EXHIBIT 10.19
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PLACEMENT AGENT AGREEMENT
Dated: Xxxxx 00, 0000
Xxxxxx Xxxxxx & Co., LLC
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
1. Offering.
A. Bridgeline Software, Inc., a Delaware corporation (the "Company"),
hereby engages Xxxxxx Xxxxxx & Co., LLC ("JGUN") (the "Placement Agent") to act
as its exclusive placement agent in connection with the issuance and sale by the
Company (the "Offering") of up to $2,300,000, or 23 Units ("Maximum
Offering")/$1,100,000, or 11 Units ("Minimum Offering"), with a "best-efforts"
over-allotment contingency of an additional $500,000, or 5 Units
("Overallotment"), which Units shall consist of senior secured notes (the
"Notes") and a five-year warrant to purchase 10,000 shares of the Company's
common stock ("Common Stock") at an exercise price of $.001 per share for each
$100,000 subscribed for (the "Warrant," and the shares issuable upon exercise of
the Warrant referred to herein as the "Warrant Shares"). The Placement Agent is
hereby authorized to engage, at its option, the services of other broker-dealers
who are members of the National Association of Securities Dealers, Inc. ("NASD")
to assist it in soliciting subscribers and to remit to such broker-dealers the
commissions payable to the Placement Agent hereunder as it shall determine.
The Offering is subject to (i) the terms and conditions set forth in
the Company's Confidential Private Offering Memorandum dated April 7, 2006 (such
memorandum with all amendments and exhibits thereto (the "Memorandum")). The
Offering is also subject to a subscription agreement and questionnaire and
noteholder agency appointment agreement to be executed by each purchaser of the
Notes and the Company (collectively, the "Subscription Agreements") (The
Subscription Agreement and the Memorandum are collectively referred to as the
"Offering Documents"). The Company shall issue and sell to Placement Agent or
its designee(s), for nominal consideration, five-year warrants to purchase 4,000
shares of Common Stock for each Unit sold (the "Placement Agent Warrants"), and
the Placement Agent agrees to enter into a six-month post-IPO lock-up on the
Placement Agent Warrant and the shares of Common Stock issuable upon exercise
thereof.
The Notes, the Warrants, the Warrant Shares, the Placement Agent
Warrants, and the Common Stock underlying the Placement Agent Warrants
("Placement Agent Shares") are hereinafter sometimes collectively referred to as
the "Securities."
The Notes and Warrants will be offered without registration under the
Securities Act of 1933, as amended (the "Securities Act"). Purchasers of the
Notes and Warrants will be granted certain registration rights with respect to
the Warrant Shares as more fully set forth in the
Warrants. The Placement Agent will be granted certain registration rights with
respect to the Placement Agent Warrants, as more fully set forth in the
Placement Agent Warrants.
B. The Notes and Warrants (collectively the "Units") will be offered by
the Company on a "best efforts, all or none" basis with respect to the "Minimum
Offering", and a "best efforts" basis with respect to the Maximum Offering, plus
a "best efforts" basis over allotment contingency with respect to the
Overalloment. The Company will issue the certificates representing the Notes and
Warrants at one or more closings (the "Closing") after subscriptions have been
received for the Minimum Offering and accepted by the Company and when funds
from investors have cleared the banking system in the normal course of business.
C. The Offering shall terminate on the earliest of: (a) the sale of the
Maximum Offering, or (b) May 31, 2006, unless extended without notice to the
Investors by the Company and the Placement Agent for no more than two (2) thirty
(30) day periods (the "Offering Period"). If the Minimum Offering is not sold
prior to the end of the Offering Period, the Offering will be terminated and all
funds received from Investors will be returned thereto, without interest thereon
or deduction therefrom. With respect to any subscriptions that are received by
the Placement Agent or accepted by the Company subsequent to the Offering
Period, all funds received by Investors will be returned thereto, without
interest thereon or deduction therefrom. The Company and Placement Agent reserve
the right to reject any and all subscription agreements in excess of the Minimum
Offering.
2. Information.
A. The Notes and Warrants shall have the terms set forth in and shall
be offered by the Company by means of the Offering Documents. Payment for the
Notes shall be made by check, money order or wire transfer as more fully
described in the Subscription Agreement. The minimum purchase by any purchaser
shall be $100,000, unless subscriptions for lesser amounts are accepted at the
discretion of the Company and the Placement Agent. The Placement Agent and the
Company agree that the Notes and Warrants will be offered solely to "accredited
investors" within the meaning of Rule 501 of Regulation D ("Accredited
Investors") promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Act and Rule 506 of Regulation D under the
Securities Act.
B. All funds received from subscriptions arranged will be promptly
transmitted to the escrow account maintained at U.S. Bank and designated as
"U.S. Bank/Bridgeline Software, Inc. - Escrow Account." In the event that a
Closing occurs, the funds received in respect of the Notes and Warrants closed
on will be forwarded to the Company, against delivery of the appropriate amount
of the Notes and Warrants, net of (i) the placement agent commission equal to
cash in an amount equal to ten percent (10%) of the gross proceeds of the Notes
sold in the Offering, (ii) the Placement Agent Warrants, and (iii) any
out-of-pocket costs and expenses paid or to be paid by the Placement Agent
including, but not limited to, travel, due diligence, printing, mailing, plus
legal expenses except that the Company shall not be responsible for any non-Blue
Sky law compliance related fees of the Placement Agent's legal counsel in excess
of $35,000 without the Company's approval.
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C. The Company and the Placement Agent reserve the right to reject any
subscriber, in whole or in part, in their sole reasonable discretion. Funds
received by the Company from any subscriber whose subscription is rejected will
be returned to such subscriber, without deduction therefrom or interest thereon,
but no sooner than such funds have cleared the banking system in the normal
course of business.
3. Representations, Warranties and Covenants of Placement Agent.
The Placement Agent represents, warrants and covenants as follows:
(i) It has the necessary power to enter into this Agreement
and to consummate the transactions contemplated hereby.
(ii) The execution and delivery by the Placement Agent of this
Agreement and the consummation of the transactions contemplated herein will not
result in any violation of, or be in conflict with, or constitute a default
under, any agreement or instrument to which a Placement Agent is a party or by
which a Placement Agent or its properties are bound, or any judgment, decree,
order or, to a Placement Agent's knowledge, any statute, rule or regulation
applicable to a Placement Agent. This Agreement constitutes the legal, valid and
binding obligation of the Placement Agent, enforceable against the Placement
Agent in accordance with its terms, except to the extent that (a) the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect and affecting the rights
of creditors generally, (b) the enforceability hereof is subject to general
principles of equity, or (c) the indemnification provisions hereof may be held
to be violative of public policy.
(iii) The Placement Agent will deliver to each Investor, prior
to any submission by such person of a written offer relating to the purchase of
the Notes and Warrants, a copy of the Offering Documents, as they may have been
most recently amended or supplemented by the Company.
(iv) Upon receipt of an executed Subscription Agreement, the
Placement Agent will promptly forward copies of the subscription documents to
the Company.
(v) The Placement Agent will not deliver the Offering
Documents to any person they do not reasonably believe to be an Accredited
Investor or to any person in a state where it does not reasonably believe that
the Offering is exempt from the applicable state "Blue Sky" laws.
(vi) The Placement Agent will not intentionally take any
action which it reasonably believes would cause the Offering to violate the
provisions of the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or the respective rules and regulations promulgated
thereunder (the "Rules and Regulations").
(vii) The Placement Agent shall have no obligation to insure
that (a) any check, note, draft or other means of payment for the Notes will be
honored, paid or enforceable against the subscriber in accordance with its
terms; or (b) subject to the performance of the Placement Agent's obligations
and the accuracy of its representations and warranties hereunder, (i) the
Offering is exempt from the registration requirements of the Securities Act or
any applicable
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state "Blue Sky" law; or (ii) any prospective purchaser is an Accredited
Investor; provided that Placement Agent will not deliver the Offering Documents
to any person they do not reasonably believe to be an Accredited Investor.
(viii) The Placement Agent is a member of the NASD and is a
broker-dealer registered as such under the Exchange Act and under the securities
laws of the states in which the Securities will be offered or sold by the
Placement Agent, unless an exemption for such state registration is available to
the Placement Agent. The Placement Agent is in compliance with all material
rules and regulations applicable to the Placement Agent generally and to the
Placement Agent's participation in the Offering.
4. Representations and Warranties of the Company.
The Company represents and warrants as follows:
(i) The execution, delivery and performance of each of this
Agreement, the Subscription Agreements and the Escrow Agreement has been duly
and validly authorized by the Company and is, or with respect to the
Subscription Agreements, will be, a valid and binding obligation of the Company,
enforceable in accordance with its respective terms, except to the extent that
(a) the enforceability hereof or thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect and affecting the rights of creditors generally, (b) the enforceability
hereof or thereof is subject to general principles of equity; or (c) the
indemnification provisions hereof or thereof may be held to be violative of
public policy.
(ii) The issuance, sale and delivery by the Company of the
Securities have been or will be prior to the Closing duly authorized by all
requisite corporate action of the Company. The Warrant Shares and the Placement
Agent Shares will, prior to the Closing, be duly reserved for issuance upon
exercise of the Warrants and exercise of the Placement Agent Warrants,
respectively.
(iii) Except as set forth in the Offering Documents or on
Schedule 4(iii), all issued and outstanding securities of the Company and its
subsidiaries have been duly authorized and validly issued, fully paid and
non-assessable and were issued in compliance with all applicable federal and
state securities laws; the holders thereof have no rights of rescission or
preemptive rights with respect thereto and are not subject to personal liability
solely by reason of being security holders; and none of such securities was
issued in violation of the preemptive rights of any holders of any security of
the Company. The Company has 15,000,000 shares of authorized Common Stock,
11,711,498 shares (calculated on a pre-1-for-3 reverse stock split anticipated
to take place on or about April 7, 2006) of which are issued and outstanding as
of the date hereof and no shares of authorized Preferred Stock.
(iv) Except as set forth in the Offering Documents or on
Schedule 4(iv) there are: (i) no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements pursuant to which the
Company is or may become obligated to issue, sell or repurchase any securities
of the Company; (ii) no restrictions on the transfer of the Company's capital
stock imposed by the Company's Certificate of Incorporation or Bylaws or any
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agreement to which the Company is a party, any order of any court or any
governmental agency to which the Company is subject or any statute other than
those imposed by relevant state and federal securities laws; (iii) no cumulative
voting or preemptive rights for any of the Company's capital stock; (iv) no
registration rights under the Securities Act with respect to the Company's
capital stock; (v) no antidilution adjustment provisions or similar rights with
respect to the outstanding securities of the Company will be triggered by the
issuance of the Securities; (vi) no voting trusts or agreements, shareholders
agreements, pledge agreements, buy-sell, rights of first offer, negotiation or
refusal or proxies or similar arrangements relating to any securities of the
Company to which the Company is a party; and (vii) no options or other rights to
purchase securities from its shareholders granted by such shareholders.
(v) The Warrant Shares and Placement Agent Shares, when issued
in accordance with the terms of the Subscription Agreement, Warrants, and the
Placement Agent Warrants and the terms of this Agreement as the case may be,
will be validly issued, fully-paid and non-assessable. The holders of the
Securities will not be subject to personal liability under the Company's
Certificate of Incorporation or Bylaws or, any state law, solely by reason of
being such holders; the Securities are not and will not be subject to the
preemptive rights of any holder of any security of the Company.
(vi) Each of the Company and its subsidiaries which are set
forth on Schedule 4(vi) has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
necessary to conduct its business (including, without limitation, any real or
personal property stated in the Offering Documents to be owned or leased by the
Company and its subsidiaries), free and clear of all liens, encumbrances,
claims, security interests and defects of any nature whatsoever, other than
those set forth in the Offering Documents or on Schedule 4(vi) and liens for
taxes not yet due and payable. All of the leases and subleases under which the
Company is the lessor or sublessor of properties or assets or under which the
Company holds properties or assets as lessee or sublessee are in full force and
effect, and the Company is not in default with respect to any of the terms or
provisions of any of such leases or subleases, and no claim has been asserted by
anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease.
(vii) There is no litigation or governmental proceeding
pending or, to the best of the Company's knowledge, threatened against, or
involving the Company or its subsidiaries or their properties or business,
except as set forth in the Offering Documents or on Schedule 4(vii). The Company
is not a party to any order, writ, injunction, judgment or decree of any court.
(viii) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing under its
respective jurisdiction of incorporation. Except as set forth in the Offering
Documents or on Schedule 4(viii), the Company does not own or control, directly
or indirectly, an interest in any other corporation, partnership, trust, joint
venture or other business entity. The Company owns 100% of the outstanding
capital stock of each of its subsidiaries. Each of the Company and its
subsidiaries is duly qualified or licensed and in good standing as a foreign
corporation in each jurisdiction in which the character of its operations
requires such qualification or licensing and where failure to
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so qualify would have a material adverse effect on the Company and its
subsidiaries taken as a whole ("MAE"). Each of the Company and its subsidiaries
has all requisite corporate power and authority, and all material and necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies (domestic and foreign) to
conduct its businesses (and proposed business), and each of the Company and its
subsidiaries is doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates and permits and all foreign, federal,
state and local laws, rules and regulations concerning the business in which it
is engaged, except where failure to so comply would not have a MAE. The Company
has all corporate power and authority to enter into this Agreement, the
Subscription Agreements, the Notes, the Warrants, the Placement Agent Warrants,
and Escrow Agreement and to carry out the provisions and conditions hereof and
thereof and to issue, sell and deliver the Securities. No consents,
authorizations, approvals, or orders of, or registration, qualification,
declaration or filing with, any federal, state or local governmental authority
on the part of the Company is required in connection herewith and therewith or
to issue, sell and deliver the Securities, other than registration or
qualification, or taking such action to secure exemption from such registration
or qualification of the Securities under applicable state, federal or foreign
securities laws, which actions have been taken or will be taken prior to the
Closing.
(ix) Except as set forth in the Offering Documents or on
Schedule 4(ix), each of the Company and its subsidiaries is not in breach of, or
in default under, any term or provision of any indenture, mortgage, deed of
trust, lease, note, loan or credit agreement or any other agreement or
instrument evidencing an obligation for borrowed money, or any other agreement
or instrument to which it is a party or by which it or any of its properties may
be bound, excluding trade payables and purchase orders as generally described in
the Offering Documents. Each of the Company and its subsidiaries is not in
violation of any provision of its charter or Bylaws or in violation of any
franchise, license, permit, judgment, decree or order, or in violation of any
statute, rule or regulation, except for the violation of statutes, rules or
regulations would not have a MAE. Neither the execution and delivery of this
Agreement and the Subscription Agreements, nor the issuance and sale or delivery
of the Securities, nor the consummation of any of the transactions contemplated
herein or in the Subscription Agreements, nor the compliance by each of the
Company and its subsidiaries with the terms and provisions hereof or thereof,
has conflicted with or will conflict with, or has resulted in or will result in
a breach of, any of the terms and provisions of, or has constituted or will
constitute a default under, or has resulted in or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company and its subsidiaries, if any, pursuant to the terms of any indenture,
mortgage, deed of trust, note, loan or credit agreement or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company or its subsidiaries may be bound or
to which any of the property or assets of the Company or its subsidiaries is
subject except where such default, lien, charge or encumbrance would not have a
MAE; nor will such action result in any violation of the provisions of the
charter or the Bylaws of each of the Company and its subsidiaries or, assuming
the due performance by the Placement Agent of its obligations hereunder, any
statute, order, rule or regulation applicable to the Company or its subsidiaries
of any court or of any foreign, federal, state or other regulatory authority or
other government body having jurisdiction over each of the Company and its
subsidiaries, if any.
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(x) Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by this Agreement other than Placement Agent and
there are no claims for services in the nature of a finder's or origination fee
with respect to the sale of the Securities.
(xi) Each of the Company and its subsidiaries owns or
possesses, free and clear of all liens or encumbrances and rights thereto or
therein by third parties, the requisite licenses or other rights to use all
trademarks, service marks, copyrights, service names, trade names, patents,
patent applications and licenses necessary to conduct its business (including,
without limitation, any such license, patent or rights described in the Offering
Documents as being owned or possessed by each of the Company and its
subsidiaries) and there is no claim or action by any person pertaining to, or
proceeding, pending or to the Company's knowledge, threatened, which challenges
the rights of each of the Company and its subsidiaries with respect to any
trademarks, service marks, copyrights, service names, trade names, patents,
patent applications and licenses used in the conduct of each of the Company's
and its subsidiaries' businesses (including, without limitation, any such
licenses or rights described in the Offering Documents as being owned or
possessed by each of the Company and its subsidiaries); each of the Company's
and its subsidiaries' current products, services or processes do not infringe or
will not infringe on the patents currently held by any third party.
(xii) Each of the Company and its subsidiaries is not under
any obligation to pay royalties or fees of any kind whatsoever to any third
party with respect to any trademarks, service marks, copyrights, service names,
trade names, patents, patent applications, licenses or technology it has
developed, uses, employs or intends to use or employ, other than to their
respective licensors.
(xiii) Subject to the performance by the Placement Agent of
its obligations hereunder, and the accuracy of the representations and
warranties made by the respective investors in the Subscription Agreements, the
Offering Documents and the offer and sale of the Securities comply, and will
continue to comply, through the Offering Period with the requirements of Rule
506 of Regulation D promulgated by the Commission pursuant to the Securities Act
and any other applicable federal and state laws, rules, regulations and
executive orders. Neither the Offering Documents nor any amendment or supplement
thereto, nor any other documents prepared by the Company in connection with the
Offering contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All statements of material facts in the Offering Documents are true
and correct as of the date of the Offering Documents and will be true and
correct in all material respects on the date of each Closing except with respect
to the number of shares of Common Stock outstanding, which may change between
the date hereof and the date of each Closing due to the conversion of
outstanding securities as described in the Offering Documents. If at any time
prior to the completion of the Offering or other termination of this Agreement
any event shall occur as a result of which it might, in the Company's opinion,
become necessary to amend or supplement the Offering Documents so that they do
not include any untrue statement of any material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances then existing, not misleading, the Company will promptly notify
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Placement Agent and will supply Placement Agent with amendments or supplements
correcting such statement or omission.
(xiv) All taxes which are due and payable from each of the
Company and its subsidiaries have been paid in full or appropriate extensions of
such payment have been obtained and each of the Company and its subsidiaries
does not have any tax deficiency or claim outstanding assessed or proposed
against it (except for such amounts set forth in the Offering Documents or on
Schedule 4(xiv), which amounts will be paid at Closing).
(xv) The financial statements of the Company included in the
Offering Documents or on Schedule 4(xv) fairly present the financial position,
results of operations, stockholders equity and cash flows, in all material
respects, of the Company at the respective dates thereof and for the periods
referred to therein.
(xvi) Neither the Company nor its subsidiaries, if any, nor
any of their respective officers, directors, employees or agents, nor any other
person acting on behalf of the Company or its subsidiaries, if any, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who is or may be in a position to
help or hinder the business of each of the Company or its subsidiaries (or
assist it in connection with any actual or proposed transaction) which (A) might
subject the Company and its subsidiaries, if any, to any material damage or
penalty in any civil, criminal or governmental litigation or proceeding, or (B)
if not given in the past, might have had a MAE on the assets, business or
operations of the Company or its subsidiaries as reflected in any of the
financial statements contained in the Offering Documents or on Schedule 4(xvi),
or (C) if not continued in the future, might adversely affect the assets,
business or operations of the Company or its subsidiaries in the future.
(xvii) Assuming (i) the accuracy of the information provided
by the respective investors in the Subscription Agreements and (ii) that
Placement Agent have complied in all material respects with their obligations
under this Agreement, the offer and sale of the Notes and Warrants pursuant to
the terms of the Offering Documents are exempt from the registration
requirements of the Securities Act and the rules and regulations promulgated
thereunder.
(xviii) When the Warrant Shares and the Placement Agent Shares
shall have been duly delivered to the purchasers and payment shall have been
made therefor, the purchasers shall have good and marketable title to the
Warrant Shares and Placement Agent Shares, as the case may be, free and clear of
all liens, encumbrances and claims whatsoever and the Company shall have paid
all taxes, if any, in respect of the original issuance thereof.
(xix) The Company understands that the foregoing
representations and warranties shall be deemed material and to have been relied
upon by Placement Agent. No representation or warranty by the Company in this
Agreement, and no written statement contained in any document, certificate or
other writing delivered by the Company to Placement Agent contains any untrue
statement of material fact or omits to state any material fact necessary
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to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading.
(xx) Upon receipt of an executed Subscription Agreement,
Company will promptly forward copies of the subscription documents to Placement
Agent.
(xxi) The Company will not deliver the Offering Documents to
any person it does not reasonably believe to be an Accredited Investor.
(xxii) The Company will not intentionally take any action
which it reasonably believes would cause the Offering to violate the provisions
of the Securities Act, Exchange Act or the Rules and Regulations.
(xxiii) The Company shall use all reasonable efforts to
determine (a) whether any prospective purchaser is an Accredited Investor and
(b) that any information furnished by a prospective investor is true and
accurate.
(xxiv) Except as set forth in the Offering Documents or on
Schedule 4(xxiv), as of the date hereof, the Company has no contractual
liability or any other liability, whether accrued, contingent, absolute,
determined, indeterminable or otherwise, which was not (i) reflected or reserved
against in the financial statements or (ii) incurred in the ordinary course of
business, consistent with past practice since its inception.
(xxv) To the best of Company's knowledge, since December 31,
2005, except as disclosed in the Offering Documents, the Company has not
incurred any liabilities or obligations, direct or contingent, not consistent
with its past practices, or entered into any transaction not consistent with its
past practices, which is material to the business of the Company, and, since the
date of the Memorandum, there has not been any change in the capital stock of,
or any incurrence of funded debt by, the Company, or any issuance of options,
warrants or other rights to purchase the capital stock of the Company, or any
adverse change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition (financial or
otherwise), net worth, results of operations, business, key personnel or
properties which would be material to the business or financial condition of the
Company, and the Company has not become a party to, and neither the business nor
the property of the Company has become the subject of, any material litigation
whether or not in the ordinary course of business.
(xxvi) Except as set forth in the Offering Documents or on
Schedule 4(xxvi), the Company filed all Federal, State, local and foreign tax
returns, if any, which are required to be filed by it to the relevant agencies
and all such returns are true and correct in all material respects except as the
Company has paid all taxes pursuant to such returns or pursuant to any
assessments received by it or which it is obligated to withhold from amounts
owing to any employee, creditor or third party. The Company has properly accrued
all taxes required to be accrued by generally accepted accounting principals
consistently applied. To the best of current management's knowledge, the tax
returns of the Company have never been audited by any state, local or Federal
authorities. The Company has not waived any statute of limitations with respect
to taxes or agreed to any extension of time with respect to any tax assessment
or deficiency.
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(xxvii) Except with respect to holders of the Units, no person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company. The Company shall grant
registration rights under the Securities Act to the Investors in the Offering
and/or their transferees as more fully described in the Subscription Agreement
between the Company and the Investors.
(xxviii) No person, firm or other business entity is a party
to any agreement, contract or understanding, written or oral entitling such
party to a right of first refusal with respect to offerings by the Company.
5. Certain Covenants and Agreements of the Company.
The Company covenants and agrees at its expense and without
any expense to Placement Agent as follows:
A. To advise Placement Agent of any adverse change in the Company's
financial condition, prospects or business or of any development materially
affecting the Company or rendering untrue or misleading any material statement
in the Offering Documents occurring at any time prior to a Closing as soon as
reasonably practicable after the Company is either informed or becomes aware
thereof.
B. To use its best efforts to cause the Securities to be qualified or
registered for sale, or to obtain exemptions from such qualification or
registration requirements, on terms consistent with those stated in the Offering
Documents, the Notes, the Warrants and the Placement Agent Warrants under the
securities laws of such jurisdictions as Placement Agent shall reasonably
request, provided that such states and jurisdictions do not require the Company
to qualify as a foreign corporation. Qualification, registration and exemption
charges and fees shall be at the sole cost and expense of the Company. Company's
counsel shall perform the required "Blue Sky" services, and all reasonable
expenses and disbursements of Company's counsel relating to such "Blue Sky"
matters and relating to the Offering shall be paid by the Company.
C. To apply the net proceeds of the Offering as described in the
Offering Documents or as set forth on Schedule 5(C).
D. To provide Placement Agent with as many copies of the Offering
Documents as the Placement Agent may reasonably request.
E. To comply with the terms of the Subscription Agreements, Notes,
Warrants and Placement Agent Warrants including, without limitation, the
registration rights provisions thereof.
F. To issue to Placement Agent or its designees, at the Closing, the
Placement Agent Warrants and provide for registration by the Company of the
Placement Agent Shares issuable upon the exercise thereof.
G. To keep available out of its authorized and designated Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants and
Placement Agent Warrants, such number of Warrant Shares and Placement Agent
Shares.
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H. Within three (3) days from the date hereof, Placement Agent shall
receive a copy of a duly executed escrow agreement in the form previously
delivered to you regarding the deposit of funds pending the Closing(s) of the
Offering with a bank or trust company acceptable to the Placement Agent (the
"Fund Escrow Agreement").
I. Employment agreements with key management reasonably acceptable to
the Placement Agent and its counsel shall have been executed and delivered.
J. A Board of Directors composition reasonably acceptable to the
Placement Agent, which shall include at least a majority of "independent"
directors, shall
be in place within 180 days of the first Closing. In the event this covenant is
not satisfied, the Placement Agent shall have the authority to nominate and the
Company shall appoint two directors selected by the Placement Agent. In the
event this covenant is satisfied, the Placement Agent's right to nominate such
directors will terminate.
K. There shall be reasonable satisfaction by the Placement Agent, in
its reasonable discretion, with their ongoing due diligence of the Company and
any subsidiaries.
L. The appointment of an observer designated by the Placement Agent, to
the Board of Directors of the Company and any subsidiary, shall have been
adopted at the time of the initial Closing. Such observer shall remain in place
so long as the Notes remain outstanding.
M. There shall be approval by the Board of Directors of the Company of
the contemplated public offering of the Company's securities as soon as possible
following the Offering on the terms outlined on Exhibit II to the Letter of
Intent (as defined below) and another Board of Directors resolution that if the
public offering of the Company's securities is not pursued in good faith and
absent the Placement Agent's failure to process the public offering in good
faith, the Company shall pay to the Placement Agent liquidated damages in the
amount of $100,000 for its failure to do so as set forth therein.
N. Pending completion of the Offering contemplated herein and the IPO
contemplated hereinafter, the Company agrees that it shall not negotiate with
any other broker-dealer or other person relating to a possible private and/or
public offering of its securities without the written consent of the Placement
Agent. In the event the Company enters into a letter of intent or effectuates a
private and/or a public offering of its securities with another broker-dealer or
any other person without the written permission of the Placement Agent after the
execution of this Agreement and prior to ______, 2006, the Company, in
compliance with the NASD Conduct Rules, shall be liable to the Placement Agent
for the out-of-pocket accountable expenses of the Placement Agent due and
payable immediately upon such engagement with another broker-dealer. The Company
further agrees that any communications with any other broker-dealer, solicited
or unsolicited, shall be conducted exclusively through the Placement Agent. The
preparations for the Offering may not be terminated prior to April 1, 2006 by
the Company other than for the Placement Agent's failure to proceed in good
faith. Thereafter, in the event marketing of the Offering has not commenced,
either party may terminate the Offering upon three days prior written notice,
without liability or continuing obligation to the other; provided, however, that
if the Company elects not to proceed with the Offering for any reason other than
the Placement Agent's bad faith in processing the transaction or if the
Placement Agent elects
11
not to proceed due to a material breach by the Company of any representation,
warranty or covenant contained in the Placement Agent Agreement to be entered
into, or as a result of the Company's failure to meet any of the conditions set
forth in Section 4 hereof, then the Company shall be obligated to pay the
Placement Agent, exclusive of any payments otherwise made, a "break-up" fee of
$100,000 plus 40,000 Placement Agent Warrants or, if the Offering Documents have
been distributed to potential investors, $150,000 plus 60,000 Placement Agent
Warrants.
6. Indemnification.
The Company agrees to indemnify and hold harmless the Placement Agent,
its affiliates, the directors, officers and employees of the Placement Agent and
its affiliates and subagents and selected dealers, and each other person or
entity, if any, controlling the Placement Agent or any of its affiliates
(collectively, "Indemnified Persons"), from and against, and the Company agrees
that no Indemnified Person shall have any liability to the Company or its
owners, parents, affiliates, securityholders or creditors for, any losses,
claims, damages, liabilities or expenses (including actions, claims or
proceedings in respect thereof (collectively, "Actions") brought by or against
any person, including stockholders of the Company, and the cost of any
investigation and preparation therefore and defense thereof) (collectively,
"Losses") (A) related to or arising out of any statements or omissions made in
the Offering Documents or any exhibit thereto or the services, commitment or
other obligations undertaken or being considered by the Placement Agent in this
Agreement in connection with the sale of the Securities in the Offering
(collectively, "Placement Agent's Role"), and claims relating to any finders or
origination fees, except that the indemnification shall not apply to the Losses
of an Indemnified Person that are determined by a court of competent
jurisdiction in a final judgment not subject to appeal to have resulted from the
bad faith or gross negligence of such Indemnified Person or to Losses arising
out of a claim under subsection (A) under this section as to an alleged omission
from or misstatement in, the Offering Documents or any exhibit thereto if either
(i) at or prior to the execution of a Subscription Agreement the copy of the
Memorandum and exhibits were not sent or delivered to the subscriber or (ii) the
alleged untrue statement was corrected or the omission of a material fact
alleged was contained in a supplement or amendment to the Memorandum was
delivered to the subscriber prior to the written acceptance of the subscriber's
Subscription Agreement by the Company. In addition, the indemnification
referenced above shall not apply to the Losses of an Indemnified Person that are
determined by a court of competent jurisdiction in a final judgment not subject
to appeal to have resulted from the bad faith or gross negligence of the
Placement Agent.
Promptly after receipt by an Indemnified Person (each an "indemnified
party") under this Section 6 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 6, notify in writing the indemnifying
party of the commencement thereof, however, that no delay on the part of the
indemnified party in notifying the indemnifying party shall relieve the
indemnifying party from any obligation hereunder unless the indemnifying party
is prejudiced by such delay. In case any such 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 therein, and to
the extent that it may wish, jointly with any other indemnifying party,
similarly notified, to assume the defense thereof, with counsel who shall be to
the reasonable satisfaction of such
12
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that if, in the reasonable judgment
of the indemnified party, it is advisable for the indemnified party to be
represented by separate counsel, the indemnified party shall have the right to
employ a single counsel only to represent the indemnified parties who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the indemnified parties thereof against the indemnifying party, in
which event the fees and expenses of such separate counsel shall be borne by the
indemnifying party. Any such indemnifying party shall not be liable to any such
indemnified party on account of any settlement of any claim or action effected
without the consent of such indemnifying party.
If such an indemnity provided for in this Agreement is unavailable or
insufficient for any Indemnified Person with respect to any Losses (other than
by reason of the gross negligence or bad faith of such indemnifying party), then
the indemnifying party, in lieu of indemnifying such Indemnified Person, will
contribute to the amount paid or payable by such Indemnified Person as a result
of such Losses (i) in such proportion as it is appropriate to reflect the
relative benefits received by the Company on the one hand, and the Placement
Agent, on the other hand, from the transactions contemplated hereunder, or (ii)
if the allocation provided by (i) above is not permitted by applicable law in
such proportion as is appropriate to reflect not only the relative benefits
referred to in (i) above, but also the relative fault on the Company, on the one
hand, and of the Placement Agent on the other hand in connection with statements
or omissions that resulted in Losses as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand,
and the Placement Agent, on the other hand shall be deemed to be in the same
proportion as the total proceeds from the Transactions (net of sales
commissions, but before deducting other expenses) received by the Company bear
to the commissions received by the Placement Agent. The relative fault of the
Company, on the one hand, and the Placement Agent, on the other hand, will be
determined with reference to, among other things, whether the untrue or alleged
untrue statement of material fact or the omission to state a material fact
relates to the information supplied by the Company, on the one hand, and the
Placement Agent, on the other hand, and their relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Placement Agent agree that it would not be just and
equitable if contribution pursuant to this section were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
THE PLACEMENT AGENT HEREBY AGREES AND THE COMPANY HEREBY AGREES, ON ITS
OWN BEHALF AND ON BEHALF OF ITS SECURITYHOLDERS, TO WAIVE ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR ACTION ARISING OUT OF PLACEMENT
AGENT'S ROLE OR THIS PLACEMENT AGENT AGREEMENT.
13
7. Payment of Expenses.
Whether or not the Offering is successfully completed, the Company
hereby agrees to bear all of the customary reasonable expenses in connection
with the Offering, including, but not limited to the following: due diligence,
travel, lodging, filing fees, printing and duplicating costs, advertisements,
postage and mailing expenses with respect to the transmission of offering
material, registrar and transfer agent fees, escrow agent fees and expenses,
fees of the Company's counsel and accountants, issue and transfer taxes, if any,
"Blue Sky" counsel fees and expenses of Company's counsel and the legal fees and
expenses of Placement Agent's counsel in an amount not to exceed $35,000. It is
agreed that the Company's counsel shall perform the required Blue Sky legal
services.
8. Conditions of the Closing
Provided the Offering shall have been subscribed for and funds
representing such amount thereof shall have cleared, each Closing shall be held
at the offices of the Placement Agent's counsel or such other place as mutually
agreed upon by the parties. The obligations of the Placement Agent hereunder
shall be subject to the continuing accuracy of the representations and
warranties, in all material respects, of the Company herein as of the date
hereof and as of the date of the Closing as if such representations and
warranties had been made on and as of such Closing; the accuracy on and as of
the date of each Closing of the statements of the officers of the Company made
pursuant to the provisions hereof; and the performance by the Company on and as
of each Closing of its covenants and obligations hereunder and to the following
further conditions:
A. At each Closing, the Placement Agent shall receive the opinion of
Xxxxx, Xxxxxx-Xxxxx & Xxxxxxxxx, P.C., counsel to the Company, dated as of the
date of the Closing, which opinion shall be acceptable to the Placement Agent.
B. At or prior to each Closing, counsel for Placement Agent shall have
been furnished such documents, certificates and opinions as it may reasonably
require for the purpose of enabling it to review or pass upon the matters
referred to in this Agreement and the Offering Documents, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
C. At and prior to each Closing, (i) there shall have been no material
adverse change nor development involving a prospective change in the financial
condition or operations except where such change would not have a material
adverse effect or the business activities, financial or otherwise, of the
Company and its subsidiaries from the latest dates as of which such condition is
set forth in the Offering Documents; (ii) there shall have been no material
transaction, not in the ordinary course of business, entered into by the Company
and its subsidiaries which has not been disclosed as having taken place or being
contemplated in the Offering Documents or to the Placement Agent in writing;
(iii) the Company shall not be in default under any provision of any instrument
relating to any outstanding indebtedness, excluding trade payables, for which a
waiver or extension has not been otherwise received except where such default
would not have a material adverse effect; (iv) except as set forth in the
Offering Documents or in the Schedules to this Agreement, the Company shall not
have issued
14
any securities (other than those set forth in the Offering Documents or pursuant
to the exercise of outstanding warrants or options) or declared or paid any
dividend or made any distribution of its capital stock of any class and there
shall not have been any material adverse change in the indebtedness (long or
short term) or liabilities or obligations of the Company and its subsidiaries
(contingent or otherwise); (v) no material amount of the assets of the Company
and its subsidiaries shall have been pledged or mortgaged, except with respect
to assets in the normal course of business and as indicated in the Offering
Documents or in the Schedules to this Agreement; and (v) no action, suit or
proceeding, at law or in equity, against the Company or its subsidiaries or
affecting any of its properties or businesses shall be pending or threatened
before or by any court or federal or state commission, board or other
administrative agency, domestic or foreign, wherein an unfavorable decision,
ruling or finding could have a material adverse effect, except as set forth in
the Offering Documents or in the Schedules of this Agreement.
D. Subject to the filing of any necessary state "Blue Sky" filings, the
Offering will become qualified or be exempt from qualification under the
securities laws of the several states as contemplated by Section 5(B) no later
than the date of the Closing and no stop order suspending the sale of the Notes
shall have been issued, and no proceedings for that purpose shall have been
initiated or threatened.
E. At each Closing, the Placement Agent shall have received a
certificate of the Company signed by its chief executive officer and chief
financial officer, dated as of the date of such Closing, to the effect that the
conditions set forth in subparagraph (C) above have been satisfied and that, as
of the date of such Closing, the representations and warranties of the Company
set forth herein are true and correct.
F. At Closing, the Company, the acquisition target and the Placement
Agent shall have executed a non-binding term sheet including all material terms
and provisions acceptable to the Placement Agent providing for an acquisition by
the Company to be consummated no later than thirty (30) days following the
Closing of the Offering.
G. At each Closing, the Company shall have duly executed and delivered
the appropriate amount of Notes to the respective holders thereof.
H. At each Closing, the Company shall duly and validly issue the
Warrants and the Placement Agent Warrants in accordance with the terms hereof.
I. The Company and the Placement Agent shall have executed the
Placement Agent Agreement and the Placement Agent shall have been delivered the
Company's counsel's opinion in accordance therewith.
J. Employment agreements with key management on the terms and
provisions reasonably acceptable to the Placement Agent shall have been executed
and delivered.
K. The Company engagement of an independent accounting firm and a legal
firm reasonably acceptable to the Placement Agent.
L. The Placement Agent shall have received comfort representation from
the Company's bank creditors.
15
M. There shall be satisfaction by the Placement Agent, in its sole
discretion, with its ongoing due diligence of the Company and any subsidiaries,
including, but not limited to, the Company's financial condition, business
prospects, acquisition targets, management and Board of Directors. This also
includes satisfactory background examinations of the Company's officers,
directors, controlling persons and key employees.
N. The appointment of a non-voting observer designated by the Placement
Agent to the Board of Directors of the Company and any Subsidiary shall have
been adopted. Such observer shall be entitled to receive reimbursement for
reasonably incurred expenses and all information as and when received by the
voting Board members so as to enable such observer to discharge his duties and
responsibilities on the Board. Such observer shall remain in place so long as
the Notes remain outstanding.
O. The Company shall have delivered to the Placement Agent at Closing
an annual projection of its operations, financial position and cash flow of the
Company and any Subsidiary, as approved by the Board of Directors and executive
officers of the Company.
P. The Company, immediately prior to the Closing of the Minimum
Offering, will furnish Placement Agent with agreements to the effect that for a
period of 12 months after the effective date of the registration statement of
the Company's initial public offering, the persons who are officers, directors
and stockholders who own any outstanding common stock of the Company or warrants
or options to purchase common stock or securities convertible into common stock
will refrain from making any public sale or distribution of their common stock
or such warrants, options or convertible securities (pursuant to Rule 144 or
otherwise) without the prior written consent of the Placement Agent. In
addition, there will be no private transaction involving such securities unless
the proposed transferee agrees to be bound by all the provisions of such
agreement prior to any such private transaction.
9. Termination.
This Agreement shall terminate if a Closing does not take place on or
before seven (7) business days following the Offering Period. In the event that
the Offering is not successfully completed, then the Company shall immediately
pay to Placement Agent the amount of its out-of-pocket expenses incurred in
connection with the offer of the Securities and pay all non-Blue Sky related
fees of counsel to Placement Agent, up to $35,000. Upon any termination of the
Offering, all subscription documents and payments for the Securities not
previously delivered to the purchasers thereof, shall be returned to the
respective subscribers, without interest thereon or deduction therefrom, and
neither party hereto shall have any further obligation to each other, except as
specifically provided herein.
16
10. Miscellaneous.
A. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all which shall be deemed to be
one and the same instrument.
B. Any notice required or permitted to be given hereunder shall be
given in writing and shall be deemed effective when deposited in the United
States mail, postage prepaid, or when received if personally delivered, sent by
overnight courier or faxed, addressed as follows:
To JGUN:
Xxxxxx Xxxxxx & Co., LLC
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
with a copy to:
Cozen X'Xxxxxx
0000 X Xxxxxx, XX, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax (000) 000-0000
Attention: Xxxxx X. Xx Xxxxxxx, Esq.
to the Company:
Bridgeline Software, Inc.
00 Xxxxx Xxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxx
with a copy to:
Xxxxx, Xxxxxx-Xxxxx & Xxxxxxxxx, P.C.
Reservoir Place, 0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
or to such other address of which written notice is given to the others.
C. This Agreement shall be governed by and construed in all respects
under the laws of the State of New York, without reference to its conflict of
laws rules or principles. Any suit, action, proceeding or litigation arising out
of or relating to this Agreement shall be brought and prosecuted only in federal
and state courts in the City, County and State of New York. The
17
parties hereby irrevocably and unconditionally consent to the jurisdiction of
each such court or courts located within the State of New York and to service of
process by registered or certified mail, return receipt requested, or by any
other manner provided by applicable law, and hereby irrevocably and
unconditionally waive any right to claim that any suit, action, proceeding or
litigation so commenced has been commenced in an inconvenient forum.
D. This Agreement and the other agreements referenced herein contain
the entire understanding between the parties hereto with respect to the subject
Offering and may not be modified or amended except by a writing duly signed by
the party against whom enforcement of the modification or amendment is sought.
The terms and conditions of any other agreement between the Company and
Placement Agent are hereby terminated, and specifically, the October 1, 2005
Letter of Intent between JGUN and the Company (the "Letter of Intent"), as well
as any other any other prior agreement or understanding not set forth herein
between the Company and the Placement Agent are hereby terminated, voided and
made null.
E. If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
BRIDGELINE SOFTWARE, INC.
By: /S/ XXXXXX X. XXXXXX
--------------------------
Name: Xxxxxx Xxxxxx
Title: President and CEO
XXXXXX XXXXXX & CO., LLC
By: /S/ XXXXXXX X. XXXXX
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Operating Officer
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