance of an Issuer Free Writing
Prospectus there occurred or occurs an event or development as a result of which
such Issuer Free Writing Prospectus included or would include an untrue
statement of a material fact or omitted or would omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances, not misleading, the Company has notified or will notify promptly
the Representative so that any use of such Issuer Free Writing Prospectus may
cease until it is amended or supplemented. The foregoing two sentences do not
apply to statements in or omissions from any Issuer Free Writing Prospectus
based upon and in conformity with written information furnished to the Company
by the Representative on behalf of the several Underwriters specifically for use
therein.
(ii) Unless the Company obtains the prior consent of the
Representative, it has not made and will not make any offer relating to the
Shares that would constitute an "issuer free writing prospectus" as defined in
Rule 433, or that would otherwise constitute a "free writing prospectus" as
defined in Rule 405, required to be filed with the Commission. The Company has
complied and will comply with the requirements of Rule 433 applicable to any
Issuer Free Writing Prospectus, including timely filing with the Commission
where required, legending and recordkeeping. The Company has satisfied and will
satisfy the conditions of Rule 433 to avoid a requirement to file with the
Commission any electronic road show.
(jj) Except as disclosed in the Prospectus, the Company does not,
directly or indirectly, including through any subsidiary, have any outstanding
personal loans or other credit extended to or for any director or executive
officer.
(kk) The operations of the Company are and have been conducted at all
times in material compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, the USA Patriot Act, the money laundering statutes of all
jurisdictions to which the Company is subject, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the "Money
Laundering Laws") and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
with respect to the Money Laundering Laws is pending, or to the knowledge of the
Company, threatened.
(ll) Neither the Company nor, to the knowledge of the Company, any
director, officer, agent, employee or affiliate of the Company is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department ("OFAC"); and the Company will not
directly or indirectly use the proceeds of the Offering, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint venture
11
partner or other person or entity, for the purpose of financing the activities
of any person currently subject to any U.S. sanctions administered by OFAC.
(mm) Except as described in the Prospectus, the Company has not sold
or issued any securities during the six-month period preceding the date of the
Prospectus, including any sales pursuant to Rule 144A under, or Regulations D or
S of, the Securities Act.
(nn) The Company has fulfilled its obligations, if any, under the
minimum funding standards of Section 302 of the U.S. Employee Retirement Income
Security Act of 1974 ("ERISA") and the regulations and published interpretations
thereunder with respect to each "plan" as defined in Section 3(3) of ERISA and
such regulations and published interpretations in which its employees are
eligible to participate and each such plan is in compliance in all material
respects with the presently applicable provisions of ERISA and such regulations
and published interpretations. No "Reportable Event" (as defined in ERISA) has
occurred with respect to any "Pension Plan" (as defined in ERISA) for which the
Company could have any material liability.
(oo) The Company has not incurred any liability for a fee, commission,
or other compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement other than as
contemplated hereby.
Each of the Company, its directors and officers has not distributed and
will not distribute prior to the later of (i) the Closing Date or the Option
Shares Closing Date, if any, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any Preliminary Prospectus, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Securities Act.
3. Covenants of the Company. The Company covenants and agrees as follows:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and any
amendments thereto, to become effective as promptly as possible. The Company
shall prepare the Prospectus in a form approved by the Representative and file
such Prospectus pursuant to Rule 424(b) under the Securities Act no later than
the Commission's close of business on the second (2nd) business day following
the execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by the Regulations.
(b) The Company shall promptly advise the Representative in writing
(i) when any post-effective amendment to the Registration Statement shall have
become effective; (ii) of any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional information;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the institution or
threatening of any proceeding for that purchase; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Shares for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and (v) of the happening of any event during
the period described in Section 3(c) 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
12
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. The Company shall not
file any amendment of the Registration Statement or supplement to the Prospectus
or any document incorporated by reference in the Registration Statement unless
the Company has furnished the Representative a copy for review prior to filing
and shall not file any such proposed amendment or supplement to which the
Representative reasonably and timely objects. The Company shall use its best
efforts to prevent the issuance of any such stop order and, if issued, to obtain
as soon as possible the withdrawal thereof.
(c) During the time when a Prospectus is required to be delivered
under the Securities Act, the Company will use all reasonable efforts to comply
with all requirements imposed upon it by the Securities Act, the Rules 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 Shares in accordance with the provisions hereof and the Prospectus. If at
any time when a Prospectus relating to the Shares is required to be delivered
under the Securities Act, or the Exchange 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 Securities Act,
the Company will notify the Representative promptly and prepare and file with
the Commission, subject to Section 3(b) hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Securities Act.
(d) Until the earlier of (i) five (5) years from the Effective Date or
(ii) such earlier time when the Common Stock is no longer listed or traded on
Nasdaq, a national securities exchange or other over-the-counter market, the
Company will use its best efforts to maintain the registration of the Common
Stock under the provisions of the Exchange Act.
(e) The Company will endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Shares for offering and sale under the securities laws
of such jurisdictions as the Representative may reasonably designate within the
United States, 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 Representative agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may be required by the
laws of such jurisdiction.
(f) The Company will deliver to each of the several Underwriters,
without charge, from time to time during the period when the Prospectus is
required to be delivered under the Securities Act or the Exchange Act, such
number of copies of each Preliminary Prospectus and the Prospectus as such
Underwriters may reasonably request and, as soon as the Registration Statement
or any amendment or supplement thereto becomes effective, deliver to you two
original executed Registration Statements, including exhibits, and all
post-effective
13
amendments thereto and copies of all exhibits filed therewith or incorporated
therein by reference and all original executed consents of certified experts.
(g) The Company will apply to be included in Standard & Poor's Daily
News and Corporation Records Corporate Descriptions for a period of five years
from the Effective Date. The Company shall also take such other action as may be
reasonably requested by the Representative to obtain a secondary market trading
exemption in such other states as may be requested by the Representative.
(h) For a period of five (5) years following the Effective Date or
until such earlier time at which the Company is liquidated, the Company shall
retain a transfer agent reasonably acceptable to the Representative ("Transfer
Agent") and will furnish to the Representative at the Company's sole cost and
expense such transfer sheets of the Company's securities as the Representative
may request, including the daily and monthly consolidated transfer sheets of the
Transfer Agent and DTC.
(i) During such time, if at all, as the Shares are quoted on the OTC
Bulletin Board (or any successor trading market) or the Pink Sheets, LLC (or
similar publisher of quotations) and no other automated quotation system, the
Company shall provide to the Representative, at its expense, such reports
published by the NASD or the Pink Sheets, LLC relating to price trading of the
Shares as the Representative shall reasonably request.
(j) The Company hereby agrees to pay on each of the Closing Date and
the Option Closing Date, if any, to the extent not paid at the Closing Date, all
expenses incident to the performance of the obligations of the Company under
this Agreement, including, without limitation, the following: (i) the
preparation, printing, filing and mailing (including the payment of postage with
respect to such mailing) of the Registration Statement and exhibits thereto, the
Preliminary and Final 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 and the Representative's Securities,
including any transfer or other taxes payable thereon; (iii) the qualification
of the Shares under state or foreign securities or Blue Sky laws, including the
costs of printing and mailing the Preliminary and Final Blue Sky Memoranda and
all amendments and supplements thereto; and the fees and disbursements of its
counsel retained for such purpose, provided, however, the Company shall not be
responsible for the Representative's Blue Sky laws related expenses (including
legal counsel fees and expenses) in excess of $25,000 or the Representative's
non-Blue Sky laws related expenses (including legal counsel fees and expenses)
in excess of $100,000, both in connection with the Offering, without the
Company's prior approval; (iv) filing fees, costs and expenses 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 Representative not to exceed $10,000 in the
aggregate; (vi) fees and disbursements of the Transfer Agent; (vii) all expenses
incurred in connection with any road shows and any "due diligence" meetings
arranged by the Representative, including a videotape or PowerPoint
presentation; (viii) the preparation, binding and delivery of up to four sets of
transaction closing books, in form and style reasonably satisfactory to the
Representative and transaction lucite cubes or similar commemorative items in a
style and quantity as reasonably
14
requested by the Representative; and (ix) all other costs and expenses incident
to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section 3(j) in an aggregate amount not to
exceed $50,000. Upon a written notice given to the Company at least two (2) days
prior to such deduction, the Representative 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 herein to be paid by the Company to the
Representative and others. If the Offering contemplated by this Agreement is not
consummated for any reason whatsoever for reasons not attributable to the
Underwriters, then the Company shall reimburse the Underwriters in full for
their out of pocket expenses, including, without limitation, its legal fees and
disbursements and "road show" and due diligence expenses. The Representative
shall retain such part of the non-accountable expense allowance (described below
in Section 3(k) previously paid as shall equal its actual out-of-pocket expenses
and refund the balance. 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.
(k) The Company further agrees that, in addition to the expenses
payable by it pursuant to Section 3(j), on the Closing Date it will pay to the
Representative a non-accountable expense allowance equal to two percent (2%) of
the gross proceeds received by the Company from the Offering (less any amounts
previously paid), including any proceeds derived from the sale of the
Over-allotment Option. The Representative acknowledges the prior receipt of a
$25,000 expense retainer, which amount shall be applied against the amount due
to the Representative under this Section 3(k).
(l) 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.
(m) The Company will make generally available to its security holders
as soon as practicable, but in any event not later than sixteen (16) months
after the effective date of the Registration Statement, an earnings statement
(which need not be certified by independent public or independent certified
public accountants unless required by the Securities Act or the Rules, but which
shall satisfy the provisions of Rule 158(a) under Section 11(a) of the
Securities Act) covering a period of at least 12 consecutive months beginning
after the Effective Date.
(n) Neither the Company nor, to its knowledge, any of its employees,
directors or stockholders (without the consent of the Representative) 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 manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares.
(o) The Company will maintain a system of internal accounting controls
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
15
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(p) For a period of three (3) years from the Effective Date, the
Company shall retain UHY or other independent public accountants reasonably
acceptable to the Representative.
(q) The Company shall immediately advise the Representative if it
becomes aware that any 5% or greater stockholder of the Company becomes an
affiliate or associated person of an NASD member participating in the
distribution of the Shares.
(r) All corporate proceedings and other legal matters necessary to
carry out the provisions of this Agreement and the transactions contemplated
hereby shall have been done to the reasonable satisfaction of counsel for the
Underwriters.
(s) Intentionally deleted.
(t) The Company will reserve and keep available the maximum number of
its authorized but unissued shares of Common Stock that are issuable upon
exercise of the Representative's Warrants outstanding from time to time.
(u) The Company shall not take any action or omit to take any action
that would cause the Company to be in breach or violation of its Certificate of
Incorporation or Bylaws.
(v) The Company agrees that it will use its best efforts to prevent
the Company from becoming subject to Rule 419 under the Securities Act,
including, without limitation, to using its best efforts to prevent any of the
Company's outstanding securities from being deemed to be a "xxxxx stock," as
defined in Rule 3a5l-1 under the Exchange Act, during such period.
4. Conditions of Underwriters' Obligations. The obligations of the several
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 the Company made
pursuant to the provisions hereof and to the performance by the Company of its
obligations hereunder and to the following conditions:
(a) 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 counsel to the Underwriters.
(b) By the Effective Date, the Representative 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.
16
(c) No order suspending the sale of the Shares in any jurisdiction
designated by you pursuant to Section 3(e) 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, to the best of the Company's
knowledge, shall be contemplated.
(d) On the Effective Date and the Option Closing Date, if any, the
Representative shall have received the favorable opinion of Xxxxx, Xxxxxx-Xxxxx
& Xxxxxxxxx, P.C., counsel to the Company, dated the Effective Date, addressed
to the Representative and in previously agreed upon form and substance
reasonably satisfactory to counsel to the Underwriters.
(e) At the time this Agreement is executed, and at each of the Closing
Date and the Option Closing Date, if any, you shall have received a letter,
addressed to the Representative 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 counsel to the Underwriters
from UHY 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 Securities Act and the applicable
Regulations and that they have not, during the periods covered by the financial
statements included in the Prospectus, provided to the Company any non-audit
services, as such term is used in Section 10A(g) of the Exchange Act;
(ii) Stating that in their opinion the financial statements 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
Securities Act and the published Regulations thereunder;
(iii) Stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of 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
which 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
Securities Act and the Regulations or are not fairly presented 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 ___________, 2006, 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 __________, 2006, to a specified date
17
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, in each case as compared
with the corresponding period in the immediately preceding year and as compared
with the corresponding period in the immediately 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) Setting forth, at a date not later than five days prior to
the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) 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 to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately preceding
five year period brought to the attention of the Company's management any
reportable condition related to internal structure, design or operation, as
defined in the Statement on Auditing Standards No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit," in the Company's internal
controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
(f) At each of the Effective Date, the Closing Date and the Option
Closing Date, if any, the Representative shall have received a certificate of
the Company signed by the President and the Secretary or Assistant Secretary of
the Company, dated the Effective Date, the Closing Date or the Option Closing
Date, as the case may be, respectively, certifying on behalf of the Company (and
not individually) that (i) the Company has performed all covenants and
agreements and complied with all conditions required by this Agreement to be
performed or complied with by the Company prior to and as of the Effective Date,
the Closing Date, or the Option Closing Date, as the case may be; (ii) the
conditions set forth in Section 4(g) hereof have been satisfied as of such date;
(iii) as of Effective Date, the 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; (iv) they have carefully examined the
Registration Statement and the Prospectus and, in their opinion, (A) as of the
Effective Date, the Registration Statement and Prospectus did not include any
untrue statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and (B)
since the Effective Date no event has occurred which should have been set forth
in a supplement or otherwise required an amendment to the Registration Statement
or the Prospectus; and (iv) no stop order suspending
18
the effectiveness of the Registration Statement has been issued and, to their
knowledge, no proceedings for that purpose have been instituted or are pending
under the Securities Act. In addition, the Representative will have received
such other and further certificates of officers of the Company as the
Representative may reasonably request.
(g) At each of the Closing Date and the Option Closing Date, if any,
the Representative shall have received a certificate of the Company signed by
the Secretary or Assistant Secretary of the Company, dated the Closing Date or
the Option Date, as the case may be, respectively, certifying on behalf of the
Company (and not individually) (i) that the copies of the Bylaws and Certificate
of Incorporation of the Company attached thereto are true and complete, have not
been modified and are in full force and effect; (ii) that the resolutions
relating to the Offering are in full force and effect and have not been
modified; (iii) all correspondence between the Company or its counsel and the
Commission; and (iv) as to the incumbency of the officers of the Company. The
documents referred to in such certificate shall be attached to such certificate.
(h) 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 adverse change in the condition 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) no action suit or proceeding, at law or in equity, shall have
been pending or threatened against the Company 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 or financial condition or income of the Company, except as set forth
in the Registration Statement and Prospectus; (iii) no stop order shall have
been issued under the Securities Act and no proceedings therefor shall have been
initiated or threatened by the Commission; and (iv) the Registration Statement
and the Prospectus and any amendments or supplements thereto shall contain all
material statements which are required to be stated therein in accordance with
the Securities Act and the Regulations and shall conform in all material
respects to the requirements of the Securities Act and the Regulations, and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto shall contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(i) On the Closing Date, the Company shall have delivered to the
Representative executed copies of the Representative's Warrants.
(j) 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 you and to counsel to the Underwriters.
(k) The Company shall have delivered to the Representative the Lock-up
Agreements referred to in Section 2(dd).
(l) The Company shall have received notice that the Shares are
eligible to be listed on the Nasdaq Capital Market as of the Effective Date.
19
5. Indemnification.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each of the Underwriters, and each of their
respective directors, officers and employees and each person, if any, who
controls any such Underwriter ("controlling person") within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, against
any and all loss, liability, claim, damage and expense whatsoever (including,
without limitation, any and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, whether arising out of any action between
any of the Underwriters and the Company or between any of the Underwriters and
any third party or otherwise) to which they or any of them may become subject
under the Securities 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); or (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 Representative's Warrants; 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 conformity with written information furnished to the
Company with respect to an 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, as the case may be. With
respect to any untrue statement or omission or alleged untrue statement or
omission made in the Preliminary Prospectus, the indemnity agreement contained
in this paragraph shall not inure to the benefit of any Underwriter to the
extent that any loss, liability, claim, damage or expense of such Underwriter
results from the fact that a copy of the Prospectus was not given or sent to the
person asserting any such loss, liability, claim or damage at or prior to the
written confirmation of sale of the Shares to such person as required by the
Securities Act and the Regulations, and if the untrue statement or omission has
been corrected in the Prospectus, unless such failure to deliver the Prospectus
was a result of non-compliance by the Company with its obligations under Section
3(f) hereof. The Company agrees promptly to notify the Representative 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.
(b) If any action is brought against an Underwriter or a controlling
person in respect of which indemnity may be sought against the Company pursuant
to Section 5(a), 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
reasonable 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 controlling person unless (i) the
employment of such counsel at the expense of the Company shall have been
authorized in writing by the Company in connection with the defense of such
action; (ii) the Company shall not have employed counsel to have charge of the
20
defense of such action; or (iii) such indemnified party or parties shall have
been advised by its or their counsel that there may be one or more material
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 reasonable fees and expenses of not more
than one additional firm of attorneys selected by the Underwriter and/or
controlling person shall be borne by the Company. Notwithstanding anything to
the contrary contained herein, if the 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 on behalf of the Company of such
action, which approval shall not be unreasonably withheld.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, its directors, officers and employees and agents
who control the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act against any and all loss, liability, claim,
damage and expense 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 made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto, in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to such Underwriter by or on
behalf of the Underwriter expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto. In
case any action shall be brought against the Company or any other person so
indemnified based on any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereto, 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 and each other person so
indemnified shall have the rights and duties given to the several Underwriters,
by the provisions of Section 5(b).
(d) In order to provide for just and equitable contribution under the
Securities 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 Securities 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 Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Notwithstanding the provisions
of this Section 5(d), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the
21
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 5(d), each director, officer, and employee of an
Underwriter or the Company, as applicable, and each person, if any, who controls
an Underwriter or the Company, as applicable, within the meaning of Section 15
of the Securities Act shall have the same rights to contribution as the
Underwriters or the Company, as applicable.
(e) Within fifteen (15) 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 which 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 effected by such party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 5(e) are intended to
supersede, to the extent permitted by law, any right to contribution under the
Securities Act, the Exchange Act or otherwise available. The Underwriters'
obligations to contribute pursuant to this Section 5(e) are several and not
joint.
6. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or their
obligations to purchase the Firm Shares or the Option Shares, if the
Over-allotment Option is exercised, hereunder, and if the number of the Firm
Shares or Option Shares with respect to which such default relates does not
exceed in the aggregate ten percent (10%) of the number of Firm Shares or Option
Shares that all Underwriters have agreed to purchase hereunder, then such Firm
Shares or Option Shares to which the default relates shall be purchased by the
non-defaulting Underwriters in proportion to their respective commitments
hereunder.
(b) In the event that the default addressed in Section 6(a) above
relates to more than ten percent (10%) of the Firm Shares or Option Shares, you
may in your discretion arrange for yourself or for another party or parties to
purchase such Firm Shares or Option Shares to which such default relates on the
terms contained herein. If within one business day after such default relating
to more than 10% of the Firm Shares or Option Shares you do not arrange for the
purchase of such Firm Shares or Option Shares, then the Company shall be
entitled to a further period of one business day within which to procure another
party or parties satisfactory to you to purchase said Firm Shares or Option
Shares on such terms. In the event that neither you nor the Company arranges for
the purchase of the Firm Shares or Option Shares to which a default relates as
provided in this Section 6, this Agreement may be terminated by you or the
Company without liability on the part of the Company (except as provided in
Section 5 hereof) or the several Underwriters (except as provided in Section 5
hereof); provided, however, that if such default occurs with respect to the
Option Shares, this Agreement will not terminate as
22
to the Firm Shares; and provided further that nothing herein shall relieve a
defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.
(c) In the event that the Firm Shares or Option Shares to which the
default relates are to be purchased by the non-defaulting Underwriters, or are
to be purchased by another party or parties as aforesaid, you or the Company
shall have the right to postpone the Closing Date or Option Closing Date for a
reasonable period, but not in any event exceeding five business days, in order
to effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment to the Registration Statement or
the Prospectus that in the opinion of counsel for the Underwriters may thereby
be made necessary. The term "Underwriter" as used in this Agreement shall
include any party substituted under this Section 6 with like effect as if it had
originally been a party to this Agreement with respect to such Shares.
7. 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 any Underwriter,
the Company or any controlling person, and shall survive 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.
8. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective on the Effective Date at the
time the Registration Statement is declared effective by the Commission.
(b) You 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 or will in your opinion in the immediate future materially
disrupt the general securities markets in the United States; (ii) if trading on
the New York Stock Exchange, the American Stock Exchange, the Boston Stock
Exchange or The Nasdaq Stock Market (or successor trading market) or the
over-the-counter market shall have been suspended by the Commission or any other
government authority having jurisdiction or minimum or maximum prices shall have
been established on such exchange or quotation system or a material disruption
in securities settlement payment of clearance services in the United States
shall have occurred; (iii) if the United States shall have become materially
involved in a new war or an increase in major hostilities; (iv) if a banking
moratorium has been declared by a New York State or federal authority; (v) if
any of the Company's representations, warranties or covenants hereunder is
breached, and if not otherwise cured or qualified by materiality, there is a
material adverse effect; (vi) the Company shall have sustained a loss by reason
of explosion, fire, flood, accident or other calamity, which, in the opinion of
the Representative, substantially affects the value of the properties of the
Company or
23
which materially interferes with the operation of the business of the Company
regardless of whether such loss shall have been insured; there shall have been a
material adverse change (including, without limitation, a change in management
(other than the appointment of a chief executive officer, a chief operating
officer, or both, of the Company who are reasonably acceptable to the
Representative) or control of the Company), in the business or operations of the
Company, except in each case as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto); or (vi) if there shall have
occurred an outbreak of hostilities between the Unites States and any foreign
power (or in the case of any ongoing hostilities, a material escalation
thereof), or an outbreak of any other insurrection or armed conflict involving
the United States, or a terrorist attack in the United States or a change in the
financial markets or any calamity or crisis after the date hereof, as in the
Representative's judgment, is material and adverse and such change, calamity or
crisis, singly or together with any other event, would make it impracticable or
inadvisable 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.
(c) In the event that this Agreement shall not be carried out for any
reason whatsoever, within the time specified herein or any extensions thereof
pursuant to the terms herein, the obligations of the Company to pay the out of
pocket expenses related to the transactions contemplated herein shall be
governed by Section 3(k) hereof.
(d) 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 effected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
9. Miscellaneous.
(a) All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed to the parties at the addresses and/or telefax numbers
set forth below (or to such other addresses and/or telefax numbers as either
party may specify in a notice provided to the other party pursuant to this
Section 9(a)) and shall be deemed given when so delivered or telecopied and
confirmed or if mailed, two days after such mailing.
If to the Representative:
XXXXXX XXXXXX & CO., LLC
Thirty Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, Chief Operating Officer
With copy to (which shall not constitute notice to the Representative):
COZEN X'XXXXXX
The Army and Navy Building
24
0000 X Xxxxxx, XX, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxx X. Xx Xxxxxxx, Esq.
If to the Company:
BRIDGELINE SOFTWARE, INC.
00 Xxxxx Xx.
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxx Xxxxxx, President and CEO
Copy to (which shall not constitute notice to the Company):
XXXXX, XXXXXX-XXXXX & XXXXXXXXX, P.C.
Reservoir Place
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Esq.
(b) 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.
(c) This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
(d) This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
(e) This Agreement shall inure solely to the benefit of and shall be
binding upon the Representative, the Underwriters, the Company and the
controlling persons, directors 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.
(f) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without regard to conflicts of
law principles. Any action hereunder shall be brought exclusively in the courts
sitting in the City, County and State of New York. The party prevailing in any
proceeding shall be entitled to recover its reasonable legal fees and expenses
from the parties not prevailing.
(g) 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,
25
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.
(h) The failure of any of the parties hereto to at any time enforce
any of the provisions of this Agreement shall not be deemed or construed to be a
waiver of any such provision, nor to in any way effect the validity of this
Agreement or any provision hereof or the right of any of the parties hereto to
thereafter 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.
(i) The invalidity or unenforceability of any Section, paragraph or
provision of this Agreement shall not affect the validity or enforceability of
any other Section, paragraph or provision hereof. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and only
such minor changes) as are necessary to make it valid and enforceable.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
26
SIGNATURE PAGE
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,
BRIDGELINE SOFTWARE, INC.
By:
-------------------------------
Xxxxxx Xxxxxx
President and Chief Executive Officer
Accepted on the date first above written.
XXXXXX XXXXXX & CO., LLC
Acting severally on behalf of itself and as
the Representative of the several Underwriters
named in Schedule I annexed hereto
By:
--------------------------------
Xxxxxxx X. Xxxxx, Chief Operating Officer
27
SCHEDULE I
BRIDGELINE SOFTWARE, INC.
3,000,000 Shares
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
Xxxxxx Xxxxxx & Co., LLC [_______]
Security Research Associates, Inc. [_______]
TOTAL: [_______]
