SMART MOVE, INC. UNDERWRITING AGREEMENT
Exhibit 1.1
, 2006
Newbridge Securities Corporation
As Representative of the several
Underwriters named in Schedule I hereto
As Representative of the several
Underwriters named in Schedule I hereto
Dear Sirs:
Smart Move, 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 750,000 units (the “Firm Units”), each unit
(“Unit”) comprised of two (2) shares (each a “Share”) of the Company’s common stock (the
“Common Stock”) and one (1) Redeemable Common Stock Purchase Warrant (each a
“Warrant”). The aforesaid Units, Shares, and Warrants are together referred to as the
“Firm Securities.” Until notice is given by the Company (“Notice of Separation”)
to holders of the Units and to the Nasdaq Stock Market, the Common Stock and the Warrants will be traded only as
Units. The Notice of Separation will provide a date that the Units will separate (the
“Separation Date”). On the Separation Date, the Units will be deemed separated and the
Common Stock and Warrants shall thereafter be traded only on a separate basis. The separation of
the Units into shares of Common Stock and Warrants will occur upon the earlier to occur of (i)
ninety (90) days from the date of this Agreement or (ii) thirty (30) days immediately following the
date on which the over-allotment Option (as hereinafter defined) is exercised in full. The
Warrants are to be issued under the terms of a Warrant Agreement (the “Warrant Agreement”)
by and between the Company and Corporate Stock Transfer, Inc. (the “Warrant Agent”), in
substantially the form as most recently filed as an exhibit to the Registration Statement (as
hereinafter defined). The Underwriters, severally and not jointly, agree to purchase from the
Company the number of Firm Units set forth opposite their respective names on Schedule I attached
hereto and made a part hereof at a purchase price (net of discounts and commissions) of $ per
Firm Unit. Each Warrant entitles its holder to exercise it to purchase one (1) share of Common
Stock at an exercise price equal to 75% of the initial public offering price of a Firm Unit during
the period commencing on the Separation Date and terminating on the five-year anniversary of the
Effective Date (as hereinafter defined). The Warrants shall be redeemable by the Company on thirty
(30) days’ prior written notice at a price of $.01 per Warrant, provided (i) the Warrants are
exercisable, (ii) the Common Stock has been registered under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), (iii) the Shares are subject of an effective registration
statement permitting their sale under the Securities Act (as hereinafter defined), and (iv) the
closing sale price of the Common Stock equals or exceeds 225% of the Exercise Price for 20 of the
30 consecutive trading days prior to the date that the Warrants are called for redemption by the
Company.
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.
333-131762), including a Preliminary Prospectus (as hereinafter defined) relating to the Securities
(as hereinafter defined), 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 Units
(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 Units,
as set forth in and pursuant to the Prospectus, as soon after the Effective Date and the date of
this Agreement as the Representative deem advisable (the “Offering”). 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 Units. 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 Unit (net of discounts and commissions) (the “Initial Price”), the number of
Firm Units set forth opposite the name of such Underwriter under the column “Number of Firm Units
to be Purchased” on Schedule I to this Agreement, subject to adjustment in accordance with Section
6 hereof.
(b) For the purposes of covering any over-allotments in connection with the distribution and
sale of the Firm Units, the Company hereby grants to the Underwriters, severally and not jointly,
an option to purchase up to an additional 112,500 Units from the Company (“Over-allotment
Option”). Such additional 112,500 Units are hereinafter referred to as “Option Units.”
The Firm Units and the Option Units are hereinafter referred to as the “Units,” and the
Units and the Shares and Warrants included in the Units are hereinafter collectively referred
to as
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the “Securities.” The purchase price to be paid for the Option Units will be the
same price per Option Unit as the price per Firm Unit 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 Units within
forty-five (45) days after the Effective Date. The Underwriters will not be under any obligation
to purchase any Option Units 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 Units to be purchased and the date and time for
delivery of and payment for the Option Units (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 Units specified in such
notice.
(c) Payment of the purchase price for, and delivery of the certificates for, the Firm Units
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 Units are called the “Closing Date.” Payment for the Firm Units 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 to
the Underwriters) representing the Firm Units (or through the facilities of the Depository Trust
Company (“DTC”)) for the account of the Underwriters. The Firm Units 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 Units 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
Units except upon tender of payment by the Representative for all the Firm Units.
In addition, in the event that any or all of the Option Units are purchased by the
Underwriters, payment of the purchase price for, and delivery of the certificates representing, the
Option Units 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 NSC 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 Units 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
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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 Units at a price of $ per Unit, which is equal to % of the
public offering price of the Units (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 on the Effective Date and expiring on the five-year anniversary of the Effective Date. The
Representative’s Warrants (and the securities that may be
acquired upon exercise of the Representative’s Warrants) may not be may not be sold, transferred, assigned, pledged or
hypothecated until one (1) year 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 all
of the securities underlying the Representative’s Warrants are referred to herein as the
“Representative’s Securities.”
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
(which, for purposes of this Section 2 shall, unless the context requires otherwise, include the
Company’s predecessor, A Smart Move, L.L.C.) 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
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the Commission (whether filed as part of the Registration Statement for the registration of the
Securities 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 or 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 Securities under the Exchange Act, which registration statement complies in
all material respects with the Exchange Act. The registration of the Securities 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 Prospectus or to be filed
with the Commission as exhibits to the Registration Statement that have not been so described or
filed. Each agreement 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 (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
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jurisdiction over the Company or any of its assets or businesses, including, without limitation,
those relating to environmental laws and regulations.
(d) 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 since its inception prior to the date hereof, except as disclosed in the Registration
Statement.
(e) The disclosures in the Registration Statement summarizing the effects of federal, state
and local regulation on the Company’s business as currently contemplated are correct summaries in
all material respects and do not omit to state a material fact.
(f) 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.
(g) 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.
(h) 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.
(i) Xxxxx Xxxxxxx Xxxxxxxx LLP (“ACM”), 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. There are no material off-balance sheet transactions, arrangements,
obligations (including contingent obligations) or any other relationships with unconsolidated
entities or other persons, that may 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.
(j) 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 conformity with
generally accepted accounting principles, consistently applied throughout the periods involved; and
the supporting schedules included in the Registration Statement present fairly in all material
respects the information required to be stated therein.
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(k) 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.
(l) 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.
(m) The Securities 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 Securities 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 Securities has been duly and validly taken. The Securities conform in all
material respects to all statements with respect thereto contained in the Registration Statement.
The Representative’s Securities have been duly and validly authorized by the Company, and, when
executed or issued, the Warrant Agreement and the Representative’s Warrants will constitute valid
and binding obligations of the Company to issue and sell, upon exercise thereof and payment of the
respective exercise prices therefor, the number and type of securities of the Company called for
thereby in accordance with the terms thereof, and such Warrant Agreement and Representative’s
Warrants are enforceable against the Company in accordance with their respective 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 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.
(n) 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
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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.
(o) Each of this Agreement, the Warrant 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.
(p) The execution, delivery, and performance by the Company of this Agreement, the Warrant
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; 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.
(q) 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. The
Company is not in violation of any term or provision of the Certificate of Incorporation or Bylaws
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.
(r) 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. The disclosures in the Registration
Statement concerning the effects of federal, state and local regulation on the Offering and the
Company’s business purpose as currently contemplated are correct in all material respects and do
not omit to state a 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.
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(s) 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 Securities and the consummation of the transactions and agreements
contemplated by this Agreement, the Warrant Agreement, the Representative’s Warrants, and the
Prospectus, except with respect to applicable federal and state securities laws.
(t) 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.
(u) There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or
governmental proceeding pending or, to the best of the Company’s knowledge, threatened against, or
involving the Company or, to the best of the Company’s knowledge, any Initial Stockholder which has
not been disclosed in the Registration Statement or the Questionnaires.
(v) 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.
(w) The Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus or any part thereof.
(x) 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 or any Initial Stockholder with respect to the sale of the Securities 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 National Association of Securities Dealers, Inc. (“NASD”).
(y) 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, 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.
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(z) The Company will not pay any of the net proceeds of the Offering to any participating NASD
member or its affiliates.
(aa) 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.
(bb) Neither the Company nor 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.
(cc) Any certificate signed by any duly authorized officer of the Company and delivered to you
or to your counsel shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
(dd) No Initial Stockholder, 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 Initial Stockholder, employee, officer
and/or director of the Company.
(ee) No more than 45% of the “value” (as defined in Section 2(a)(41) of the Investment Company
Act of 1940 (“Investment Company Act”)) of the Company’s total assets consist of, and no more than
45% of the Company’s net income after taxes is derived from, securities other than “Government
securities” (as defined in Section 2(a)(16) of the Investment Company Act).
(ff) The Company does not own an interest in any corporation, partnership, limited liability
company, joint venture, trust, or other business entity, except as described in the Prospectus.
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(gg) 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.
(hh) The Company has obtained the agreement (the “Lock-up Agreements”) of each of its
officers, directors and 5% shareholders that he will not, without the prior written consent of the
Representative, during the eighteen (18) month period 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 .
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 Units 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 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 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
11
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 Securities in accordance with the provisions hereof and the Prospectus. If at any time when
a Prospectus relating to the Securities 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. The Company will not deregister the
Units under the Exchange Act without the prior written consent of the Representative.
(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 Units 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 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. Promptly after
the consummation of the Offering, the Company shall take such steps as may be necessary to obtain a
secondary market trading exemption for the Company’s securities
in the State of California. 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.
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(h) The Company shall retain a financial public relations firm reasonably acceptable to the
Representative for a term to be agreed upon by the Company and the Representative.
(i) Promptly after the Closing Date, the Company will endeavor to retain a research firm to
provide coverage of the Company for a period of not less than 12 months. The research firm must be
reasonably acceptable to the Representative.
(j) 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 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.
(k) On the Effective Date the Company shall deliver a written report detailing those states in
which the Securities may be traded in non-issuer transactions under the Blue Sky laws of the fifty
(50) states (“Secondary Trading Survey”).
(l) During such time, if at all, as the Units, the Shares, and the Warrants 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 Units, the Shares, and the Warrants, as the Representative shall reasonably
request.
(m) 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 Securities and the Representative’s Securities, including any transfer
or other taxes payable thereon; (iii) the qualification of the Units 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; (iv) filing fees, costs and expenses (excluding fees of the
Representative’s 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 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 transaction closing books, in form and style reasonably satisfactory to the
Representative, and transaction lucite cubes or similar commemorative items in a style and
13
quantity
as reasonably requested by the Representative; and (ix) all other costs and expenses incident to
the performance of its obligations hereunder. 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(q) 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.
(n) The Company further agrees that, in addition to the expenses payable pursuant to Section
3(m), 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) by deduction from the proceeds of the Offering. In the event the Offering
is terminated, any portion of the non-accountable expense previously paid to the Representative
will be returned to the Company to the extent not applied to expenses actually incurred by the
Representative in accordance with NASD Conduct Rule 2710(f)(2)(C).
(o) 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.
(p) The Company will make generally available to its security holders as soon as practicable,
but not later than forty-five (45) days after the end of the period covered thereby, 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.
(q) 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 Securities.
(r) 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
14
accountability for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(s) For a period of three (3) years from the Effective Date, the Company shall retain ACM or
other independent public accountants reasonably acceptable to the Representative.
(t) 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 Units.
(u) 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.
(v) The Company agrees not to solicit Warrant exercises other than through the Underwriters.
Upon any exercise of the Warrants after twelve months from the Effective Date, the Company agrees
to pay any Underwriter a fee of 1% of the aggregate Warrants exercise price, if: (i) the market
price of the Common Stock on the date the Warrants are exercised is greater than the then exercise
price of the Warrants; (ii) the exercise of the Warrants is solicited by such Underwriter at such
time as it is a member of the NASD and such Underwriter is designated in writing by the holder of
the Warrants as the NASD member soliciting the exercise; (iii) the Warrants are not held in a
discretionary account; (iv) the disclosure of compensation arrangements was made both at the time
of the Offering and at the time of exercise of the Warrants; and (v) the solicitation of exercise
of the Warrant was not in violation of Regulation M promulgated under the Exchange Act. No Warrant
solicitation by an Underwriter will occur for a period of 12 months after the Effective Date. The
Underwriters may engage sub-agents in their solicitation efforts.
(w) In connection with the solicitation of exercise of the Warrants, the Company will (i)
assist the Underwriters with respect to such solicitation, if requested by the Underwriters, and
(ii) at the Underwriters’ request, provide the Underwriters, and direct the Company’s transfer
agent and warrant agent to provide to the Underwriter, at the Company’s cost, lists of the record
and, to the extent known, beneficial owners of, the Warrants.
(x) 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 Warrants, the
Representative’s Option, and the Warrants issuable upon exercise of the Representative’s Option
outstanding from time to time.
(y) The Company will afford the Representative the right, but not the obligation, commencing
on the Effective Date and surviving for a period of two (2) years, to designate one observer to
attend meetings of the Board of Directors. The designee, if any, and
the Representative will receive notice of each meeting of the Board of Directors in accordance
with Delaware law. Any such designee will receive the same reimbursement for all reasonable costs
and expenses incurred in attending meetings of the Board of Directors, including but not limited
to, food, lodging and transportation, together with such other fee or such compensation as
15
is paid
by the Company to the highest compensated outside member of the Board of Directors. Moreover, to
the extent permitted by law, the Representative and its designee shall be indemnified for the
actions of such designee as an observer to the Board of Directors and in the event the Company
maintains a liability insurance policy affording coverage for the acts of its officers and/or
directors, to the extent permitted under such policy, each of the Representative and its designee
shall be an insured under such policy. During the stated two-year period, the Representative’s
observer to the Company’s Board of Directors will be (i) invited to attend meetings of the
Company’s Board of Directors; (ii) given written notice of each such meeting and provided with an
agenda and minutes of the meeting no later than the date such notice and items are provided to the
other directors (iii) provided with a copy of all Actions by Unanimous Written consent of the Board
of Directors in lieu of an actual meeting; (iv) furnished with a copy of all public filings by the
Company and Company press releases as released; (v) updated by the Company’s management on at least
a quarterly basis, regarding the Company’s activities, prospects and financial condition; and (vi)
advised immediately of material events to the extent consistent with applicable law. During the
subject two-year period, the Company will hold meetings of its Board of Directors at intervals of
not less than 90 days. Any observer designated by the Representative, as herein provided, shall be
acceptable to the Company, which acceptance shall not be unreasonably withheld, and such designated
observer shall make certain representations in writing to the Company concerning his
responsibilities under the federal securities laws with respect to information obtained by such
observer as a result of his attendance at meetings of the Board of Directors of the Company and as
a result of the receipt by him of other nonpublic information concerning the Company; and provided
further that upon written notice to the Representative, the Company may exclude the representative
from meetings where, in the written opinion of counsel for the Company, the observer’s presence
would destroy the attorney-client privilege.
(z) The Company shall deliver the Notice of Separation, after consulting with the
Representative, in accordance with the time frames set forth in the first paragraph of this
Agreement.
(aa) On the Closing Date, the Company shall enter into a Consulting Agreement with the
Representative (the “Consulting Agreement”) whereby the Company will agree to pay the
Representative a financial consulting fee of $5,000 per month for each of the next succeeding 24
months. The entire 24-month consulting fee ($120,000) will be due and payable on the Closing Date.
(bb) 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.
(cc) 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.
16
4. Conditions of Underwriters’ Obligations. The obligations of the several
Underwriters to purchase and pay for the Units, 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:
(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.
(c) No order suspending the sale of the Units 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 Cozen X’Xxxxxx, 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 ACM 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
17
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 ___, 200___, 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
___, 200___, 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, 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.
18
(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, to the effect 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(h)
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 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
(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 or any Initial Stockholder 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
19
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
Securities as herein contemplated shall be reasonably satisfactory in form and substance to you and
to counsel to the Underwriters.
(k) On the Closing Date, the Representative shall have received the Secondary Market Trading
Survey.
(l) The Company has delivered to the Representative the Lock-up Agreements referred to in
Paragraph 2(hh).
(m) The Company shall have received notice that the Units are eligible to be listed on the
Nasdaq Capital Market as of the Effective Date.
5. Indemnification.
(a) Subject to the conditions set forth below, the Company agrees to indemnify and hold
harmless each of the Underwriters, and each dealer selected by you that participates in the offer
and sale of the Securities (each a “Selected Dealer”) 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); (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 (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 Units 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 conformity with written information furnished to the Company
20
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, or in
any application, 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 Securities 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
Securities or in connection with the Registration Statement or Prospectus.
(b) If any action is brought against an Underwriter, a Selected Dealer or a controlling person
in respect of which indemnity may be sought against the Company pursuant to Section 5(a), such
Underwriter or Selected Dealer 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 or Selected Dealer, as the
case may be) and payment of actual expenses. Such Underwriter, Selected Dealer 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, Selected Dealer 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 defense of such action; or (iii)
such indemnified party or parties shall have reasonably concluded that there will be 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, Selected
Dealer and/or controlling person shall be borne by the Company. Notwithstanding anything to the
contrary contained herein, if the Underwriter, Selected Dealer 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 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 the
21
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 or any other person so indemnified 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 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 Units 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 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
22
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 Units or the Option Units, if the Over-allotment Option is exercised, hereunder, and if
the number of the Firm Units or Option Units with respect to which such default relates does not
exceed in the aggregate ten percent (10%) of the number of Firm Units or Option Units that all
Underwriters have agreed to purchase hereunder, then such Firm Units or Option Units 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 Units or Option Units, you may in your discretion arrange for yourself or
for another party or parties to purchase such Firm Units or Option Units 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 Units or Option Units you do not arrange for the purchase of such Firm
Units or Option Units, 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 Units or
Option Units on such terms. In the event that neither you nor the Company arranges for the
purchase of the Firm Units or Option Units 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 Sections 3(s) and 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 Units, this Agreement will not terminate as to the Firm Units; 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 Units or Option Units 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 Securities.
7. Representations and Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained in this Agreement
23
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 Securities 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 materially disrupted, or in
your opinion will in the immediate future materially disrupt, 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 on The Nasdaq Stock Market (or successor trading market) shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been fixed, or maximum ranges for prices for securities shall have
been required on The Nasdaq Stock Market or by order of the Commission or any other government
authority having jurisdiction; (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 a moratorium on foreign exchange trading has been
declared which materially adversely impacts the United States securities market; (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;
(vii) if any of the Company’s representations, warranties or covenants hereunder is breached, and
if not otherwise qualified by materiality, there is a material adverse effect; or (viii) if the
Representative shall have become aware after the date hereof of such a material adverse change in
the conditions or prospects of the Company, or such adverse material change in general market
conditions, including, without limitation, as a result of terrorist activities after the date
hereof, as in the Representative’s 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 Securities.
(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(p) 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
24
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 and shall be deemed given
when so delivered or telecopied and confirmed or if mailed, two days after such mailing.
If to the Representative:
Newbridge Securities Corporation
0000 Xxxx Xxxxxxx Xxxxx Xxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxx X. Xxxxx, President
0000 Xxxx Xxxxxxx Xxxxx Xxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxx X. Xxxxx, President
With copy to (which shall not constitute notice to the Representative):
Xxxx Xxxxx LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
If to the Company:
Smart Move, Inc.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx, President
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx, President
Copy to (which shall not constitute notice to the Company):
Cozen X’Xxxxxx
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xx Xxxxxxx, Esq.
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xx Xxxxxxx, 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 (together with the other agreements and documents being delivered pursuant
to or in connection with this Agreement) constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and thereof, and supersede all prior
25
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 Representative 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 Florida, without giving effect to conflict of laws. The Company hereby agrees that
any action, proceeding or claim against it arising out of, relating in any way to this Agreement
shall be brought and enforced in the courts of the State of Florida of the United States of
America, 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 it at the address set forth in Section 10(a) hereof. Such mailing shall be
deemed personal service and shall be legal and binding upon the Company in any action, proceeding,
or claim. The Company agrees 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.
(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, 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.
[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, | ||||||||||
| SMART MOVE, INC. | ||||||||||
| By: | ||||||||||
| Xxxxx Xxxxxx, | ||||||||||
| President and Chief Executive Officer | ||||||||||
| Accepted on the date first above written. | ||||||||||
| NEWBRIDGE SECURITIES CORPORATION | ||||||||||
| Acting severally on behalf of itself and as | ||||||||||
| the Representative of the several Underwriters | ||||||||||
| named in Schedule I annexed hereto | ||||||||||
By: |
||||||||||
| Xxx X. Xxxxx, President | ||||||||||
27
SCHEDULE I
SMARTMOVE, INC.
750,000 Units
| Number of Firm | ||
| Underwriter | Units | |
| to be Purchased | ||
Newbridge Securities Corporation
|
[ ] | |
TOTAL:
|
[ ] |
