Shares of Common Stock CAMPUSU, INC. UNDERWRITING AGREEMENT
___________________
Shares of Common Stock
CAMPUSU,
INC.
__________
__, 2007
MAXIM
GROUP LLC
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
As
Representative of the Underwriters
named
on Schedule
A
hereto
Ladies
and Gentlemen:
CampusU,
Inc., a corporation organized and existing under the laws of Delaware (the
“Company”),
confirms its agreement, subject to the terms and conditions set forth herein,
with each of the underwriters listed on Schedule
A
hereto
(collectively, the “Underwriters”),
for
whom Maxim Group LLC is acting as representative (in such capacity, the
“Representative”),
to
sell and issue to the Underwriters an aggregate of _______________ shares (the
“Firm
Shares”)
of its
common stock, $0.00041 par value per share (the “Common
Stock”).
In
addition, the Company shall grant to the Underwriters, upon the terms and
conditions set forth in Section 2 hereof, an option to purchase up to an
aggregate additional amount of __________ shares of Common Stock, representing
up to 15% of the Firm Shares (the “Additional
Shares”).
The
Firm Shares and any Additional Shares purchased by the Underwriters are referred
to herein as the “Shares.”
The
Shares are more fully described in the Registration Statement and Prospectus
referred to below.
In
addition, the Company shall, at the Closing (as defined herein) issue to the
Representative or, at the direction of the Representative, to other Underwriters
or selling group members or bona fide officers of the Underwriters or selling
group members, a warrant or warrants (the “Representative’s
Warrant”)
to
purchase up to an aggregate of ________ shares of Common Stock (6% of the number
of Firm Shares sold in the Offering). The Shares and the Representative’s
Warrant are more fully described in the Registration Statement and Prospectus
referred to below. The offering and sale of the Shares contemplated by this
underwriting agreement (this “Agreement”)
is
referred to herein as the “Offering.”
1.
Representations
and Warranties of the Company.
The
Company represents, warrants and covenants to, and agrees with, each of the
Underwriters that, as of the date hereof and as of the Closing Date and each
Additional Closing Date:
Maxim
Group LLC
_________________,
2007
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(a) The
Company has filed with the Securities and Exchange Commission (the “Commission”)
a
registration statement on Form S-1 (Registration No. 333-144034), and amendments
thereto, and related preliminary prospectuses for the registration under the
Securities Act of 1933, as amended (the “Securities
Act”),
of
the Shares, which registration statement, as so amended (including
post-effective amendments, if any), has been declared effective by the
Commission and copies of which have heretofore been delivered to the
Underwriters. Promptly after execution and delivery of this Agreement, the
Company will prepare and file a prospectus in accordance with the provisions
of
Rule 430A (“Rule
430A”)
of the
rules and regulations of the Commission (the “Rules
and Regulations”)
and
paragraph (b) of Rule 424 (“Rule
424(b)”)
of the
Regulations. The information included in such prospectus that was omitted from
such registration statement at the time it became effective but that is deemed
to be part of such registration statement at the time it became effective
pursuant to paragraph (b) of Rule 430A is referred to as “Rule
430A Information.”
Each
prospectus used before such registration statement became effective, and any
prospectus that omitted the Rule 430A Information that was used after such
effectiveness and prior to the execution and delivery of this Agreement, is
referred to herein as a “Preliminary
Prospectus.”
Such
registration statement, including the amendments thereto, the exhibits and
any
schedules thereto, at the time it became effective, and including the Rule
430A
Information, is herein called the “Registration
Statement.”
The
Preliminary Prospectus dated ________________, 2007, that was included in the
Registration Statement at the Time of Sale (as defined below) is referred to
herein as the “Sale
Preliminary Prospectus”,
except
that if any revised prospectus or prospectus supplement shall be provided to
the
Underwriters by the Company for use in connection with the Offering which
differs from the Sale Preliminary Prospectus (whether or not such revised
prospectus or prospectus supplement is required to be filed by the Company
pursuant to Rule 424(b)), the term “Prospectus” shall also refer to such revised
prospectus or prospectus supplement, as the case may be, from and after the
time
it is first provided to the Underwriters for such use. For purposes of this
Agreement and the Securities Act, “Time
of Sale”,
means
_____ p.m., New York City time, on the date of this Agreement.
The
final prospectus in the form first furnished to the Underwriters for use in
connection with the Offering is referred to herein as the “Prospectus.”
If
the
Company has filed or is required pursuant to the terms hereof to file a
registration statement pursuant to Rule 462(b) under the Securities Act
registering additional shares of Common Stock (a “Rule
462(b) Registration Statement”),
then,
unless otherwise specified, any reference herein to the term “Registration
Statement” shall be deemed to include such Rule 462(b) Registration Statement.
Other than a Rule 462(b) Registration Statement, which, if filed, becomes
effective upon filing, no other document with respect to the Registration
Statement has heretofore been filed with the Commission. All of the Shares
have
been registered under the Securities Act pursuant to the Registration Statement
or, if any Rule 462(b) Registration Statement is filed, will be duly registered
under the Securities Act with the filing of such Rule 462(b) Registration
Statement. Based on communications from the Commission, no stop order suspending
the effectiveness of either the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued and, to the Company’s knowledge,
no proceeding for that purpose has been initiated or threatened by the
Commission. Any reference herein to the Registration Statement, any Preliminary
Prospectus, the Sale Preliminary Prospectus or the Prospectus shall be deemed
to
refer to and include the exhibits incorporated by reference therein pursuant
to
the Rules and Regulations on or before the effective date of the Registration
Statement, the date of such Preliminary Prospectus, the Sale Preliminary
Prospectus or the date of the Prospectus, as the case may be. Any reference
herein to the terms “amend”, “amendment” or “supplement” with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall
be
deemed to refer to and include: (i) the filing of any document under the
Securities Exchange Act of 1934, as amended, and together with the Rules and
Regulations promulgated thereunder (the “Exchange
Act”)
after
the effective date of the Registration Statement, the date of such Preliminary
Prospectus, the Sale Preliminary Prospectus or the date of the Prospectus,
as
the case may be, which is incorporated therein by reference, and (ii) any such
document so filed. All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, a Preliminary Prospectus,
the
Sale Preliminary Prospectus and the Prospectus, or any amendments or supplements
to any of the foregoing shall be deemed to include any copy thereof filed with
the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System (“XXXXX”).
The
Sale Preliminary Prospectus and the Prospectus delivered to the Underwriters
for
use in connection with the Offering were or will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant
to
XXXXX, except to the extent permitted by Regulation S-T. If, subsequent to
the date of this Agreement, the Company or the Representative determine that,
at
the Time of Sale, the Sale Preliminary Prospectus included an untrue statement
of a material fact or omitted a statement of material fact necessary to make
the
statements therein, in the light of the circumstances under which they were
made, not misleading and have agreed to provide an opportunity to purchasers
of
the Firm Shares to terminate their old purchase contracts and enter into new
purchase contracts, then the Sale Preliminary Prospectus will be deemed to
include any additional information available to purchasers at the time of entry
into the first such new purchase contract.
Maxim
Group LLC
_________________,
2007
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(b) At
the
time of the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement or the effectiveness of any post-effective amendment
to
the Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 424(b), when any supplement to or amendment of
the
Prospectus is filed with the Commission, when any document filed under the
Exchange Act was or is filed and at the Closing Date and the Additional Closing
Date (as hereinafter respectively defined), if any, the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus and any amendments thereof
and supplements or exhibits thereto complied or will comply in all material
respects with the applicable provisions of the Securities Act, the Exchange
Act
and the Rules and Regulations, and did not and will not contain an untrue
statement of a material fact and did not and will not omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein: (i) in the case of the Registration Statement, not misleading, and
(ii)
in the case of the Sale Preliminary Prospectus or the Prospectus in light of
the
circumstances under which they were made, not misleading. When any Preliminary
Prospectus (including the Sale Preliminary Prospectus) was first filed with
the
Commission (whether filed as part of the registration statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a)
under the Securities Act), and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied in all material respects
with the applicable provisions of the Securities Act, the Exchange Act and
the
Rules and Regulations and did not contain an untrue statement of a material
fact
and did not 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. No representation and warranty
is
made in this subsection (b), however, with respect to any information contained
in or omitted from the Registration Statement or the Prospectus or any related
Preliminary Prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through the Representative
specifically for use therein. The parties acknowledge and agree that such
information provided by or on behalf of any Underwriter consists solely of
the
names of the Underwriters appearing in the “Underwriting” section of the
Prospectus and the following additional disclosure contained in the
“Underwriting” section of the Prospectus: (i) the first paragraph under the
heading entitled “Pricing of Securities”, (ii) the second paragraph under the
heading entitled “Lock-Ups”, (iii) the final paragraph under the heading
entitled “Stabilization” and (iv) all of the paragraphs under the heading
entitled “Foreign Regulatory Restrictions on Purchase of Shares” (the
“Underwriters’
Information”).
(c) The
Company has filed with the Commission a Form 8-A (File Number ___ - ________)
providing for the registration under the Exchange Act of the Common Stock.
The
registration of the Common Stock under the Exchange Act has been declared
effective by the Commission on the date hereof.
(d) The
documents, exhibits or other materials incorporated or deemed to be
incorporated by reference
in the
Sale Preliminary Prospectus or the Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply
in all
material respects
with the
requirements of the Securities Act, the Exchange Act and the Rules and
Regulations, and, when read together with the other information in the Sale
Preliminary Prospectus or the Prospectus, do not contain an untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
There
are no contracts or other documents (including, without limitation, any voting
agreement), which are required to be described in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus or filed as exhibits to
the
Registration Statement by the Securities Act, the Exchange Act or the Rules
and
Regulations and which have not been so described, filed or incorporated by
reference.
(e) BDO
Xxxxxxx, LLP (“BDO”),
whose
reports relating to the Company are included in the Registration Statement,
are
independent public accountants as required by the Securities Act, the Exchange
Act, the Rules and Regulations and the rules and regulations promulgated by
the
Public Company Accounting Oversight Board (the “PCAOB”).
BDO
is duly registered and in good standing with the PCAOB. BDO has not, during
the
periods covered by the financial statements included in the Registration
Statement, the Preliminary Prospectus and the Prospectus, provided to the
Company any non-audit services, as such term is used in Section 10A(g) of the
Exchange Act.
(f) The
Shares have been authorized for listing on the Nasdaq Capital Market
(“NCM”)
and,
to the Company’s knowledge, no proceedings have been instituted or threatened
which would effect, and no event or circumstance has occurred which is
reasonably likely to effect, the listing of the Shares on the
NCM.
Maxim
Group LLC
_________________,
2007
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(g) Except
as
set forth on Schedule
B,
the
Company has no direct or indirect subsidiaries and owns no equity interest
in
any other foreign or domestic individual, corporation, trust, general or limited
partnership, joint venture, limited liability company or other entity (each,
a
“Person”).
The
entities set forth on Schedule B are referred to herein as each, a “Subsidiary”
and
collectively, the “Subsidiaries.”
(h) Subsequent
to the respective dates as of which information is presented in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus, and except as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus: (i) the Company has not declared, paid or made any dividends or
other distributions of any kind on or in respect of its capital stock, and
(ii)
there has been no material adverse change (or, to the knowledge of the Company,
any development which has a high probability of involving a material adverse
change in the future), whether or not arising from transactions in the ordinary
course of business, in or affecting: (A) the business, condition (financial
or
otherwise), results of operations, stockholders’ equity, properties or prospects
(as such prospects are disclosed or described in the Sale Preliminary Prospectus
and the Prospectus) of the Company or of any of the Subsidiaries; (B) the
long-term debt or capital stock of the Company and the Subsidiaries; or (C)
the
Offering or consummation of any of the other transactions contemplated by this
Agreement, the Registration Statement or the Prospectus (a “Material
Adverse Change”).
Since
the date of the latest balance sheet presented in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus, neither the Company nor
any
Subsidiary has incurred or undertaken any liabilities or obligations, whether
direct or indirect, liquidated or contingent, matured or unmatured, or entered
into any transactions, including any acquisition or disposition of any business
or asset, which are material to the Company or any Subsidiary, except for
liabilities, obligations and transactions which are disclosed in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus.
(i) As
of the
dates indicated in the Sale Preliminary Prospectus and the Prospectus, the
authorized, issued and outstanding shares of capital stock of the Company were
as set forth therein in the column headed “Actual” under the section thereof
captioned “Capitalization” and, after giving effect to the Offering and the
other transactions contemplated by this Agreement and the Registration
Statement, will be as set forth in the columns headed “Pro Forma” and “Pro Forma
As Adjusted” in such section. All of the issued and outstanding shares of
capital stock of the Company are fully paid and non-assessable (and those shares
of Common Stock issuable upon conversion of the Company’s notes and warrants as
described in the Registration Statement and the Prospectus, upon conversion
thereof in accordance with their respective terms and as described in the
Registration Statement, will be fully paid and non-assessable) and have been
duly and validly authorized and issued, in compliance with all applicable state
and federal securities laws, rules and regulations and not in violation of
or
subject to any preemptive or similar right that does or will entitle any Person
(as defined below), upon the issuance or sale of any security, to acquire any
Relevant Security from the Company. As used herein, the term “Relevant
Security”
means
any Common Stock or other security of the Company that is convertible into,
or
exercisable or exchangeable for Common Stock or equity securities, or that
holds
the right to acquire any Common Stock or equity securities of the Company or
any
other such Relevant Security, except for such rights as may have been fully
satisfied or waived prior to the effectiveness of the Registration Statement.
Maxim
Group LLC
_________________,
2007
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(j) The
Shares have been duly and validly authorized and, when issued,
delivered
and
paid
for in
accordance with this Agreement
and as
described in the Sale Preliminary Prospectus and the Prospectus on each of
the
Closing Date and the Additional Closing Date, as applicable, will
be
duly and validly issued, fully paid and non-assessable, will have been issued
in
compliance with all applicable state and federal securities laws, rules and
regulations and will not have been issued in violation of or subject to any
preemptive or similar right that does or will entitle any Person to acquire
any
Relevant Security from the Company upon issuance or sale of Shares in the
Offering. The shares of Common Stock representing the Shares conform to the
descriptions thereof contained in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus. Except as disclosed in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus,
the
Company has no outstanding warrants, options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, or any contracts or
commitments to issue or sell, any Relevant Security.
(k) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, and except for shareholdings equal to less than 1% of a
publicly-traded company, no director, officer or key employee of the Company
holds any direct equity, debt or other pecuniary interest in any Person with
whom the Company does business or is in privity of contract with, other than,
in
each case, indirectly through the ownership by such individuals of shares of
Common Stock.
(l) The
Company has been duly incorporated and validly exists as a corporation in good
standing under the laws of the State of Delaware. Each Subsidiary has been
duly
organized and is validly existing as a company in good standing under the laws
of its jurisdiction
of
formation. The Company and each Subsidiary has all requisite power and authority
to carry on its respective business as it is currently being conducted and
as
described in the Sale Preliminary Prospectus and the Prospectus, and to own,
lease and operate its properties. The Company and each Subsidiary is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business makes such
qualification necessary, except, in each case, for those failures to be so
qualified or in good standing which (individually and in the aggregate) could
not reasonably be expected to have a material adverse effect on: (i) the
business, condition (financial or otherwise), results of operations,
stockholders’ equity, properties or prospects (as such prospects are disclosed
or described in the Sale Preliminary Prospectus and the Prospectus) of the
Company; (ii) the long-term debt or capital stock of the Company; or (iii)
the
Offering or consummation of any of the other transactions contemplated by this
Agreement, the Registration Statement or the Prospectus (any such effect being
a
“Material
Adverse Effect”).
(m) [intentionally
omitted]
Maxim
Group LLC
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2007
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(n) The
Company and each Subsidiary is not: (i) in violation of its certificate of
incorporation, by-laws or other organizational documents (including
stockholders’, voting or similar agreements), (ii) in default under, and no
event has occurred which, with notice or lapse of time or both, would constitute
a default under or result in the creation or imposition of any lien, charge,
mortgage, pledge, security interest, claim, equity, trust or other encumbrance,
preferential arrangement, defect or restriction of any kind whatsoever
(“Lien”)
upon
any of its property or assets pursuant to, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which it is a party
or
by which it is bound or to which any of its property or assets is subject or
(iii) is in violation in any respect of any law, rule, regulation, ordinance,
directive, judgment, decree or order of any judicial, regulatory or other legal
or governmental agency or body, foreign or domestic, except (in the case of
clause (ii) above) for any Lien disclosed in the Registration Statement, the
Sale Preliminary Prospectus and the Prospectus and except, in the case of each
of clause (ii) and (iii), for any default, violation or event that would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.
(o) The
Company has full right, power and authority to execute and deliver this
Agreement, the Representative’s Warrant and all other agreements, documents,
certificates and instruments required to be delivered pursuant to this Agreement
(collectively, the “Transaction
Documents”)
and to
perform its obligations hereunder and thereunder and to consummate each of
the
transactions contemplated by each of the Transaction Documents. The Company
has
duly and validly authorized each of the Transaction Documents and each of the
transactions contemplated by the Transaction Documents. Each of the Transaction
Documents have been or will be duly and validly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company
and is enforceable against the Company in accordance with its terms, except
as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(p) The
execution, delivery and performance of the Transaction Documents and the
consummation of the transactions contemplated thereby do not and will not:
(i)
conflict with, require consent under or result in a breach of any of the terms
and provisions of, or constitute a default (or an event which with notice or
lapse of time, or both, would constitute a default) under, or result in the
creation or imposition of any Lien upon any property or assets of the Company
or
any Subsidiary pursuant to any indenture, mortgage, deed of trust, loan
agreement or other agreement, instrument, franchise, license or permit to which
the Company or its affiliates (as such term is defined in Rule 144 under the
Securities Act, “Affiliates”)
is a
party or by which the Company or any Subsidiary or their respective properties,
operations or assets may be bound or (ii) violate or conflict with any provision
of the certificate of incorporation, by-laws or other organizational documents
of the Company or any Subsidiary, or (iii) violate or conflict with any law,
rule, regulation, ordinance, directive, judgment, decree or order of any
judicial, regulatory or other legal or governmental agency or body, domestic
or
foreign, except, in the case of each of clauses (i) and (iii), for any default,
violation or event that would not, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect.
Maxim
Group LLC
_________________,
2007
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(q) The
Company and each Subsidiary has all material consents, approvals,
authorizations, orders, registrations, qualifications, licenses, filings and
permits of, with and from all judicial, regulatory and other legal or
governmental agencies and bodies and all third parties, foreign and domestic
(collectively, the “Consents”),
to
own, lease and operate its properties and conduct its business as it is now
being conducted and as disclosed in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus, and each such Consent is valid and
in
full force and effect.
The
Company has not received notice of any investigation or proceedings which will
result in or, if decided adversely to the Company, could reasonably be expected
to result in the revocation of, or imposition of a materially burdensome
restriction on, any Consent or could reasonably be expected to have a Material
Adverse Effect. No
Consent contains a materially burdensome restriction that has not been
adequately disclosed in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus.
(r) The
Company is in compliance with all applicable laws, rules, regulations,
ordinances, directives, judgments, decrees and orders, foreign and domestic,
including those relating to transactions with Affiliates, the non-compliance
with which would not have a Material Adverse Effect.
(s) All
Consents and agreements described in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus which authorize and permit the Company
to resell products to students, faculty and educational institutions at academic
discounts are in full force and effect and no facts or circumstances exist
that
would be reasonably likely to cause a termination of such Consents or Agreements
or the Company to be in violation of such Consents or agreements. Complete
and
accurate copies of all Consents have previously been provided by the Company
to
the Representative.
(t) The
Representative’s Warrant will conform to the description thereof in the
Registration Statement and in the Prospectus and, when sold to and paid for
by
the Representative in accordance with the Representative’s Warrant, will have
been duly authorized and validly issued and will constitute a valid and binding
obligation of the Company. The shares of Common Stock issuable upon exercise
of
the Representative’s Warrant (the “Representative’s
Warrant Shares”)
have
been duly authorized and reserved for issuance upon exercise of the
Representative’s Warrant by all necessary corporate action on the part of the
Company and, when issued and delivered and paid for upon such exercise in
accordance with the terms of the Representative’s Warrant, will be validly
issued, fully paid, non-assessable and free of preemptive rights.
Maxim
Group LLC
_________________,
2007
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(u) No
Consent of, with or from any judicial, regulatory or other legal or governmental
agency or body or any third party, foreign or domestic, is required for the
execution, delivery and performance of this Agreement and the Representative’s
Warrant or consummation of each of the transactions contemplated by this
Agreement and the Representative’s Warrant, including the issuance, sale and
delivery of the Shares and the Representative’s Warrant to be issued, sold and
delivered hereunder and thereunder, except: (i) the registration under the
Securities Act of the Shares and the Representative’s Warrant Shares and the
approval for listing of the Shares on the NCM, each of which has become
effective and (ii) such Consents as may be required under state securities
or
blue sky laws, the Financial Industry Regulatory Authority, formerly known
as
the National Association of Securities Dealers, Inc. (“FINRA”),
or
any similar self regulatory organization in connection with the purchase and
distribution of the Shares by the Underwriters, each of which has been obtained
and is in full force and effect.
(v) No
forward-looking statement (within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act) contained in the Registration Statement
and the Prospectus has been made or reaffirmed without a reasonable basis or
has
been disclosed other than in good faith.
(w) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, there is no judicial, regulatory, arbitral or other legal or
governmental proceeding or other litigation or arbitration, domestic or foreign,
pending to which the Company is a party or of which any property, operations
or
assets of the Company is the subject which, either individually or in the
aggregate, if determined adversely to the Company, could reasonably be expected
to have a Material Adverse Effect. To the Company’s knowledge, no such
proceeding, litigation or arbitration is threatened or contemplated.
(x) The
financial statements, including the notes thereto, and any supporting schedules
included in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus present fairly the financial position as of the dates indicated
and
the cash flows and results of operations for the periods specified of the
Company. Except as otherwise stated in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus, said financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis throughout the periods involved. Any
supporting schedules included in the Registration Statement and the Prospectus
present fairly the information required to be stated therein. No other financial
statements or supporting schedules are required to be included or incorporated
by reference in the Registration Statement. The other financial and statistical
information included in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus present fairly the information included therein
and have been prepared on a basis consistent with that of the financial
statements that are included in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus and the books and records of the respective
entities presented therein.
Maxim
Group LLC
_________________,
2007
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(y) There
are no pro forma or as adjusted financial statements which are required to
be
included in
the Registration Statement, the
Sale
Preliminary Prospectus
and
the Prospectus in accordance with Regulation
S-X under the Securities Act which have not been included as so required. The
pro forma and/or as adjusted financial information included in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus has been properly
compiled and prepared in accordance with the applicable requirements of the
Securities Act and the Rules and Regulations and include all adjustments
necessary to present fairly in accordance with generally accepted accounting
principles the pro forma and as adjusted financial position of the respective
entity or entities presented therein at the respective dates indicated and
their
cash flows and the results of operations for the respective periods specified.
The assumptions used in preparing the pro forma and as adjusted financial
information included in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events
described therein. The related pro forma and pro forma as adjusted adjustments
give appropriate effect to those assumptions; and the pro forma and pro forma
as
adjusted financial information reflect the proper application of those
adjustments to the corresponding historical financial statement
amounts.
(z) The
statistical, industry-related and market-related data included in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus
are
based on or derived from sources which the Company reasonably and in good faith
believes are reliable and accurate, and such data agree with the sources from
which they are derived.
(aa) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, the Company maintains a system of internal accounting and other
controls sufficient to provide reasonable assurances that: (i) transactions
are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with United States 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 accounting for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(bb) The
Company’s board of directors has validly appointed an audit committee,
compensation committee and nominating committee whose composition satisfies
the
requirements of the rules and regulations of the NCM and the Company’s board of
directors and/or audit committee, compensation committee and the nominating
committee has each adopted a charter that satisfies the requirements of the
NCM.
Neither the Company’s board of directors nor the audit committee thereof has
been informed, nor is any director of the Company aware, of: (i) any significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect
the Company’s ability to record, process, summarize and report financial
information; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s
internal control over financial reporting.
Maxim
Group LLC
_________________,
2007
Page
10
of
38
(cc) The
Company is in material compliance with the applicable provisions of the
Xxxxxxxx-Xxxxx Act of 2002, as amended (“Sarb-Ox”),
and
the rules and regulations promulgated thereunder and related or similar rules
and regulations promulgated by the NCM or any other governmental or self
regulatory entity or agency, except for violations which, singly or in the
aggregate, would not have a Material Adverse Effect. Without limiting the
generality of the foregoing, as of the effective date of the Registration
Statement: (i) all members of the Company’s board of directors who are required
to be “independent” (as that term is defined under applicable laws, rules and
regulations), including, without limitation, all members of the audit committee,
compensation committee and nominating committee of the Company’s board of
directors, meet the qualifications of independence as set forth under applicable
laws, rules and regulations and (ii) the audit committee of the Company’s board
of directors has at least one member who is an “audit committee financial
expert” (as that term is defined under applicable laws, rules and
regulations).
(dd) No
relationship, direct or indirect, exists between or among any of the Company
or
any Affiliate of the Company, on the one hand, and any director, officer, key
employee, principal stockholder, customer or supplier of the Company or any
Affiliate of the Company, on the other hand, which is required by the Securities
Act, the Exchange Act or the Rules and Regulations to be described in the
Registration Statement, the Sale Preliminary Prospectus or the Prospectus which
is not so described as required. Except as disclosed in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus, there are no
outstanding loans, advances (except normal advances for business expenses in
the
ordinary course of business) or guarantees of indebtedness by the Company to
or
for the benefit of any of the officers or directors of the Company or any of
their respective family members, except as disclosed in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus. The Company
has
not, in violation of Sarb-Ox, directly or indirectly, including through any
Affiliate of the Company (other than as permitted under the Sarb-Ox for
depositary institutions), extended or maintained credit, arranged for the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer of the
Company.
(ee) (i) Except
as
previously disclosed to the Representative in writing, no officer, director,
or
beneficial owner of any class of the Company’s securities (whether debt or
equity, registered or unregistered, regardless of the time acquired or the
source from which derived) or any other Affiliate is a member or a person
associated, or affiliated with a member of FINRA.
(ii) No
proceeds from the sale of the Shares (excluding underwriting compensation)
will
be paid to any FINRA member, or any persons associated or affiliated with a
member of FINRA, except as specifically contemplated herein.
(iii) Except
as
previously disclosed to the Representative in writing, no person to whom
securities of the Company have been privately issued within the 180-day period
prior to the initial filing date of the Registration Statement has any
relationship or affiliation or association with any member of
FINRA.
Maxim
Group LLC
_________________,
2007
Page
11
of
38
(ff) As
used
in this Agreement, the term “Intellectual
Property”
shall
mean all: (A) patents, trademarks, trade names, service marks, trade dress,
copyrights and any renewal rights therefor, domain names, mask works, net lists,
schematics, technology, trade secrets, know-how, moral rights, computer software
programs or applications (in both source and object code form), applications
and
registrations for any of the foregoing owned by the Company, specifically
including but not limited to the proprietary processes embodied in the Company’s
pending patents; (B) goodwill associated with trademarks, trade names, service
marks and trade dress owned by the Company; (C) software, including, but not
limited to, the source code for the Company’s products described in the
Prospectus, as well as software, firmware listings, updated software source
code, and complete system build software and instructions related to all
software owned by the Company; (D) documents, records and files relating to
design, end user documentation, manufacturing, quality control, sales, marketing
or customer support for all intellectual property described herein owned by
the
Company; (E) other tangible or intangible proprietary information and materials
owned by the Company; and (F) license and other rights in any third party
product, intellectual property, proprietary or personal rights, documentation,
or tangible or intangible property, including without limitation the types
of
intellectual property and tangible and intangible proprietary information
described in (A) through (E) above (other than license agreements for standard
“shrink wrapped, off the shelf,” commercially available, third party products
used by the Company) that are owned or held by or on behalf of the Company
or
that are being, and/or have been, used, or are currently under development
for
use, in the business of the Company as the same is described in the Registration
Statement and the Prospectus. The Intellectual Property belonging or inuring
to
the benefit of the Company or in which the Company, directly or indirectly,
owns
any rights is referred to herein as “Company
Intellectual Property” and
Intellectual Property described in clause (F) above is referred to herein as
“Company
Licensed Intellectual Property.” Unless
otherwise specifically noted, the term “Intellectual
Property”
shall
refer collectively to both the Company Intellectual Property and the Company
Licensed Intellectual Property.
(ii) The
Company owns, possesses, licenses or has other rights to use, as the case may
be, on reasonable terms, all Intellectual Property necessary for the conduct
of
the Company’s business as the same is described in the Registration Statement
and the Prospectus, including, without limitation, and if necessary to carry
out
such activities, rights to make, use, exclude others from using, reproduce,
modify, adapt, create derivative works based on, translate, distribute (directly
and indirectly), transmit, display and perform publicly, license, rent, lease,
assign, and sell the Intellectual Property in all geographic locations and
fields of use, and to sublicense any or all such rights to third parties,
including the right to grant further sublicenses.
(iii) Except
as
set forth in the Prospectus or the Registration Statement, the Company is not
currently, nor, as a result of the execution or delivery of this Agreement,
or
performance of the Company’s obligations hereunder, will the Company be, in
violation of any license, sublicense or other agreement relating to the
Intellectual Property to which the Company is a party or otherwise bound. Except
as set forth in the Prospectus, the Registration Statement or the exhibits
thereto, the Company is not obligated to provide any consideration (whether
financial or otherwise) to any third party, nor is any third party otherwise
entitled to any consideration, with respect to any exercise of rights by the
Company or its successors in the Intellectual Property.
Maxim
Group LLC
_________________,
2007
Page
12
of
38
(iv) Except
as
set forth in the Prospectus, the Registration Statement or the exhibits thereto,
the use, reproduction, modification, distribution, licensing, sublicensing,
sale, or any other exercise of rights in any Intellectual Property or any other
authorized exercise of rights in or to any Intellectual Property by the Company
or its licensees does not and, to the knowledge of the Company, will not
infringe any copyright, patent, trade secret, trademark, service xxxx, trade
name, firm name, domain name, logo, trade dress, mask work, moral right, other
intellectual property right, right of privacy, right of publicity or right
in
personal or other data of any Person. No claims: (A) challenging the validity
or
ownership by the Company of any of Company Intellectual Property, or (B) to
the
effect that the use, reproduction, modification, manufacturing, distribution,
licensing, sublicensing, sale or any other exercise of rights in any Company
Intellectual Property by the Company or its licensees infringes or will infringe
on any intellectual property or other proprietary or personal right of any
Person have been asserted or, to the Company’s knowledge, are threatened by any
Person. Except as set forth in the Prospectus, all registered trademarks
included in the Intellectual Property and all copyright registrations held
by
the Company are valid, enforceable and subsisting. To the Company’s knowledge,
there is and has been no unauthorized use, infringement or misappropriation
of
any of any Intellectual Property by any Person (including, without limitation,
any employee or former employee of the Company).
(v) Except
as
set forth in the Prospectus, the Registration Statement or the exhibits thereto,
no parties other than the Company possess any current or contingent rights
to
any source code that is part of any Company Intellectual Property (including,
without limitation, through any escrow account).
(vii)
Except
as
set forth in the Prospectus, the Registration Statement or the exhibits thereto,
there is no Person who has created any material portion of, or otherwise have
any rights in or to, any Intellectual Property (other than employees of the
Company whose work product was created by them entirely within the scope of
their employment by the Company and constitutes works made for hire owned by
the
Company). The Company has secured from all parties who have created any material
portion of, or otherwise have any rights in or to, any Intellectual Property
valid and enforceable written assignments or licenses of any such work or other
rights to the Company.
(viii)
The
Company has obtained legally binding written agreements from all employees
of
the Company and third parties with whom the Company has shared confidential
proprietary information: (A) of the Company, or (B) received from others that
the Company is obligated to treat as confidential, which agreements require
such
employees and third parties to keep such information confidential.
(gg) Neither
the Company nor, to the Company’s knowledge, any of the Company’s directors,
officers or employees has violated: (i) the Bank Secrecy Act, as amended, (ii)
the Money Laundering Control Act of 1986, as amended, (iii) the Foreign Corrupt
Practices Act, or (iv) the Uniting and Strengthening of America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT
ACT)
Act of 2001, and/or the rules and regulations promulgated under any such law,
or
any successor law, except
for such violations which, singly or in the aggregate, would not have a Material
Adverse Effect.
Maxim
Group LLC
_________________,
2007
Page
13 of
38
(hh) Neither
the Company nor any of its Affiliates has, prior to the date hereof, made any
offer or sale of any securities which are required to be “integrated” pursuant
to the Securities Act or the Rules and Regulations with the offer and sale
of
the Shares pursuant to the Registration Statement.
(ii) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, no holder of any Relevant Security has any rights to require
registration of any Relevant Security as part or on account of, or otherwise
in
connection with, the offer and sale of the Shares contemplated hereby, and
any
such rights so disclosed have either been fully complied with by the Company
or
effectively waived by the holders thereof, and any such waivers remain in full
force and effect.
(jj) The
Company is not and, at all times up to and including consummation of the
transactions contemplated by this Agreement, and after giving effect to
application of the net proceeds of the Offering, will not be, subject to
registration as an “investment company” under the Investment Company Act of
1940, as amended, and is not and will not be an entity “controlled” by an
“investment company” within the meaning of such act.
(kk) Except
as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, there are no contracts, agreements or understandings between the
Company and any Person that would give rise to a valid claim against the Company
or any Underwriter for a brokerage commission, finder’s fee or other like
payment in connection with the transactions contemplated by this Agreement
or
any arrangements, agreements, understandings, payments or issuance with respect
to the Company or any of its officers, directors, stockholders, partners,
employees or Affiliates that may be aggregated with or otherwise affect the
Underwriters’ compensation as determined by FINRA.
(ll) The
Company owns or leases all such properties as are necessary to the conduct
of
its business as presently operated and as proposed to be operated as described
in the Registration, the Sale Preliminary Prospectus and the Prospectus. The
Company has good and marketable title in fee simple to all real property and
good and marketable title to all personal property owned by it, in each case
free and clear of all Liens except such as are described in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus or such as do
not
or will not (individually or in the aggregate) have a Material Adverse Effect.
Any real property and buildings held under lease or sublease by the Company
is
held pursuant to valid, subsisting and enforceable leases with such exceptions
as are not material to, and do not interfere with, the use made and proposed
to
be made of such property and buildings by the Company. The Company has not
received any notice of any claim adverse to its ownership of any real or
personal property or of any claim against the continued possession of any real
property, whether owned or held under lease or sublease by the Company.
Maxim
Group LLC
_________________,
2007
Page
14
of
38
(mm) The
Company maintains insurance of the types and in the amounts which are
customary
for companies engaged in similar businesses,
including, but not limited to: (i) directors’ and officers’ insurance (including
insurance
covering the Company, its directors and officers for liabilities or losses
arising in connection with this Offering, including, without limitation,
liabilities or losses arising under the Securities Act, the Exchange Act, the
Rules and Regulations and applicable foreign securities laws), (ii)
insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, (iii) business interruption insurance and (iv)
product liability insurance. The
Company maintains and will continue to maintain insurance (of which the Company
is the beneficiary) with at least $1,500,000 of coverage of the life of Xxxxxx
Xxxxx for a period of three (3) years from the Closing Date with an
insurer rated at least AA or better in the most recent addition of “Best’s Life
Reports”.
There
are no claims by the Company under any policy or instrument described in this
paragraph as to which any insurance company is denying liability or defending
under a reservation of rights clause. All
of the insurance policies described in this paragraph are in full force and
effect.
The
Company has not been refused any insurance coverage sought or applied for,
and
the Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(nn) The
Company has accurately prepared and timely filed all federal, state, foreign
and
other tax returns that are required to be filed by it and has paid or made
provision for the payment of all taxes, assessments, governmental or other
similar charges, including without limitation, all sales and use taxes and
all
taxes which the Company is obligated to withhold from amounts owing to
employees, creditors and third parties, with respect to the periods covered
by
such tax returns (whether or not such amounts are shown as due on any tax
return). No deficiency assessment with respect to a proposed adjustment of
the
Company’s federal, state, local or foreign taxes is presently in effect or is
pending or, to the Company’s knowledge, threatened. The accruals and reserves on
the books and records of the Company in respect of tax liabilities for any
taxable period not finally determined are adequate to meet any assessments
and
related liabilities for any such period and, since the date of the Company’s
most recent audited financial statements, the Company has not incurred any
liability for taxes other than in the ordinary course of its business. There
is
no tax lien, whether imposed by any federal, state, foreign or other taxing
authority, outstanding against the assets, properties or business of the
Company.
(oo) No
labor
disturbance by the employees of the Company currently exists or, to the
Company’s knowledge, is likely to occur.
(pp) Since
January 1, 2005, the Company has not received any written notification from
any
of the five (5) largest suppliers (measured in dollar value) of the products
sold by the Company or any Subsidiary: (i) that any such supplier is canceling
or otherwise terminating its relationship with the Company or a Subsidiary
and
the Company does not know of any such supplier contemplating taking any such
action or (ii) of a material dispute or a material dissatisfaction concerning
the Company’s relationship with such a supplier that could reasonably be
expected to result in the cancellation or termination of the relationship
between the Company and such supplier.
Maxim
Group LLC
_________________,
2007
Page
15 of
38
(qq) The
Company has at all times operated its business in material compliance with
all
Environmental Laws, and no material expenditures are or will be required in
order to comply therewith. The Company has not received any notice or
communication that relates to or alleges any actual or potential violation
or
failure to comply with any Environmental Laws that will result in a Material
Adverse Effect. As used herein, the term “Environmental
Laws”
means
all applicable laws and regulations, including any licensing, permits or
reporting requirements, and any action by a Federal state or local government
entity pertaining to the protection of the environment, protection of public
health, protection of worker health and safety, or the handling of hazardous
materials, including without limitation, the Clean Air Act, 42 U.S.C. Sec.
7401,
et seq., the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601, et seq., the Federal Water Pollution Control
Act, 33 U.S.C. Sec. 1321, et seq., the Hazardous Materials Transportation Act,
49 U.S.C. Sec. 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Sec. 690-1, et seq., and the Toxic Substances Control Act, 15 U.S.C.
Sec.
2601, et seq.
(rr) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, the Company is not a party to an “employee benefit plan,” as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974
(“ERISA”)
which:
(i) is subject to any provision of ERISA and (ii) is or was at any time
maintained, administered or contributed to by the Company and covers any
employee or former employee of the Company or any ERISA Affiliate (as defined
hereafter). These plans are referred to collectively herein as the “Employee
Plans.”
For
purposes of this paragraph, “ERISA
Affiliate”
of
any
person or entity means any other person or entity which, together with that
person or entity, could be treated as a single employer under Section 414(m)
of
the Internal Revenue Code of 1986, as amended (the “Code”),
or is
an “affiliate,” whether or not incorporated, as defined in Section 407(d)(7) of
ERISA, of the person or entity. The Company has provided the Representative
with
complete and accurate copies of all Employee Plans to which it is a
party.
(ss) To
the
extent required by the applicable provisions of the Securities Act and the
Rules
and Regulations, the Registration Statement and the Prospectus identify each
employment, severance or other similar arrangement or policy and each material
plan or arrangement providing for insurance coverage (including any self-insured
arrangements), workers’ compensation, disability benefits, severance benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits
or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation, or post-retirement
insurance, compensation or benefits which: (i) is not an Employee Plan, (ii)
is
entered into, maintained or contributed to, as the case may be, by the Company
or any of their respective ERISA Affiliates, and (iii) covers any employee
or
former employee of the Company or any of their respective ERISA Affiliates.
These contracts, plans and arrangements are referred to collectively in this
Agreement as the “Benefit
Arrangements.”
Each
Benefit Arrangement has been maintained in substantial compliance with its
terms
and with requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to that Benefit Arrangement. The Company has
provided the Representative with complete and accurate copies of all Benefit
Arrangements to which it is a party.
Maxim
Group LLC
_________________,
2007
Page
16 of
38
(tt) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, there is no liability in respect of post-retirement health and
medical benefits for retired employees of the Company or any of their respective
ERISA Affiliates other than medical benefits required to be continued under
applicable law, determined using assumptions that are reasonable in the
aggregate, over the fair market value of any fund, reserve or other assets
segregated for the purpose of satisfying such liability (including for such
purposes any fund established pursuant to Section 401(h) of the Code). With
respect to any of the Company’s Employee Plans which are “group health plans”
under Section 4980B of the Code and Section 607(1) of ERISA, there has been
material compliance with all requirements imposed there under such that the
Company or their respective ERISA Affiliates have no (and will not incur any)
loss, assessment, tax penalty, or other sanction with respect to any such
plan.
(uu) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, the Company is not a party to nor subject to any employment contract
or arrangement providing for annual future compensation, or the opportunity
to
earn annual future compensation (whether through fixed salary, bonus,
commission, options or otherwise) of more than $60,000 to any officer,
consultant, director or employee.
(vv) Except
as
set forth in the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, the execution of this Agreement, the Representative’s Warrant or any
other Transaction Document and consummation of the transactions contemplated
hereby and thereby does not constitute a triggering event under any Employee
Plan or any other employment contract, whether or not legally enforceable,
which
(either alone or upon the occurrence of any additional or subsequent event)
will
or may result in any payment (of severance pay or otherwise), acceleration,
increase in vesting, or increase in benefits to any current or former
participant, employee or director of the Company.
(ww) No
“prohibited transaction” (as defined in either Section 406 of the ERISA or
Section 4975 of Code), “accumulated funding deficiency” (as defined in Section
302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement under
Section 4043 of ERISA has been waived) has occurred with respect to any employee
benefit plan for which the Company would have any liability; each employee
benefit plan of the Company is in compliance in all material respects with
applicable law, including (without limitation) ERISA and the Code; the Company
has not incurred and does not expect to incur liability under Title IV of ERISA
with respect to the termination of, or withdrawal from any “pension plan”; and
each employee benefit plan of the Company that is intended to be qualified
under
Section 401(a) of the Code is so qualified and nothing has occurred, whether
by
action or by failure to act, which could cause the loss of such qualification.
Maxim
Group LLC
_________________,
2007
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17
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38
(xx) Except
as
described in the Registration Statement, the Sale Preliminary Prospectus and
the
Prospectus, or except as would not have a Material Adverse Effect, the Company:
(i) is and at all times has been in full compliance with all federal, state
and
local statutes, rules, regulations or guidance applicable to its current and
proposed businesses and operations (“Applicable
Laws”);
(ii)
has not received notice of adverse finding, warning letter, untitled letter
or
other correspondence or notice from any federal, state, local or foreign
governmental authority having authority over the Company (“Governmental
Authority”)
alleging or asserting noncompliance with any Applicable Laws or any licenses,
certificates, approvals, clearances, authorizations, permits and supplements
or
amendments thereto required by any such Applicable Laws (“Authorizations”);
(iii)
possesses all Authorizations and such Authorizations are valid and in full
force
and effect and are not in violation of any term of any such Authorizations;
(iv)
has not received notice of any claim, suit, proceeding, hearing, enforcement,
audit, investigation, arbitration or other action from any Governmental
Authority or third party alleging that any business operation or activity is
in
violation of any Applicable Laws or Authorizations and has no knowledge that
any
such Governmental Authority or third party is considering any such claim, suit,
proceeding, hearing, enforcement, audit, investigation, arbitration or other
action; (v) has not received notice that any Governmental Authority has taken,
is taking or intends to take action to limit, suspend, modify or revoke any
Authorizations and has no knowledge that any such Governmental Authority is
considering such action; (vi) has filed, obtained, maintained or submitted
all
material reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any Applicable Laws
or
Authorizations and that all such material reports, documents, forms, notices,
applications, records, claims, submissions and supplements or amendments were
complete and correct in all material respects on the date filed (or were
corrected or supplemented by a subsequent submission); and (vii) has not, either
voluntarily or involuntarily, initiated, conducted, or issued or caused to
be
initiated, conducted or issued, any recall, market withdrawal or replacement,
safety alert, post sale warning, or other notice or action relating to the
alleged lack of safety or efficacy of any product or any alleged product defect
or violation and the Company does not have any knowledge that any third party
has initiated, conducted or intends to initiate any such notice or action.
(yy) Neither
the Company nor any of the Company’s officers, directors, employees or agents
has at any time during the last five (5) years: (i) made any unlawful
contribution to any candidate for foreign office, or failed to disclose fully
any contribution in violation of law, or (ii) made any payment to any federal
or
state governmental officer or official, or other Person charged with similar
public or quasi-public duties, other than payments that are not prohibited
by
the laws of the United States of any jurisdiction thereof.
(zz) The
Company has not offered, or caused the Underwriters to offer, the Firm Shares
to
any Person or entity with the intention of unlawfully influencing: (i) a
customer or supplier of the Company or its Affiliates to alter the customer’s or
supplier’s level or type of business with the Company or any of its Affiliates
or (ii) a journalist or publication to write or publish favorable information
about the Company, any Affiliate or their respective products or
services.
(aaa) As
used
in this Agreement, references to matters being “material”
with
respect to the Company shall mean a material event, change, condition, status
or
effect related to the condition (financial or otherwise), properties, assets
(including intangible assets), liabilities, business, prospects (as such
prospects are disclosed or described in any Preliminary Prospectus or the
Prospectus), operations or results of operations of the
Company.
Maxim
Group LLC
_________________,
2007
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18
of
38
(bbb) As
used
in this Agreement, the term “knowledge
of the Company”
(or
similar language) shall mean the knowledge of the officers and directors of
the
Company who are named in the Sale Preliminary Prospectus and the Prospectus,
with the assumption that such officers and directors shall have made reasonable
and diligent inquiry of the matters presented (with reference to what is
customary and prudent for the applicable individuals in connection with the
discharge by the applicable individuals of their duties as officers or directors
of the Company).
(ccc) Any
certificate signed by or on behalf of the Company and delivered to the
Representative or to Ellenoff Xxxxxxxx & Schole LLP, counsel for the
Representative (“Underwriters’
Counsel”),
shall
be deemed to be a representation and warranty by the Company to each Underwriter
listed on Schedule
A
hereto
as to the matters covered thereby.
2.
Purchase,
Sale and Delivery of the Shares and the Representative’s
Warrants.
(a) On
the
basis of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to each Underwriter, and each Underwriter, severally and not
jointly, agrees to purchase from the Company, at a purchase price per share
of
$______, the number of Firm Shares set forth opposite their respective names
on
Schedule
A
hereto,
together with any additional number of Shares which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 9 hereof.
(b) Payment
of the purchase price for, and delivery of certificates representing, the Firm
Shares shall be made at the offices of the Underwriters’ Counsel, 000 Xxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as shall be agreed
upon
by the Representative and the Company, at 10:00 A.M., New York City time, on
the
third (3rd) or, as permitted under Rule 15c6-1 under the Exchange Act, fourth
(4th) business day (unless postponed in accordance with the provisions of
Section 9 hereof) following the date of the effectiveness of the Registration
Statement, or such other time not later than ten (10) business days after such
date as shall be agreed upon by the Representative and the Company as permitted
under Rule 15c6-1 under the Exchange Act (such time and date of payment and
delivery being herein called the “Closing
Date”).
The
closing of the payment of the purchase price for, and delivery of certificates
representing, the Firm Shares is referred to herein as the “Closing.”
(c) Payment
of the purchase price for the Firm Shares shall be made by wire transfer in
immediately available funds to or as directed by the Company upon delivery
of
certificates for the Firm Shares to the Representative through the facilities
of
The Depository Trust Company for the respective accounts of the several
Underwriters. Certificates for the Firm Shares shall be registered in such
name
or names and shall be in such denominations as the Representative may request
at
least two (2) business days before the Closing Date.
Maxim
Group LLC
_________________,
2007
Page
19
of
38
(d) In
addition, on the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set
forth, the Company hereby grants to the Underwriters an option to purchase
up to
an aggregate of ___________ Additional Shares at the same purchase price per
share to be paid by the Underwriters for the Firm Shares as set forth in Section
2(a) above, for the sole purpose of covering over-allotments in the sale of
Firm
Shares by the Underwriters. This option may be exercised at any time and from
time to time on or before the forty-fifth (45th)
day
following the final date of the Prospectus, by written notice from the
Representative to the Company. Such notice shall set forth the aggregate number
of Additional Shares as to which the option is being exercised and the date
and
time, as reasonably determined by the Representative, when the Additional Shares
are to be delivered (any such date and time being herein sometimes referred
to
as the “Additional
Closing Date”);
provided,
however,
that no
Additional Closing Date shall occur earlier than the Closing Date or earlier
than the second (2nd) full business day after the date on which the option
shall
have been exercised nor later than the eighth (8th) full business day after
the
date on which the option shall have been exercised (unless such time and date
are postponed in accordance with the provisions of Section 9 hereof). Upon
any
exercise of the option as to all or any portion of the Additional Shares, each
Underwriter, acting severally and not jointly, agrees to purchase from the
Company the number of Additional Shares that bears the same proportion of the
total number of Additional Shares then being purchased as the number of Firm
Shares set forth opposite the name of such Underwriter on Schedule
A
hereto
(or such number increased as set forth in Section 9 hereof) bears to the total
number of Firm Shares that the Underwriters have agreed to purchase hereunder,
subject, however, to such adjustments to eliminate fractional shares as the
Representative in its sole discretion shall make.
(e) Payment
of the purchase price for, and delivery of certificates representing, the
Additional Shares shall be made at the office of Underwriters’ Counsel, or at
such other place as shall be agreed upon by the Representative and the Company,
at 10:00 A.M., New York City time, on the Additional Closing Date (unless
postponed in accordance with the provisions of Section 9 hereof), or such other
time as shall be agreed upon by the Representative and the Company.
(f) Payment
of the purchase price for the Additional Shares shall be made by wire transfer
in immediately available funds to or as directed by the Company upon delivery
of
certificates for the Additional Shares to the Representative through the
facilities of The Depository Trust Company for the respective accounts of the
several Underwriters. Certificates for the Additional Shares shall be registered
in such name or names and shall be in such denominations as the Representative
may request at least two (2) business days before the Additional Closing Date.
The Company will permit the Representative to examine and package such
certificates for delivery at least one full business day prior to the Additional
Closing Date.
(g) On
the
Closing, the Company will further issue and sell to the Representative or,
at
the direction of the Representative, to other Underwriters or selling group
members or bona fide officers of the Underwriters or selling group members,
for
an aggregate purchase price of $100, the Representative’s Warrant, which shall
be exercisable for a period of five years from the effective date of the
Registration Statement commencing on the one year anniversary of the effective
date of the Registration Statement. The Representative’s Warrant shall be
exercisable at a price equal to 120% of the initial public offering price of
the
Common Stock and shall contain terms and provisions more fully described herein
below and as set forth more particularly in the Representative’s Warrant to be
executed by the Company on the Closing Date, including, but not limited to:
(i)
one demand and unlimited piggyback registration rights for a period of five
years after the Closing, (ii) cashless exercise; and (iii) customary
anti-dilution provisions. The Representative’s Warrant shall not be redeemable.
As provided in the Representative’s Warrant, the Representative may designate
that the Representative’s Warrant be issued in varying amounts directly to other
Underwriters and selling group members and to bona fide officers of the
Underwriters and selling group members. As further provided, no sale, transfer,
assignment, pledge or hypothecation of the Representative’s Warrant shall be
made for a period of one year from the Closing Date, except: (a) by operation
of
law or reorganization of the Company, or (b) to the Underwriters and bona fide
partners, officers of the Underwriters and selling group members.
Maxim
Group LLC
_________________,
2007
Page
20
of
38
3. Offering.
Upon
authorization of the release of the Firm Shares or, as the case may be, the
Additional Shares, by the Representative, the Underwriters propose to offer
the
Shares for sale to the public upon the terms and conditions set forth in the
Prospectus.
4. Covenants
of the Company.
The
Company acknowledges, covenants and agrees with the Underwriters
that:
(a) The
Registration Statement and any amendments thereto have been declared effective,
and if Rule 430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b), the Company will file the Prospectus (properly completed
if
Rule 430A has been used) pursuant to Rule 424(b) within the prescribed time
period and will provide evidence satisfactory to the Representative of such
timely filing.
(b) The
Company will notify the Representative immediately (and, if requested by the
Representative, will confirm such notice in writing): (i) when the Registration
Statement and any amendments thereto become effective, (ii) of any request
by
the Commission for any amendment of or supplement to the Registration Statement,
the Sale Preliminary Prospectus or the Prospectus or for any additional
information, (iii) of the Company’s intention to file or prepare any supplement
or amendment to the Registration Statement or the Prospectus, (iv) of the
mailing or the delivery to the Commission for filing of any amendment of or
supplement to the Registration Statement, the Sale Preliminary Prospectus or
the
Prospectus, including but not limited to Rule 462(b) under the Securities Act,
(v) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereto or of the initiation, or the threatening, of any proceedings therefor,
it being understood that the Company shall make every effort to avoid the
issuance of any such stop order, (vi) of the receipt of any comments from the
Commission, and (vii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose to enter a stop order at any time,
the
Company will make every reasonable effort to prevent the issuance of any such
stop order and, if issued, to obtain the lifting of such order as soon as
possible. The Company will not file any amendment to the Registration Statement
or any amendment of or supplement to the Sale Preliminary Prospectus or the
Prospectus (including the prospectus required to be filed pursuant to Rule
424(b)) that differs from the prospectus on file at the time of the
effectiveness of the Registration Statement or file any document under the
Exchange Act if such document would be deemed to be incorporated by reference
into the Prospectus to which the Representative shall object in writing after
being timely furnished in advance a copy thereof. The Company will provide
the
Representative with copies of all such amendments, filings and other documents
a
sufficient time prior to any filing or other publication thereof to permit
and
afford the Representative a reasonable opportunity and time to review and
comment thereon.
Maxim
Group LLC
_________________,
2007
Page
21
of
38
(c) The
Company shall comply with the Securities Act, the Exchange Act and all
applicable Rules and Regulations to permit completion of the distribution as
contemplated in this Agreement, the Registration Statement and the Prospectus.
If, at any time when a prospectus relating to the Shares is required to be
delivered under the Securities Act, the Exchange Act and all applicable Rules
and Regulations in connection with the sales of Shares, any event shall have
occurred as a result of which the Prospectus as then amended or supplemented
would, in the judgment of the Underwriters or the Company, include an untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein, in the light of
the
circumstances existing at the time of delivery to the purchaser, not misleading,
or if, to comply with the Securities Act, the Exchange Act or the Rules and
Regulations, it shall be necessary at any time to amend or supplement the
Prospectus or Registration Statement, or to file any document which is an
exhibit to the Registration Statement or the Prospectus or in any amendment
thereof or supplement thereto, the Company will notify the Representative
promptly and prepare and file with the Commission, subject to Section 4(a)
hereof, an appropriate amendment or supplement (in form and substance reasonably
satisfactory to the Representative) which will correct such statement or
omission or which will effect such compliance and will use its reasonable best
efforts to have any amendment to the Registration Statement declared effective
as soon as possible.
(d) The
Company will promptly deliver to the Underwriters and Underwriters’ Counsel a
signed copy of the Registration Statement, as initially filed and all amendments
thereto, including all consents and exhibits filed therewith, and will maintain
in the Company’s files manually signed copies of such documents for at least
five (5) years after the date of filing thereof. The Company will promptly
deliver to each of the Underwriters such number of copies of the Sale
Preliminary Prospectus, the Prospectus, the Registration Statement, and all
amendments of and supplements to such documents, if any, and all documents
which
are exhibits to the Registration Statement and Prospectus or any amendment
thereof or supplement thereto, as the Underwriters may reasonably request.
The
Company will promptly furnish the Underwriters with copies of the Prospectus
in
New York City in such quantities as the Underwriters may reasonably request.
(e) The
Company consents to the use and delivery of the Sale Preliminary Prospectus
by
the Underwriters in accordance with Rule 430 and Section 4(b) of the Securities
Act.
Maxim
Group LLC
_________________,
2007
Page
22
of
38
(f) If
the Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall both file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with
Rule
111 of the Securities Act by the earlier of: (i) 10:00 p.m., New York City
time,
on the date of this Agreement, and (ii) the time that confirmations are given
or
sent, as specified by Rule 462(b)(2).
(g) During
the period of 180 days after the effective date of the Registration Statement,
neither the Company nor any of its Affiliates will directly or indirectly,
take
any action which constitutes or is designed to cause or result in, or which
could reasonably be expected to constitute, cause or result in, the
stabilization or manipulation of the price of any security to facilitate the
sale or resale of the Shares.
(h) The
Company will use its reasonable best efforts, in cooperation with the
Representative, at or prior to the time of effectiveness of the Registration
Statement, to qualify the Shares for offering and sale under the securities
laws
relating to the offering or sale of the Shares of such jurisdictions, domestic
or foreign, as the Representative may designate and to maintain such
qualification in effect for so long as required for the distribution thereof;
except that in no event shall the Company be obligated in connection therewith
to qualify as a foreign corporation or to execute a general consent to service
of process.
(i) The
Company will make generally available to its security holders and to the
Underwriters as soon as practicable, but in any event not later than twelve
(12)
months after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Securities Act), an audited earnings statement of the
Company complying with Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule 158).
(j) During
the twelve (12) months following the Closing Date, without the consent of the
Representative which shall not be unreasonably withheld, the Company will not
file any registration statement relating to the offer or sale of any of the
Company’s securities, except for (i) a resale registration statement pursuant to
the terms of the Amendment No. 2 to the Registration Rights Agreement dated
as
of October ____, 2007 between the Company and each of Smithfield Fiduciary
LLC
and Iroquois Master Fund Ltd., (ii) a resale registration statement pursuant
to
the terms of the Amendment to the Subscription Agreement dated as of October
____, 2007 between the Company and each of holders of the Company’s 8%
debentures and the Series A convertible preferred stock, and (iii) a Form S-8
filed with the Commission in connection with any of the Company’s stock option
plans.
(k) Prior
to
the Closing Date, each
of
the Company’s officers, directors and stockholders listed on a schedule
previously provided to the Representative as of the Effective Date (the
“Lock-Up
Parties”)
who
own any of the Company’s outstanding shares of Common Stock, or warrants or
options to purchase Common Stock or other securities convertible into Common
Stock, shall enter into a written “lock-up” agreement in the form attached
hereto as Annex
II.
(l) During
the twelve (12) month period following the Closing Date, the Company shall
not,
without the prior written consent of the Representative, offer, sell or
distribute any of its securities, other than pursuant the Company’s 2007 Stock
Equity Plan or pursuant to the terms of any securities exercisable or
convertible into shares of the Company’s capital stock that are outstanding at
the Closing Date.
Maxim
Group LLC
_________________,
2007
Page
23
of
38
(m) During
the twenty-four (24) months following the Closing, the Company shall not offer,
sell or distribute any convertible securities convertible at a price that may,
at the time of conversion, be less than the Fair Market Value of the Common
Stock on the date of the original sale, without the consent of the
Representative, which consent shall not be unreasonably withheld. For purposes
of this Section 4, the term “Fair
Market Value”
shall
mean the greater of: (i) the average of the volume weighted average price of
the
Company’s common stock for each of the 30 trading days prior to the date of the
original sale; and (ii) the last sale price of the Common Stock, during normal
operating hours, as reported on the NCM, or any other exchange or electronic
quotation system on which the Common Stock is then listed.
(n) For
a period of two (2) years from the effective date of the Registration Statement,
the Company, at its expense, shall provide the Representative a subscription
to
the Company’s weekly transfer sheets from the previous week and securities
positions listings.
(o) For
a period of two (2) years from the effective date of the Registration Statement,
the Company, at its expense, shall obtain
and keep current a listing in the Standard & Poors or Mergent Manuals (it
being agreed that the Company shall obtain such listing prior to Closing);
(p) During
the period of two (2) years from the effective date of the Registration
Statement, the Company will furnish or make available via XXXXX to the
Underwriters copies of all reports or other communications (financial or other)
furnished to security holders or from time to time published or publicly
disseminated by the Company, and will furnish or make available via XXXXX to
the
Underwriters: (i) as soon as they are available, copies of any reports,
financial statements and proxy or information statements furnished to or filed
with the Commission or any national securities exchange on which any class
of
securities of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company as the
Representative may from time to time reasonably request.
(q) The
Company will not issue press releases or engage in any other publicity, without
the Representative’s prior written consent (which consent shall not unreasonably
be withheld, conditioned or delayed), other than normal and customary releases
issued in the ordinary course of the Company’s business, for a period ending at
5:00 p.m. Eastern time on the first business day following the thirtieth (30th)
day following the Closing Date.
(r) The
Company will use its good faith best efforts to maintain its key person life
insurance with an insurer rated at least AA or better in the most recent
addition of “Best’s Life Reports” in the amount of $1,500,000 on the life of
Xxxxxx Xxxxx in full force and effect for a period of three (3) years from
the
Closing Date. The Company shall be the sole beneficiary of such
policy.
Maxim
Group LLC
_________________,
2007
Page
24
of
38
(s) Upon
conclusion of the Offering and for no less than two (2) years from the Closing
Date, the Company will engage a financial public relations firm mutually
acceptable to the Company and the Representative.
(t) The
Company has or will retain a transfer agent reasonably acceptable to the
Representative for the Shares and shall continue to retain such transfer agent
(or another transfer agent reasonably acceptable to the Representative) for
a
period of three (3) years following the Closing Date.
(u) The
Company will apply the net proceeds from the sale of the Shares as set forth
under the caption “Use of Proceeds” in the Prospectus. Without
the written consent of the Representative, no proceeds of the Offering will
be
used to pay outstanding loans from officers, directors or stockholders or to
pay
any accrued salaries or bonuses to any employees or former employees, except
as
disclosed in the Prospectus.
(v) The
Company will use its reasonable best efforts to effect and maintain the listing
of the Shares on the NCM.
(w) The
Company, during the period when the Prospectus is required to be delivered
under
the Securities Act or the Exchange Act, will file all documents required to
be
filed with the Commission pursuant to the Securities Act, the Exchange Act
and
the Rules and Regulations within the time periods required thereby.
(x) The
Company will do and perform all things required to be done or performed under
this Agreement by the Company prior to the Closing Date or the Additional
Closing Date, as the case may be, and satisfy all conditions precedent to the
delivery of the Firm Shares and the Additional Shares.
(y) The
Company will not take, and will cause its Affiliates not to take, directly
or
indirectly, any action which constitutes or is designed to cause or result
in,
or which could reasonably be expected to constitute, cause or result in, the
stabilization or manipulation of the price of any security to facilitate the
sale or resale of the Shares or any other shares of Common Stock.
(z)
The
Company will not, without the prior written consent of the Representative
(which
consent may be given or withheld in the sole discretion of the Representative),
for a period of six (6) months from the effective date of the Registration
Statement, take (and will cause its Affiliates not to take), directly or
indirectly: (i) any action which results in the release of any “lock-up” or
similar share transfer restriction agreement made in favor of the Company,
which
agreement is in effect prior to the effective date of the Registration Statement
and (ii) any action (including the issuance of any legal opinion by counsel
to
the Company) relating to or which would facilitate the sale of any securities
of
the Company (including any shares of Common Stock) under Rule 144 promulgated
under the Securities Act, as the same may be amended from time to
time.
Maxim
Group LLC
_________________,
2007
Page
25
of
38
(aa) The
Company shall cause to be prepared and delivered to the Representative, at
its
expense, within one (1) business day from the effective date of this Agreement,
an Electronic Prospectus
to be used by the Underwriters in connection with the Offering. As used herein,
the term “Electronic
Prospectus”
means a form of prospectus, and any amendment or supplement thereto, that meets
each of the following conditions: (i) it shall be encoded in an electronic
format, reasonably satisfactory to the Representative, that may be transmitted
electronically by the other Underwriters to offerees and purchasers of the
Shares for at least the period during which a Prospectus relating to the Shares
is required to be delivered under the Securities Act; (ii) it shall disclose
the
same information as the paper prospectus and prospectus filed pursuant to XXXXX,
except to the extent that graphic and image material cannot be disseminated
electronically, in which case such graphic and image material shall be replaced
in the electronic prospectus with a fair and accurate narrative description
or
tabular representation of such material, as appropriate; and (iii) it shall
be
in or convertible into a paper format or an electronic format, reasonably
satisfactory to the Representative, that will allow recipients thereof to store
and have continuously ready access to the prospectus at any future time, without
charge to such recipients (other than any fee charged for subscription to the
Internet as a whole and for on-line time). The Company hereby confirms that
it
has included or will include in the Prospectus filed pursuant to XXXXX or
otherwise with the Commission and in the Registration Statement at the time
it
was declared effective an undertaking that, upon receipt
of a request by an investor or his or her representative within the period
when
a prospectus relating to the Shares is required to be delivered under the
Securities Act, the Company shall transmit or cause to be transmitted promptly,
without charge, a paper copy of the Prospectus
(bb) Right
to Appoint Observer.
The
Company will, for a period of two (2) years following the Closing of the
Offering, engage a designee of the Representative as an observer (“Observer”)
to its
board of directors (the “Board”)
where
such Observer shall attend meetings of the Board, receive all notices and other
correspondence and communications sent by the Company to members of the Board;
provided, that such Observer shall not be entitled to any compensation, other
than reimbursement for costs incurred in attending such meetings including,
food, lodging and transportation and shall sign a confidentiality agreement.
The
Company further agrees that, during such two (2) year period, it shall schedule
no less than four (4) meetings of the Board in each such year, at which meetings
such Observer shall be permitted to attend or otherwise participate as set
forth
herein; such meetings shall be held quarterly each year. Further, during such
two (2) year period, the Company shall give notice to the Representative with
respect to any proposed acquisitions, mergers, reorganizations or other similar
transactions. In lieu of Representative’s right to designate an Observer, Maxim
shall have the right during such three-year period, in its sole discretion,
to
designate one person for election as a director (“Director”)
of the
Company and the Company will utilize its reasonable best efforts to obtain
the
election of such person who shall be entitled to receive compensation equal
to
the compensation of other non-employee directors, excluding for the purposes
of
determining the amount of such other person whose compensation, the Chairperson
of any committee of the Company’s Board and any such other person whose
compensation exceeds the average compensation of the remaining eligible board
members by 10%. In addition, such Director shall be entitled to receive the
same
expense reimbursements and other benefits as any other non-employee director.
Representative agrees that any such person that it designates for election
as a
Director hereunder will be “independent” as that term is defined by either: (i)
the by-laws of the NCM, if the Company’s securities are listed for trading on
NCM at the time of such designation, or (ii) as defined by the American Stock
Exchange Rules, if the securities are listed for trading on the AMEX at the
time
of such designation. In the event that the Company’s securities are neither
listed on the NCM or AMEX at the time of such designation, any such Director
will meet the independence requirements of the Sarb-Ox.
Maxim
Group LLC
_________________,
2007
Page
26
of
38
The
Company agrees to indemnify and hold such Observer or Director harmless to
the
same extent provided to the other directors of the Company pursuant to the
Company’s Certificate of Incorporation and applicable law against any and all
claims, actions, damages, costs and expenses, and judgments arising solely
out
of the attendance and participation of the Director at any such meeting
described herein. Additionally, the Company shall maintain a liability insurance
policy affording coverage for the acts of its officers and directors for a
period of at least two (2) years from the Closing, and it agrees, if possible,
to include Representative’s designee as an insured under such
policy.
(cc) The
Company represents and agrees that, unless it obtains the prior consent of
Representative (which
consent shall not unreasonably be withheld, conditioned or delayed),
it has
not made and will not make any offer relating to the Shares that would
constitute an “issuer free writing prospectus,” as defined in Rule 433
promulgated under the Securities Act, or that would otherwise constitute a
“free
writing prospectus,” as defined in Rule 405 promulgated under the
Securities Act, required to be filed with the Commission. Any such free writing
prospectus consented to by the Representative is hereinafter referred to as
a
“Permitted
Free Writing Prospectus.”
The
Company represents that it has treated or agrees that it will treat each
Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as
defined in Rule 433 promulgated under the Securities Act, and has complied
and will comply with the requirements said Rule 433 applicable to any
Permitted Free Writing Prospectus, including timely filing with the Commission
where required, legending and record keeping.
5. Consideration;
Payment of Expenses.
(a) In
addition to the underwriters’ discount provided for in Section 2(a) hereof, as
additional consideration for the services to be provided for hereunder, the
Company shall pay to the Underwriters or their respective designees their pro
rata portion (based on the Shares purchased) of a
non-accountable expense allowance equal to two percent (2%) of the gross
proceeds of the Offering (exclusive of proceeds from the sale of Additional
Shares), less $50,000 previously paid.
(b) The
Representative reserves the right to reduce any item of its compensation or
adjust the terms thereof as specified herein in the event that a determination
shall be made by FINRA to the effect that the Underwriters’ aggregate
compensation is in excess of FINRA rules or that the terms thereof require
adjustment.
(c) Whether
or not: (i) the transactions are contemplated by this Agreement, (ii) the
Registration Statement and the Prospectus are consummated or (iii) this
Agreement is terminated, the Company hereby agrees to pay all costs and expenses
incident to the performance of its obligations hereunder, including the
following:
(i) all
expenses in connection with the preparation, printing, “edgarization” and filing
of the Registration Statement, any Preliminary Prospectus and the Prospectus
and
any and all amendments and supplements thereto and the mailing and delivering
of
copies thereof to the Underwriters and dealers;
Maxim
Group LLC
_________________,
2007
Page
27
of
38
(ii) the
fees,
disbursements and expenses of the Company’s counsel and accountants in
connection with the registration of the Shares under the Securities Act and
the
Offering;
(iii) the
cost
of producing this Agreement and any agreement among Underwriters, blue sky
survey, closing documents and other instruments, agreements or documents
(including any compilations thereof) in connection with the
Offering;
(iv) the
cost
of two (2) “tombstone” advertisements
to be
placed in appropriate daily or weekly periodicals of
the
Representative’s choice (i.e., The Wall Street Journal and The New York
Times);
(v) all
expenses in connection with the qualification of the Shares for offering and
sale under state or foreign securities or blue sky laws, including the fees
and
disbursements of Underwriters’ Counsel as set forth in Section 5(d) hereof in
connection with such qualification and in connection with any blue sky survey
undertaken by such counsel;
(vi) the
filing fees incident to securing any required review by FINRA of the terms
of
the Offering;
(vii) all
fees
and expenses in connection with listing the Shares on the NCM;
(viii) all
expenses of the Company and its representatives incurred in connection with
attending or hosting meetings with prospective purchasers of the Shares
(“Road
Show Expenses”);
(ix) any
stock
transfer taxes incurred in connection with the transfer of securities from
the
Company to the Underwriters pursuant to this Agreement or the
Offering;
(x) the
cost
of preparing stock certificates representing the Shares;
(xi) the
cost
and charges of any transfer agent or registrar for the Shares;
and
(xii) all
other
costs and expenses incident to the performance of the Company’s obligations
hereunder which are not otherwise specifically provided for in this Section
5.
(d) At
the
Closing,
the
Company shall issue a payment of $5,000 to Underwriters’
Counsel in consideration of “Blue Sky” services rendered.
The
Company shall also
pay, as due, state registration, qualification and filing fees, FINRA filing
fees and accountable out-of-pocket disbursements in connection with such
registration, qualification or filing.
Maxim
Group LLC
_________________,
2007
Page
28
of
38
(e) The
Company shall also reimburse the Representative for all fees, expenses and
disbursements relating to background checks of the Company’s officers and
directors in an amount not to exceed $3,000 per individual; provided, that
the
Company shall only be responsible for the fees, expenses and disbursements
for
the background checks for up to three (3) individuals, however, in the event
that the Company has more than three (3) senior executive officers prior to
the
consummation of the Offering, the Company will pay up to $3,000 for the expenses
and disbursements for the background checks for each such additional senior
executive officer.
(f) It
is
understood, however, that except as provided in this Section 5, and Sections
7,
8 and 11(b) hereof, the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel. Notwithstanding anything to
the
contrary in this Section 5, in the event that this Agreement is terminated
pursuant to this Section 5 or 11(b) hereof, the Company will pay all reasonable
out-of-pocket accountable expenses of the Underwriters (including but not
limited to the reasonable fees and disbursements of counsel to the Underwriters)
incurred in connection herewith, less any amounts previously advanced to the
Representative.
6.
Conditions
of Underwriters’ Obligations.
The
obligations of the Underwriters to purchase and pay for the Firm Shares and
the
Additional Shares as provided herein shall be subject to: (i) the accuracy
of
the representations and warranties of the Company herein contained in all
material respects, as of the date hereof and as of the Closing Date, (ii) the
absence from any certificates, opinions, written statements or letters furnished
to the Representative or to Underwriters’ Counsel pursuant to this Section 6 of
any material misstatement or omission, (iii) the performance in all material
respects by the Company of its obligations hereunder, and (iv) each of the
following additional conditions. For purposes of this Section 6, the terms
“Closing Date” and “Closing” shall refer to the Closing Date for the Firm Shares
and any Additional Closing Date, if different, for the Additional Shares, and
each of the foregoing and following conditions must be satisfied as of each
Closing.
(a) The
Registration Statement shall have become effective and all necessary regulatory
or listing approvals shall have been received not later than 5:30 P.M., New
York
time, on the date of this Agreement, or at such later time and date as shall
have been consented to in writing by the Representative. If the Company shall
have elected to rely upon Rule 430A under the Securities Act, the Prospectus
shall have been filed with the Commission in a timely fashion in accordance
with
the terms hereof and a form of the Prospectus containing information relating
to
the description of the Shares and the method of distribution and similar matters
shall have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period; and, at or prior to the Closing Date or the actual
time
of the Closing, no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued and
no
proceedings therefor shall have been initiated or threatened by the Commission.
Maxim
Group LLC
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2007
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(b) The
Representative shall have received the favorable written opinion of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
legal
counsel for the Company, dated as of the Closing Date addressed to the
Underwriters in the form attached hereto as Annex
I.
(c) All
proceedings taken in connection with the sale of the Firm Shares and the
Additional Shares as herein contemplated shall be satisfactory in form and
substance to the Representative and to Underwriters’ Counsel.
(d) The
Representative shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company, dated as of the Closing Date to
the
effect that: (i) the condition set forth in subsection (a) of this Section
6 has
been satisfied, (ii) as of the date hereof and as of the applicable Closing
Date, the representations and warranties of the Company set forth in Section
1
hereof that are qualified as to materiality or Material Adverse Effect are
true
and complete in all respects, and all of the representations and warranties
of
the Company set forth in Section 1 hereof that are not qualified as to
materiality or Material Adverse Effect shall be true and complete in all
material respects (iii) as of the applicable Closing Date, all agreements,
conditions and obligations of the Company to be performed or complied with
hereunder on or prior thereto have been duly performed or complied with, (iv)
the Company has not sustained any material loss or interference with their
respective businesses, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding, (v) no stop order suspending
the effectiveness of the Registration Statement or any post-effective amendment
thereof has been issued and no proceedings therefor have been initiated or
threatened by the Commission, (vi) there are no pro forma or as adjusted
financial statements that are required to be included or incorporated by
reference in the Registration Statement and the Prospectus pursuant to the
Rules
and Regulations which are not so included or incorporated by reference and
(vii)
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus there has not been any material
adverse change or any development involving a prospective material adverse
change, whether or not arising from transactions in the ordinary course of
business, in or affecting: (x) the business, condition (financial or otherwise),
results of operations, stockholders’ equity, properties or prospects (as such
prospects are disclosed or described in any Preliminary Prospectus or the
Prospectus) of the Company; (y) the long-term debt or capital stock of the
Company; or (z) the Offering or consummation of any of the other transactions
contemplated by this Agreement, the Registration Statement and the Prospectus.
(e) On
the date of this Agreement, on the Closing Date and, as the case may be, on
each
Additional Closing Date, the Representative shall have received a “cold comfort”
letter from BDO
dated,
respectively, as of the date of the date of delivery and addressed to the
Underwriters and in form and substance satisfactory to the Representative and
Underwriters’ Counsel,
confirming that they are independent certified public accountants with respect
to the Company within the meaning of the Securities Act and the Rules and
Regulations, and stating, as of the date of delivery (or, with respect to
matters involving changes or developments since the respective dates as of
which
specified financial information is given in the Prospectus,
as of a date not more than five (5) days prior to the date of such letter),
the
conclusions and findings of such firm with respect to the financial information
and other matters relating to the Registration Statement covered by such letter
and, with respect to letters issued as of Additional Closing Dates, confirming
the conclusions and findings set forth in such prior letter.
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Group LLC
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2007
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(f) Subsequent
to the execution and delivery of this Agreement or, if earlier, the dates as
of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been any material change in the capital stock or long-term
debt of the Company or any change or development involving a change, whether
or
not arising from transactions in the ordinary course of business, in the
business, condition (financial or otherwise), results of operations,
stockholders’ equity, properties or prospects (as such prospects are disclosed
or described in any Preliminary Prospectus or the Prospectus) of the Company,
including but not limited to the occurrence of any fire, flood, storm,
explosion, accident, act of war or terrorism or other calamity, the effect
of
which, in any such case described above, is, in the sole judgment of the
Representative, so material and adverse as to make it impracticable or
inadvisable to proceed with the Offering on the terms and in the manner
contemplated in the Prospectus (exclusive of any supplement).
(g) The
Representative shall have received a lock-up agreement from each Lock-Up Party,
duly executed by the applicable Lock-Up Party, in each case substantially in
the
form attached hereto as Annex
II.
(h) The
Shares shall have been approved for listing on the NCM.
(i) FINRA
shall have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(j) No
action
shall have been taken and no statute, rule, regulation or order shall have
been
enacted, adopted or issued by any federal, state or foreign governmental or
regulatory authority that would, as of the Closing Date, prevent the issuance
or
sale of the Shares; and no injunction or order of any federal, state or foreign
court shall have been issued that would, as of the Closing Date, prevent the
issuance or sale of the Shares.
(k) Since
the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall have been no litigation or other proceeding
instituted against the Company or any of its officers or directors in their
capacities as such, before or by any Federal, state or local court, commission,
regulatory body, administrative agency or other governmental body, domestic
or
foreign, which litigation or proceeding, in the reasonable judgment of the
Representative, could have a Material Adverse Effect.
(l) The
Company shall have furnished the Underwriters and Underwriters’ Counsel with
such other certificates, opinions or other documents (including a customary
certificate of the Company’s Secretary) as they may have reasonably
requested.
Maxim
Group LLC
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2007
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If
any of
the conditions specified in this Section 6 shall not have been fulfilled when
and as required by this Agreement, or if any of the certificates, opinions,
written statements or letters furnished to the Representative or to
Underwriters’ Counsel pursuant to this Section 6 shall not be reasonably
satisfactory in form and substance to the Representative and to Underwriters’
Counsel, all obligations of the Underwriters hereunder may be cancelled by
the
Representative at, or at any time prior to, the consummation of the Closing,
and
the obligations of the Underwriters to purchase the Additional Shares may be
cancelled by the Representative at, or at any time prior to, the Additional
Closing Date. Notice of such cancellation shall be given to the Company in
writing, or by telephone. Any such telephone notice shall be confirmed promptly
thereafter in writing.
7.
Indemnification.
(a) The
Company shall indemnify and hold harmless each Underwriter and each Person,
if
any, who controls each Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including,
but
not limited to, reasonable attorneys’ fees and any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they
or
any of them may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses
(or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact made by the Company contained
in
the Registration Statement, as originally filed or any amendment thereof, or
any
related Preliminary Prospectus (including the Sale Preliminary Prospectus)
or
the Prospectus, or in any supplement thereto or amendment thereof, or arise
out
of or are based upon the omission or alleged omission made by such party to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading; provided,
however,
that the
Company will not be liable in any such case to the extent but only to the extent
that (i) any such loss, liability, claim, damage or expense arises out of or
is
based upon any such untrue statement or alleged untrue statement or omission
or
alleged omission made therein in reliance upon and in conformity with the
Underwriters’ Information or (ii) such statement or omission was corrected in
the Prospectus or in a Permitted Free Writing Prospectus in conformity with
the
requirements of the Securities Act. This indemnity agreement will be in addition
to any liability, which the Company may otherwise have, including but not
limited to other liability under this Agreement. Notwithstanding the foregoing,
the foregoing indemnity shall not inure to the benefit of any Underwriter (or
any Person controlling such Underwriter) from whom the person asserting any
such
losses, claims, damages or liabilities purchased Shares, if either a copy of
a
Permitted Free Writing Prospectus (previously approved in writing by the
Representative as provided for in Section 4(bb) hereof) intended for general
distribution to prospective investors or the Prospectus (in each case, as then
amended or supplemented if the Company shall have furnished any amendments
or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if such
Permitted Free Writing Prospectus intended for general distribution to
prospective investors or Prospectus, as applicable, would have cured the defect
giving rise to such losses, claims, damages or liabilities, unless such failure
is the result of noncompliance by the Company with Section 4(d)
hereof.
Maxim
Group LLC
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2007
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(b) Each
Underwriter, severally and not jointly, shall indemnify and hold harmless the
Company, each of the directors of the Company, each of the officers of the
Company who shall have signed the Registration Statement, and each other Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including
but
not limited to attorneys’ fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them
may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, as
originally filed or any amendment thereof, or any related Preliminary Prospectus
(including the Sale Preliminary Prospectus) or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
in
each case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with the Underwriters’ Information;
provided,
however,
that in
no case shall any Underwriter be liable or responsible for any amount in excess
of the underwriting discount applicable to the Shares to be purchased by such
Underwriter hereunder.
(c) Promptly
after receipt by an indemnified party under subsection (a) or (b) above of
notice of any claims or the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification
is
to be sought in writing of the claim or the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve the indemnifying
party from any liability which it may have under this Section 7 to the extent
that it is not materially prejudiced as a result thereof and in any event shall
not relieve it from any liability that such indemnifying party may have
otherwise than on account of the indemnity agreement hereunder). In case any
such claim or action is brought against any indemnified party, and it notifies
an indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate, at its own expense in the defense of such action,
and to the extent it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel satisfactory to such indemnified
party; provided however, that counsel to the indemnifying party shall not
(except with the written consent of the indemnified party) also be counsel
to
the indemnified party. Notwithstanding the foregoing, the indemnified party
or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of
such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, (iii) the
indemnifying party does not diligently defend the action after assumption of
the
defense, or (iv) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct
the
defense of such action on behalf of the indemnified party or parties), in any
of
which events such fees and expenses shall be borne by the indemnifying parties.
No indemnifying party shall, without the prior written consent of the
indemnified parties, effect any settlement or compromise of, or consent to
the
entry of judgment with respect to, any pending or threatened claim,
investigation, action or proceeding in respect of which indemnity or
contribution may be or could have been sought by an indemnified party under
this
Section 7 or Section 8 hereof (whether or not the indemnified party is an actual
or potential party thereto), unless (x) such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such claim, investigation, action or proceeding and
(ii) does not include a statement as to or an admission of fault, culpability
or
any failure to act, by or on behalf of the indemnified party, and (y) the
indemnifying party confirms in writing its indemnification obligations hereunder
with respect to such settlement, compromise or judgment.
Maxim
Group LLC
_________________,
2007
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8.
Contribution.
In
order to provide for contribution in circumstances in which the indemnification
provided for in Section 7 hereof is for any reason held to be unavailable from
any indemnifying party or is insufficient to hold harmless a party indemnified
thereunder, the Company
and the
Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company, any
contribution received by the Company from Persons, other than the Underwriters,
who may also be liable for contribution, including Persons who control the
Company within the meaning of Section 15 of the Securities Act or Section 20
of
the Exchange Act, officers of the Company who signed the Registration Statement
and directors of the Company) as incurred to which the Company and one or more
of the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company
and the
Underwriters from the Offering or, if such allocation is not permitted by
applicable law, in such proportions as are appropriate to reflect not only
the
relative benefits referred to above but also the relative fault of the
Company and
the
Underwriters in connection with the statements or omissions which resulted
in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company
and the
Underwriters shall be deemed to be in the same proportion as: (x) the total
proceeds from the Offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company bears
to
(y) the underwriting discount or commissions received by the Underwriters,
in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault of each of the Company
and of
the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company
or the
Underwriters and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Company
and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by pro rata allocation (even if
the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this Section. The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an indemnified party and referred
to
above in this Section 8 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
judicial, regulatory or other legal or governmental agency or body, commenced
or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 8: (i) no Underwriter shall be required to contribute any amount
in
excess of the amount by which the discounts and commissions applicable to the
Shares underwritten by it and distributed to the public exceeds the amount
of
any damages which such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission
and
(ii) no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any
Person who was not guilty of such fraudulent misrepresentation. For purposes
of
this Section 8, each Person, if any, who controls an Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as such Underwriter, and each Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject
in
each case to clauses (i) and (ii) of the immediately preceding sentence. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect
of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they
may
have under this Section 8 or otherwise. The obligations of the Underwriters
to
contribute pursuant to this Section 8 are several in proportion to the
respective number of Shares to be purchased by each of the Underwriters
hereunder and not joint.
9.
Underwriter
Default.
Maxim
Group LLC
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2007
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(a) If
any
Underwriter or Underwriters shall default in its or their obligation to purchase
Firm Shares or Additional Shares hereunder, and if the Firm Shares or Additional
Shares with respect to which such default relates (the “Default
Shares”)
do not
(after giving effect to arrangements, if any, made by the Representative
pursuant to subsection (b) below) exceed in the aggregate 10% of the number
of
Firm Shares or Additional Shares, each non-defaulting Underwriter, acting
severally and not jointly, agrees to purchase from the Company that number
of
Default Shares that bears the same proportion of the total number of Default
Shares then being purchased as the number of Firm Shares set forth opposite
the
name of such Underwriter on Schedule
A
hereto
bears to the aggregate number of Firm Shares set forth opposite the names of
the
non-defaulting Underwriters, subject, however, to such adjustments to eliminate
fractional shares as the Representative in its sole discretion shall make.
(b) In
the
event that the aggregate number of Default Shares exceeds 10% of the number
of
Firm Shares or Additional Shares, as the case may be, the Representative may
in
its discretion arrange for itself or for another party or parties (including
any
non-defaulting Underwriter or Underwriters who so agree) to purchase the Default
Shares on the terms contained herein. In the event that within five calendar
days after such a default the Representative does not arrange for the purchase
of the Default Shares as provided in this Section 9, this Agreement or, in
the
case of a default with respect to the Additional Shares, the obligations of
the
Underwriters to purchase and of the Company to sell the Additional Shares shall
thereupon terminate, without liability on the part of the Company with respect
thereto or the Underwriters (except in each case as provided in Sections 5,
7,
8, 10 and 11(d)), but nothing in this Agreement shall relieve a defaulting
Underwriter or Underwriters of its or their liability, if any, to the other
Underwriters and the Company for damages occasioned by its or their default
hereunder.
(c) In
the
event that any Default Shares are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
the Representative or the Company shall have the right to postpone the Closing
Date or Additional Closing Date, as the case may be for a period, not exceeding
five (5) 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 or supplement to the Registration Statement or the Prospectus which,
in the reasonable opinion of Underwriters’ Counsel, may thereby be made
necessary or advisable. The term “Underwriter” as used in this Agreement shall
include any party substituted under this Section 9 with like effect as if it
had
originally been a party to this Agreement with respect
to such Firm Shares and Additional Shares.
10.
Survival
of Representations and Agreements.
All
representations and warranties, covenants and agreements of the Company and
the
Underwriters contained in this Agreement or in certificates of officers of
the
Company submitted pursuant hereto, including the agreements contained in Section
5, the indemnity agreements contained in Section 7 and the contribution
agreements contained in Section 8 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling Person thereof or by or on behalf of the Company,
any of its officers and directors or any controlling Person thereof, and shall
survive delivery of and payment for the Shares to and by the Underwriters.
The
covenants and agreements contained in Sections 5, 7, 8, this Section 10 and
Sections 14 and 15 hereof shall survive any termination of this Agreement,
including termination pursuant to Section 9 or 11 hereof.
Maxim
Group LLC
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2007
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11.
Effective
Date of Agreement; Termination.
(a) This
Agreement shall become effective upon the later of: (i) receipt by the
Representative and the Company of notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement.
(b) The
Representative shall have the right to terminate this Agreement at any time
prior to the consummation
of the Closing
or
to
terminate the obligations of the Underwriters to purchase the Additional Shares
at any time prior to the
consummation of any closing to occur on an Additional
Closing Date, as the case may be, if: (i) any domestic or international event
or
act or occurrence has materially disrupted, or in the opinion of the
Representative will in the immediate future materially disrupt, the market
for
the Company’s securities or securities in general; or (ii) trading on the New
York Stock Exchange, The NASDAQ Global Market, the NCM or the AMEX shall
have been suspended or been made subject to material limitations, or minimum
or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required, on the New York Stock Exchange, The
NASDAQ Global
Market,
the
NCM or
the AMEX
or by order of the Commission or any other governmental authority having
jurisdiction; or (iii) a banking moratorium has been declared by any state
or
federal authority or if any material disruption in commercial banking or
securities settlement or clearance services shall have occurred; or (iv) (A)
there shall have occurred any outbreak or escalation of hostilities or acts
of
terrorism involving the United States or there is a declaration of a national
emergency or war by the United States, (B) there shall have been any other
calamity or crisis or any change in political, financial or economic conditions,
or (C) a
Material Adverse Change with respect to the Company shall have occurred
and
if the
effect of any such event in (A), (B) or (C), in the reasonable judgment of
the
Representative, makes it impracticable or inadvisable to proceed with the
offering, sale and delivery of the Firm Shares or the Additional Shares, as
the
case may be, on the terms and in the manner contemplated by this Agreement
and
the Prospectus.
(c) Any
notice of termination pursuant to this Section 11 shall be in
writing.
(d) If
this
Agreement shall be terminated pursuant to any of the provisions hereof (other
than pursuant to Section 9(b) hereof), or if the sale of the Shares provided
for
herein is not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, the Company will, subject to demand by
the
Representative, reimburse the Underwriters for all accountable, out-of-pocket
expenses (including the fees and expenses of their counsel), incurred by the
Underwriters in connection herewith.
12.
Notices.
All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing, and:
Maxim
Group LLC
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2007
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(a) if
sent
to the Representative or any Underwriter, shall be mailed, delivered, or faxed
and confirmed in writing, to Maxim Group LLC, 000 Xxxxxxxxx, Xxx Xxxx, Xxx
Xxxx
00000, Attention: Xxxxxxxx X. Xxxxxx, Director of Investment Banking, in each
case, with a copy to Underwriters’ Counsel at Ellenoff Xxxxxxxx & Schole
LLP, 000 Xxxxxxxxx Xxxxxx, 00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx, 00000, Attention: Xxxxxxx X. Xxxxxxxx, Esq.;
and
(b) if
sent
to the Company shall be mailed, delivered, or faxed and confirmed in writing
to
the Company at the addresses set forth in the Registration Statement, with
a
copy to Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. Chrysler
Center 000
Xxxxx
Xxxxxx Xxx
Xxxx,
Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.;
provided,
however,
that any
notice to an Underwriter pursuant to Section 7 shall be delivered or sent by
mail or facsimile transmission to such Underwriter at its address set forth
in
its acceptance facsimile to the Representative, which address will be supplied
to any other party hereto by the Representative upon request. Any such notices
and other communications shall take effect at the time of receipt thereof.
13.
Parties.
This
Agreement shall inure solely to the benefit of, and shall be binding upon,
the
Underwriters, the Company and the controlling Persons, directors, officers,
employees and agents referred to in Sections 6 and 7 hereof, and their
respective successors 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 provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be
for
the sole and exclusive benefit of the parties hereto and said controlling
Persons and their respective successors, officers, directors, heirs and legal
representatives, and it is not for the benefit of any other Person. The term
“successors and assigns” shall not include a purchaser, in its capacity as such,
of Shares from any of the Underwriters.
14.
Governing
Law.
This
Agreement shall be deemed to have been executed and delivered in New York and
both this Agreement and the transactions contemplated hereby shall be governed
as to validity, interpretation, construction, effect, and in all other respects
by the laws of the State of New York, without regard to the conflicts of laws
principals thereof (other than Section 5-1401 of The New York General
Obligations Law). Each of the Underwriters and the Company: (a) agrees that
any
legal suit, action or proceeding arising out of or relating to this Agreement
and/or the transactions contemplated hereby shall be instituted exclusively
in
the Supreme Court of the State of New York, New York County, or in the United
States District Court for the Southern District of New York, (b) waives any
objection which it may have or hereafter to the venue of any such suit, action
or proceeding, and (c) irrevocably consents to the jurisdiction of Supreme
Court
of the State of New York, New York County, or in the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. Each of the Underwriters and the Company further agrees to accept
and acknowledge service of any and all process which may be served in any such
suit, action or proceeding in the Supreme Court of the State of New York, New
York County, or in the United States District Court for the Southern District
of
New York and agrees that service of process upon the Company mailed by certified
mail to the Company’s address or delivered by Federal Express via overnight
delivery shall be deemed in every respect effective service of process upon
the
Company, in any such suit, action or proceeding, and service of process upon
the
Underwriters mailed by certified mail to the Underwriters’ address or delivered
by Federal Express via overnight delivery shall be deemed in every respect
effective service process upon the Underwriter, in any such suit, action or
proceeding. THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT
PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS)
HEREBY WAIVES ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
CLAIM
BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION STATEMENT, THE
SALE PRELIMINARY PROSPECTUS AND THE PROSPECTUS.
Maxim
Group LLC
_________________,
2007
Page
37
of
38
15. No
Fiduciary Relationship.
The
Company hereby acknowledges that the Underwriters are acting solely as
underwriters in connection with the offering of the Company’s securities. The
Company further acknowledges that the Underwriters are acting pursuant to a
contractual relationship created solely by this Agreement entered into on an
arm’s length basis and in no event do the parties intend the Underwriters act or
be responsible as a fiduciary to the Company, their respective management,
stockholders, equity holders, creditors or any other person in connection with
any activity the Underwriters may undertake or have undertaken in furtherance
of
the offering of the Company’s securities, either before or after the date
hereof. The Underwriters hereby expressly disclaim any fiduciary or similar
obligations to the Company, either in connection with the transactions
contemplated by this Agreement or any matters leading up to such transactions,
and the Company hereby confirms its understanding and agreement to that effect.
The Company and the Underwriters agree they are each responsible for making
their own independent judgments with respect to any such transactions, and
any
opinions or views expressed by the Underwriters to the Company regarding such
transactions, including but not limited to any opinions or views with respect
to
the price or market for the Company’s securities, do not constitute advice or
recommendations to the Company. The Company hereby waives and releases, to
the
fullest extent permitted by law, any claims the Company or their Affiliates
may
have against the Underwriters with respect to any breach or alleged breach
of
any fiduciary or similar duty to the Company in connection with the transactions
contemplated by this Agreement or any matters involving such
transactions.
16. Entire
Agreement.
This
Agreement, together with the schedule and exhibits attached hereto and as the
same may be amended from time to time in accordance with the terms hereof,
contains the entire agreement among the parties hereto relating to the subject
matter hereof and there are no other or further agreements outstanding not
specifically mentioned herein.
17. Severability.
If any
term or provision of this Agreement or the performance thereof shall be invalid
or unenforceable to any extent, such invalidity or unenforceability shall not
affect or render invalid or unenforceable any other provision of this Agreement
and this Agreement shall be valid and enforced to the fullest extent permitted
by law.
18. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument. Delivery of a signed counterpart of this Agreement
by facsimile transmission shall constitute valid and sufficient delivery
thereof.
Maxim
Group LLC
_________________,
2007
Page
38
of
38
19. Headings.
The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
20. Time
is of the Essence.
Time
shall be of the essence of this Agreement. As used herein, the term “business
day” shall mean any day when the Commission’s office in Washington, D.C. is open
for business.
[Signature
Page Follows]
If
the
foregoing correctly sets forth your understanding, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute
a
binding agreement among us.
| Very truly yours, | ||
| CAMPUSU, INC. | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
Accepted
by the Representative, acting for itself and as
Representative
of the Underwriters named on Schedule
A
attached hereto,
as
of the date first written above:
MAXIM
GROUP LLC
| By: | |||
|
Name:
|
|||
|
Title:
|
[Signature
Page to Underwriting Agreement]
SCHEDULE
A
Underwriters
|
Underwriter
|
Total
Number of Firm
Shares
to be Purchased
|
Number
of Additional Shares
to
be Purchased if Option is
Fully
Exercised
|
|
Maxim
Group LLC
|
||
|
Xxxxxx,
Xxxxx Xxxxx, Incorporated
|
||
|
TOTAL
|
SCHEDULE
B
Subsidiaries
Campus
Tech, Inc., a Virginia corporation
ANNEX
I
Form
of Opinion of Company Counsel
I-1
ANNEX
II
Lock-Up
Agreement
_________________,
2007
MAXIM
GROUP LLC
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
Re:
CampusU,
Inc. Lock-Up Agreement
Ladies
and Gentlemen:
This
letter agreement (this “Agreement”)
relates to the public offering (the “Offering”)
by
CampusU, Inc., a company organized and existing under the laws of the State
of
Delaware (the “Company”),
of
shares of its common stock, par value $0.0001 per share (the “Common Shares”).
The
Offering is governed by a certain Underwriting Agreement (the “Underwriting
Agreement”),
to be
entered into by and between the Company and Maxim Group LLC (the “Representative”),
as
representative of the several underwriters named therein.
In
order
to induce the Representative to underwrite the Offering, the undersigned
hereby
agrees that, without the prior written consent of the Representative, which
consent shall not be unreasonably withheld, during the period from the date
hereof until and through the six (6) month anniversary of the closing of
the
offering contemplated by the Underwriting Agreement (the “Lock-Up
Period”),
the
undersigned: (a) will not, directly or indirectly, offer, sell, agree to
offer
or sell, solicit offers to purchase, grant any call option or purchase any
put
option with respect to, pledge, borrow or otherwise dispose of any Relevant
Security (as defined below), and (b) will not establish or increase any “put
equivalent position” or liquidate or decrease any “call equivalent position”
with respect to any Relevant Security (in each case within the meaning of
Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and
regulations promulgated thereunder), or otherwise enter into any swap,
derivative or other transaction or arrangement that transfers to another,
in
whole or in part, any economic consequence of ownership of a Relevant Security,
whether or not such transaction is to be settled by delivery of Relevant
Securities, other securities, cash or other consideration.
As
used
herein, the term “Relevant
Security”
means
any Common Shares or other security of the Company thereof that is convertible
into, or exercisable or exchangeable for Common Shares or other equity
securities of the Company or that holds the right to acquire any Common Shares
or other equity securities of the Company or any other such Relevant Security.
The
undersigned hereby authorizes the Company during the Lock-Up Period to cause
any
transfer agent for the Relevant Securities to decline to transfer, and to
note
stop transfer restrictions on the stock register and other records relating to,
Relevant Securities for which the undersigned is the record holder and, in
the
case of Relevant Securities for which the undersigned is the beneficial but
not
the record holder, agrees during the Lock-Up Period to cause the record holder
to cause the relevant transfer agent to decline to transfer, and to note
stop
transfer restrictions on the stock register and other records relating to,
such
Relevant Securities.
The
undersigned hereby further agrees that, without the prior written consent
of the
Representative, which consent shall not be unreasonably withheld, during
the
Lock-Up Period the undersigned will not: (x) file or participate in the filing
with the Securities and Exchange Commission of any registration statement,
or
circulate or participate in the circulation of any preliminary or final
prospectus or other disclosure document with respect to any proposed offering
or
sale of a Relevant Security or (y) exercise any rights the undersigned may
have
to require registration with the Securities and Exchange Commission of any
proposed offering or sale of a Relevant Security.
II-1
Notwithstanding
the foregoing, and subject to the conditions below, the undersigned may transfer
the Relevant Securities in the transactions described in clauses (i) through
(v)
below without the prior written consent of Maxim, provided that (1) Maxim
receives a signed lock-up agreement for the balance of the lock-up period
from
each donee, trustee, distributee, or transferee, as the case may be, (2)
any
such transfer shall not involve a disposition for value, (3) such transfers
are
not required to be reported in any public report or filing with the Securities
and Exchange Commission, or otherwise during the lock-up period and (4) the
undersigned does not otherwise voluntarily effect any public filing or report
regarding such transfers during the lock-up period:
| (i) |
as
a bona fide gift or gifts; or
|
| (ii) |
to
any trust for the direct or indirect benefit of the undersigned or
the
immediate family of the undersigned; or
|
| (iii) |
as
a distribution to members,
partners or stockholders of the
undersigned;
|
| (iv) |
to
any beneficiary of the undersigned pursuant to a will or other
testamentary document or applicable laws of descent;
or
|
| (v) |
to
any corporation, partnership, limited liability company or other
entity
all of the beneficial ownership interests of which are held by the
undersigned or immediate family of
the undersigned.
|
For
purposes of this lock-up agreement, “immediate family” shall mean any
relationship by blood, marriage or adoption, not more remote than first
cousin.
The
undersigned hereby represents and warrants to the Representative and the
Company
that the undersigned has full power and authority to enter into this Agreement
and that this Agreement constitutes the legal, valid and binding obligation
of
the undersigned, enforceable in accordance with its terms. Upon request,
the
undersigned will execute any additional documents necessary in connection
with
enforcement of the terms hereof. Any obligations of the undersigned shall
be
binding upon the successors and assigns of the undersigned from the date
first
above written.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York, without regard to the conflicts of laws principles thereof.
Delivery of a signed copy of this letter by facsimile transmission shall
be
effective as delivery of the original hereof.
Very
truly yours,
_____________________________
___________________
II-2
