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Exhibit 1.1
2,500,000 Shares
FORTUNET, INC.
Common Stock, $0.001 par value
UNDERWRITING AGREEMENT
________, 2006
W.R. Hambrecht + Co, LLC
as
Representative of the several
Underwriters
named in Schedule I hereto
c/o W.R. Hambrecht + Co, LLC
539 Bryant Street, Suite 100
San Francisco, CA 94107
Ladies and Gentlemen:
FortuNet,
Inc., a Nevada corporation (the "Company") proposes, subject to
the terms and conditions contained herein, to sell to you and the
other
underwriters named on Schedule I to this Agreement (the
"Underwriters"), for
whom you are acting as Representative (the "Representative"), an
aggregate of
2,500,000 shares (the "Firm Shares") of the Company's common stock,
$0.001 par
value per share (the "Common Stock"). The respective amounts of the
Firm Shares
to be purchased by each of the several Underwriters are set forth
opposite their
names on Schedule I hereto. In addition, the Company proposes to
grant to the
Underwriters an option to purchase up to an additional 375,000
shares (the
"Option Shares") of Common Stock from the Company for the purpose
of covering
over-allotments in connection with the sale of the Firm Shares. The
Firm Shares
and the Option Shares are collectively called the "Shares."
The
Company has prepared and filed in conformity with the requirements
of
the Securities Act of 1933, as amended (the "Securities Act"), and
the published
rules and regulations thereunder (the "Rules") adopted by the
Securities and
Exchange Commission (the "Commission") a Registration Statement (as
hereinafter
defined) on Form S-1 (No. 333-128391), including a preliminary
prospectus
relating to the Shares, and such amendments thereof as may have
been required to
the date of this Agreement. Copies of such Registration Statement
(including all
amendments thereof) and of the related Preliminary Prospectus (as
hereinafter
defined) have heretofore been delivered by the Company to you. The
term
"Preliminary Prospectus" means any preliminary prospectus included
at any time
as a part of the Registration Statement or filed with the
Commission by the
Company pursuant to Rule 424(a) of the Rules.
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The term "Registration Statement" as used in this Agreement means
the initial
registration statement (including all exhibits and financial
schedules), as
amended at the time and on the date it becomes effective (the
"Effective Date"),
including the information (if any) contained in the form of final
prospectus
filed with the Commission pursuant to Rule 424(b) of the Rules and
deemed to be
part thereof at the time of effectiveness pursuant to Rule 430A of
the Rules.
The term "Prospectus" as used in this Agreement means the
prospectus in the form
included in the Registration Statement at the time of effectiveness
or, if Rule
430A of the Rules is relied on, the term Prospectus shall also
include the final
prospectus filed with the Commission pursuant to Rule 424(b) of the
Rules.
The
Company understands that the Underwriters propose to make a
public
offering of the Shares, as set forth in and pursuant to the
Prospectus, as soon
after the Effective Date and the date of this Agreement as the
Representative
deems advisable. The Company hereby confirms that the Underwriters
and dealers
have been authorized to distribute or cause to be distributed each
Preliminary
Prospectus and are authorized to distribute the Prospectus (as from
time to time
amended or supplemented if the Company furnishes amendments or
supplements
thereto to the Underwriters).
1. Sale,
Purchase, Delivery and Payment for the Shares. On the basis of
the representations, warranties and agreements contained in, and
subject to the
terms and conditions of, this Agreement:
(a) The Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to
purchase from the Company, at a purchase price of $_____ per share
(the "Initial
Price"), the number of Firm Shares set forth opposite the name of
such
Underwriter under the column "Number of Firm Shares to be Purchased
from the
Company" on Schedule I to this Agreement, subject to adjustment in
accordance
with Section 9 hereof.
(b) The Company hereby grants to the several Underwriters an
option
to purchase, severally and not jointly, all or any part of the
Option Shares at
the Initial Price. The number of Option Shares to be purchased by
each
Underwriter shall be the same percentage (adjusted by the
Representative to
eliminate fractions) of the total number of Option Shares to be
purchased by the
Underwriters as such Underwriter is purchasing of the Firm Shares.
Such option
may be exercised only to cover over-allotments in the sales of the
Firm Shares
by the Underwriters and may be exercised in whole or in part at any
time on or
before 12:00 noon, New York City time, on the business day before
the Firm
Shares Closing Date (as defined below), and from time to time
thereafter within
30 days after the date of this Agreement, in each case upon
written, facsimile
or electronic notice, by the Representative to the Company no later
than 12:00
noon, New York City time, on the business day before the Firm
Shares Closing
Date or at least two business days before the Option Shares Closing
Date (as
defined below), as the case may be, setting forth the number of
Option Shares to
be purchased and the time and date (if other than the Firm Shares
Closing Date)
of such purchase.
(c) Payment of the purchase price for, and delivery of
certificates
for, the Firm Shares shall be made at the offices of W.R. Hambrecht
+ Co, LLC,
539 Bryant Street, Suite 100, San Francisco, CA, 94107 at 7:00
a.m., San
Francisco time, on the third business day
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following the date of this Agreement or at such time on such other
date, not
later than ten (10) business days after the date of this Agreement,
as shall be
agreed upon by the Company and the Representative (such time and
date of
delivery and payment are called the "Firm Shares Closing Date"). In
addition, in
the event that any or all of the Option Shares are purchased by
the
Underwriters, payment of the purchase price, and delivery of the
certificates,
for such Option Shares shall be made at the above-mentioned
offices, or at such
other place as shall be agreed upon by the Representative and the
Company, on
each date of delivery as specified in the notice from the
Representative to the
Company (such time and date of delivery and payment are called the
"Option
Shares Closing Date"). The Firm Shares Closing Date and any Option
Shares
Closing Date are called, individually, a "Closing Date" and,
together, the
"Closing Dates."
(d) Payment for the Shares shall be made to the Company by wire
transfer of immediately available funds to the order of the Company
against
delivery of the respective certificates to the Representative for
the respective
accounts of the Underwriters of certificates for the Shares to be
purchased by
them.
(e) Certificates evidencing the Shares shall be registered in
such
names and shall be in such denominations as the Representative
shall request at
least two full business days before the Firm Shares Closing Date
or, in the case
of Option Shares, on the day of notice of exercise of the option as
described in
Section 1(b) and shall be delivered by or on behalf of the Company
to the
Representative through the facilities of the Depository Trust
Company ("DTC")
for the account of such Underwriter. The Company will cause the
certificates
representing the Shares to be made available for checking and
packaging, at such
place as is designated by the Representative, on the full business
day before
the Firm Shares Closing Date (or the Option Shares Closing Date in
the case of
the Option Shares).
2.
Representations and Warranties of the Company. The Company
represents
and warrants to each Underwriter as of the date hereof, as of the
Firm Shares
Closing Date and as of each Option Shares Closing Date (if any),
and further
covenants, as follows:
(a) On the Effective Date, the Registration Statement complied,
and
on the date of the Prospectus, the date any post-effective
amendment to the
Registration Statement becomes effective, the date any supplement
or amendment
to the Prospectus is filed with the Commission and each Closing
Date, the
Registration Statement and the Prospectus (and any amendment
thereof or
supplement thereto) will comply, in all material respects, with the
requirements
of the Securities Act and the Rules and the Securities Exchange Act
of 1934 (the
"Exchange Act") and the rules and regulations of the Commission
thereunder. The
Registration Statement did not, as of the Effective Date, contain
any untrue
statement of a material fact or omit to state any material fact
required to be
stated therein or necessary in order to make the statements therein
not
misleading; and on the Effective Date and the other dates referred
to above
neither the Registration Statement nor the Prospectus, nor any
amendment thereof
or supplement thereto, will contain any untrue statement of a
material fact or
will omit to state any material fact required to be stated therein
or necessary
in order to make the statements therein not misleading. When any
related
preliminary prospectus was first filed with the Commission (whether
filed as
part of the Registration Statement or any amendment thereto or
pursuant to Rule
424(a) of the Rules) and when any amendment thereof or supplement
thereto was
first filed with the Commission, such preliminary prospectus as
amended or
supplemented complied in all
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material respects with the applicable provisions of the Securities
Act and the
Rules and did not contain any untrue statement of a material fact
or omit to
state any material fact required to be stated therein or necessary
in order to
make the statements therein not misleading. If applicable, each
Preliminary
Prospectus and the Prospectus delivered to the Underwriters for use
in
connection with this offering was identical to the electronically
transmitted
copies thereof filed with the Commission pursuant to EDGAR, except
to the extent
permitted by Regulation S-T. If Rule 434 is used, the Company will
comply with
the requirements of Rule 434 and the Prospectus shall not be
"materially
different," as such term is used in Rule 434, from the Prospectus
included in
the Registration Statement at the time it became effective.
Notwithstanding the
foregoing, none of the representations and warranties in this
paragraph 2(a)
shall apply to statements in, or omissions from, the Registration
Statement or
the Prospectus made in reliance upon, and in conformity with,
information herein
or otherwise furnished in writing by the Representative on behalf
of the several
Underwriters for use in the Registration Statement or the
Prospectus. With
respect to the preceding sentence, the Company acknowledges that
the only
information furnished in writing by the Representative on behalf of
the several
Underwriters for use in the Registration Statement or the
Prospectus is the
information set forth in the paragraph describing the "Open IPO" on
the front
cover page, under the subcaption "Open IPO" under the caption
"Prospectus
Summary," and contained under the caption "Plan of Distribution" in
the
Prospectus (insofar as such information relates to the Underwriters
or related
persons), excluding any information relating to the engagement or
compensation
of Spiegel Partners, LLC.
(b) The Registration Statement is effective under the Securities
Act
and no stop order preventing or suspending the effectiveness of the
Registration
Statement or suspending or preventing the use of the Prospectus has
been issued
by the Commission and no proceedings for that purpose have been
instituted or
are threatened under the Securities Act. Any required filing of the
Prospectus
and any supplement thereto pursuant to Rule 424(b) of the Rules has
been or will
be made in the manner and within the time period required by such
Rule 424(b).
(c) The financial statements of the Company (including all notes
and
schedules thereto) included in the Registration Statement and
Prospectus present
fairly the financial position of the Company and its consolidated
subsidiary at
the dates indicated and the statement of operations, stockholders'
equity and
cash flows of the Company and its consolidated subsidiary for the
periods
specified; and such financial statements and related schedules and
notes
thereto, and the unaudited financial information filed with the
Commission as
part of the Registration Statement, have been prepared in
conformity with
generally accepted accounting principles, consistently applied
throughout the
periods involved. The summary and selected financial data included
in the
Prospectus present fairly the information shown therein as at the
respective
dates and for the respective periods specified and have been
presented on a
basis consistent with the consolidated financial statements set
forth in the
Prospectus and other financial information. The pro forma financial
statements
and the related notes thereto included in the Registration
Statement and the
Prospectus present fairly the information shown therein, have been
prepared in
accordance with the Commission's rules and guidelines with respect
to pro forma
financial statements and have been properly compiled on the bases
described
therein, and the assumptions used in the preparation thereof are
reasonable and
the adjustments used therein are appropriate to give effect to the
transactions
and circumstances referred to therein.
(d) Schechter Dokken Kanter Andrews & Selcer Ltd., whose
reports are
filed with the Commission as a part of the Registration Statement,
are and,
during the periods
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covered by their reports, were independent public accountants
as required by the Securities Act and the Rules and are registered
with the
Public Company Accounting Oversight Board.
(e) The Company maintains a system of internal control over
financial reporting (as such term is defined in Rule 13a-15(f) of
the Exchange
Act) that complies with the requirements of the Exchange Act and
has been
designed by the Company's principal executive officer and principal
financial
officer, or under their supervision, to provide reasonable
assurance regarding
the reliability of financial reporting and the preparation of
financial
statements for external purposes in accordance with generally
accepted
accounting principles. The Company's internal control over
financial reporting
is effective and the Company is not aware of any material
weaknesses in its
internal control over financial reporting. Since the date of the
latest audited
financial statements included in the Prospectus, there has been no
change in the
Company's internal control over financial reporting that has
materially
affected, or is reasonably likely to materially affect, the
Company's internal
control over financial reporting.
(f) The Company maintains disclosure controls and procedures
(as
such term is defined in Rule 13a-15(e) of the Exchange Act) that
comply with the
requirements of the Exchange Act; such disclosure controls and
procedures have
been designed to ensure that material information relating to the
Company and
its subsidiaries is made known to the Company's principal executive
officer and
principal financial officer by others within those entities; such
disclosure
controls and procedures are effective.
(g) The Company (i) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of
Nevada, having full power and corporate authority to own or lease
its properties
and to conduct its business as described in the Registration
Statement and the
Prospectus; and (ii) is duly qualified to do business as a foreign
corporation
and is in good standing in all jurisdictions in which the character
of the
property owned or leased or the nature of the business transacted
by it makes
qualification necessary except for such jurisdictions where the
failure to so
qualify individually or in the aggregate would not have a material
adverse
effect on the assets, properties, condition, financial or
otherwise, or in the
results of operations, business affairs or business prospects of
the Company and
its subsidiary considered as a whole (a "Material Adverse Effect").
The Company
has employees located solely in Nevada and Florida, and in no other
jurisdiction
in the United States, and is duly qualified to do business as a
foreign
corporation and is in good standing in Colorado, Louisiana and
Washington, which
are the only jurisdictions where the Company is required to be so
qualified. To
the Company's knowledge, no proceeding has been instituted in any
such
jurisdiction revoking, limiting or curtailing, or seeking to
revoke, limit or
curtail, such power and authority or qualification. The Company
does not own,
lease or license any asset or property outside the United States of
America. The
Company has one subsidiary, Millenium Games, Inc., a Nevada
corporation. The
subsidiary has no employees and is duly qualified to do business as
a foreign
corporation and is in good standing in Alaska, California,
Colorado, Illinois,
Louisiana, New Hampshire and Wisconsin, which are the only
jurisdictions where
the Company is required to be so qualified. The Company does not
own any capital
stock or other equity securities in any other entity.
(h) The Company and its sole subsidiary, Millenium Games, Inc.,
and
each of their respective officers, directors and, if applicable,
stockholders,
has all requisite
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corporate power and authority, and all necessary authorizations,
qualifications,
determinations of suitability, accreditations, approvals, consents,
orders,
licenses, certificates and permits of and from all tribal,
governmental, gaming
or other regulatory bodies or any other person or entity
(collectively, the
"Permits") and has made all necessary filings required under any
applicable
tribal, governmental, gaming or other regulatory law, regulation or
rule
("Applicable Law"), to own, lease and license its assets and
properties and
conduct its business as described in the Registration Statement and
the
Prospectus, all of which have been validly obtained, are valid and
in full force
and effect and will be, after the consummation of the transactions
contemplated
by this Agreement, in full force and effect. The Company and its
said subsidiary
has fulfilled and performed in all material respects all of its
material
obligations with respect to such Permits and no event has occurred
that allows,
or after notice or lapse of time would allow, revocation or
termination thereof
or results in any other material impairment of the rights of the
Company
thereunder. Except as may be required under the Securities Act and
state and
foreign Blue Sky laws, no other Permits are required to enter into,
deliver and
perform this Agreement and to issue and sell the Shares. Except as
disclosed in
the Prospectus, neither the Company nor its subsidiary, nor any of
their
respective officers, directors or, if applicable, stockholders, is
required by
any Applicable Law to obtain accreditation, certification,
qualification or a
determination of suitability from any tribal, government, gaming or
other
regulatory body or authority in order to provide the products and
services that
it currently provides or that it proposes to provide as set forth
in the
Prospectus. Neither the Company nor its subsidiary nor any of their
respective
officers, directors or, if applicable, stockholders, is in
violation of, in
default under, or has received any notice regarding a possible
violation,
default or revocation of any Permit or Applicable Law or any
decree, order or
judgment applicable to it, him or her, or of any pending or
threatened action,
claim, suit or proceeding, the effect of which, individually or in
the
aggregate, could result in a material adverse change to the
business, or result
in the invalidation, revocation or impairment of any Permit, or
otherwise
restrict its ability to conduct its business in any jurisdiction to
which any
Permit pertains. Each of the Company and its subsidiary has posted
and
maintained in full force all bonds, and paid all applicable fines,
dues and/or
fees required by the Permits. Except as has been disclosed in the
Registration
Statement and the Prospectus, neither the Company nor its
subsidiary has entered
into any agreement with, or is subject to any order, writ, decree
or other
judgment by, any tribal, gaming, state or federal government or
other regulatory
body or authority which, individually or in the aggregate, does or
may
materially restrict or alter the products or services that may be
offered by it
in the conduct of its business or otherwise materially restrict its
ability to
fully exploit any Permit issued to or obtained by it. No Permit
contains a
materially burdensome restriction that is not adequately described
in the
Registration Statement and the Prospectus. Each of the Company and
its
subsidiary their respective officers, directors or, if applicable,
stockholders,
has owned or possessed such Permits as were necessary to conduct
its historic
business activities, or was exempt from any applicable requirement
to hold any
such Permit, at the time and in each jurisdiction in which it
historically
conducted such activities.
(i) The Company and its subsidiary own, possess, license or
have
other rights to use the patents and patent applications,
copyrights, trademarks,
service marks, trade names, technology, know-how (including trade
secrets and
other unpatented and/or unpatentable proprietary rights), customer
lists, plans,
processes, supplier lists, business plans, business methods,
prototypes,
inventions, discoveries, internet domain names, software and other
intellectual
property rights necessary to conduct its business in the manner in
which it is
being
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conducted and in the manner in which it is contemplated to be
conducted as set
forth in the Prospectus (collectively, the "Company Intellectual
Property") and
neither the Company nor its subsidiary expect the termination or
loss of such
Company Intellectual Property Rights; none of the patents owned or
licensed by
the Company is unenforceable or invalid, and, to the Company's
knowledge, none
of the patent applications owned or licensed by the Company would
be
unenforceable or invalid if issued as patents; the Company is not
obligated to
pay a royalty, grant a license, or provide other consideration to
any third
party in connection with the Company Intellectual Property other
than as
disclosed in the Prospectus; the Company has not received any
notice of
violation or any conflict with rights of others with respect to the
Company
Intellectual Property other than as disclosed in the Prospectus;
there are no
pending or to the Company's knowledge, threatened actions, suits,
proceedings or
claims by others that the Company is infringing any patent, trade
secret, trade
mark, service mark, copyright or other intellectual property or
proprietary
right other than as disclosed in the Prospectus; and the products
or processes
of the Company referenced in the Prospectus do not, to the
knowledge of the
Company, violate or conflict with any intellectual property or
proprietary right
of any third person, or any discovery, invention, product or
process that is the
subject of a patent application filed by any third person. Except
as otherwise
set forth in the Prospectus, to the Company's and its subsidiary's
knowledge, no
third party is infringing upon any Company Intellectual Property
rights.
(j) The Company
and its aformentioned subsidiary have good and
marketable title in fee simple to all real property, and good and
marketable
title to all other property owned by them, in each case free and
clear of all
liens, encumbrances, claims, security interests and defects, except
such as do
not materially affect the value of such property and do not
materially interfere
with the use made or proposed to be made of such property by the
Company and its
subsidiary. All property held under lease by the Company and its
subsidiary is
held by them under valid, existing and enforceable leases, free and
clear of all
liens, encumbrances, claims, security interests and defects, except
such as are
not material and do not materially interfere with the use made or
proposed to be
made of such property by the Company and its subsidiary. Subsequent
to the
respective dates as of which information is given in the
Registration Statement
and the Prospectus, (i) there has not been any Material Adverse
Effect; (ii)
neither the Company nor its said subsidiary has sustained any loss
or
interference with its assets, businesses or properties (whether
owned or leased)
from fire, explosion, earthquake, flood or other calamity, whether
or not
covered by insurance, or from any labor dispute or any court or
legislative or
other governmental action, order or decree which would have a
Material Adverse
Effect; and (iii) since the date of the latest balance sheet
included in the
Registration Statement and the Prospectus, neither the Company nor
its
subsidiary has (A) issued any securities or incurred any liability
or
obligation, direct or contingent, for borrowed money, except such
liabilities or
obligations incurred in the ordinary course of business, (B)
entered into any
transaction not in the ordinary course of business or (C) declared
or paid any
dividend or made any distribution on any shares of its stock or
redeemed,
purchased or otherwise acquired or agreed to redeem, purchase or
otherwise
acquire any shares of its capital stock.
(k) There is no
document, contract or other agreement required to
be described in the Registration Statement or Prospectus or to be
filed as an
exhibit to the Registration Statement which is not described or
filed as
required by the Securities Act or Rules. Each description of a
contract,
document or other agreement in the Registration Statement and
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the Prospectus accurately reflects in all respects the terms of
the
underlying contract, document or other agreement. Each contract,
document or
other agreement described in the Registration Statement and
Prospectus or listed
in the Exhibits to the Registration Statement is in full force and
effect and is
valid and enforceable by and against the Company or its subsidiary,
as the case
may be, in accordance with its terms. Neither the Company nor its
subsidiary, if
the subsidiary is a party, nor to the Company's knowledge, any
other party is in
default in the observance or performance of any term or obligation
to be
performed by it under any such agreement, and no event has occurred
which with
notice or lapse of time or both would constitute such a default, in
any such
case which default or event, individually or in the aggregate,
would have a
Material Adverse Effect. No default exists, and no event has
occurred which with
notice or lapse of time or both would constitute a default, in the
due
performance and observance of any term, covenant or condition, by
the Company or
its subsidiary, if the subsidiary is a party thereto, of any other
agreement or
instrument to which the Company or its subsidiary is a party or by
which the
Company or its properties or business or its subsidiary or its
properties or
business may be bound or affected which default or event,
individually or in the
aggregate, would have a Material Adverse Effect.
(l) The
statistical, industry-related and market-related data
included in the Registration Statement are based on or derived from
sources that
the Company reasonably and in good faith believes to be reliable
and accurate,
such data agree with the sources from which they are derived, and
the Company
has received any consents required from such sources in connection
with the
inclusion of their data in the Registration Statement.
(m) Neither the
Company nor its subsidiary is in violation of any
term or provision of its charter or by-laws or of any franchise,
license,
permit, judgment, decree, order, statute, rule or regulation, where
the
consequences of such violation, individually or in the aggregate,
would have a
Material Adverse Effect.
(n) This
Agreement has been duly authorized, executed and
delivered by the Company.
(o) Neither the
execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the
transactions
contemplated hereby (including, without limitation, the issuance
and sale by the
Company of the Shares) will give rise to a right to terminate or
accelerate the
due date of any payment due under, or conflict with or result in
the breach of
any term or provision of, or constitute a default (or an event
which with notice
or lapse of time or both would constitute a default) under, or
require any
consent or waiver under, or result in the execution or imposition
of any lien,
charge or encumbrance upon any properties or assets of the Company
or its
subsidiary pursuant to the terms of, any indenture, mortgage, deed
of trust or
other agreement or instrument to which the Company or its
subsidiary is a party
or by which either the Company or its subsidiary or any of their
properties or
businesses is bound, or any franchise, license, permit, judgment,
decree, order,
statute, rule or regulation applicable to the Company or its
subsidiary or
violate any provision of the charter or by-laws of the Company or
its
subsidiary, except for such consents or waivers which have already
been obtained
and are in full force and effect.
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(p) The Company
has the duly authorized and validly issued
outstanding capitalization as of September 30, 2005 as set forth
under the
caption "Capitalization" in the Prospectus and will have the
adjusted
capitalization as of September 30, 2005 (giving effect to the
closing of the
offering contemplated by this Agreement) set forth therein on the
each Closing
Date, based on the assumptions set forth therein. The certificates
evidencing
the Shares are in due and proper legal form and have been duly
authorized for
issuance by the Company. All of the issued and outstanding shares
of Common
Stock have been duly and validly issued and are fully paid and
nonassessable.
All of the issued and outstanding shares of capital stock of the
Company were
issued in transactions that were exempt from the registration
requirements of
the Securities Act, without violation of preemptive rights, rights
of first
refusal or similar rights. There are no statutory preemptive or
other similar
rights to subscribe for or to purchase or acquire any shares of
Common Stock of
the Company or its subsidiary or any such rights pursuant to its
Articles of
Incorporation or by-laws or any agreement or instrument to or by
which the
Company or its subsidiary is a party or bound. The Shares, when
issued and sold
pursuant to this Agreement will be duly and validly issued, fully
paid and
nonassessable and none of them will be issued in violation of any
preemptive or
other similar right. Except as disclosed in the Registration
Statement and the
Prospectus, there is no outstanding option, warrant or other right
calling for
the issuance of, and there is no commitment, plan or arrangement to
issue, any
share of stock of the Company or its subsidiary or any security
convertible
into, or exercisable or exchangeable for, such stock. The
securities of the
Company conform to the descriptions thereof contained in the
Registration
Statement and the Prospectus. All outstanding shares of capital
stock of the
Company's aforementioned subsidiary have been duly authorized and
validly
issued, and are fully paid and nonassessable and are owned directly
by the
Company free and clear of any security interests, liens,
encumbrances, equities
or claims, other than those described in the Prospectus.
(q) No holder of
any security of the Company has any right, which
has not been waived, to have any security owned by such holder
included in the
Registration Statement or to demand registration of any security
owned by such
holder for a period of 180 days after the date of this Agreement.
Each director
and executive officer of the Company and each stockholder of the
Company holding
over 1% of the Company's outstanding capital stock has delivered to
the
Representative his enforceable written lock-up agreement.
(r) All
necessary corporate action has been duly and validly taken
by the Company and to authorize the execution, delivery and
performance of this
Agreement and the issuance and sale of the Shares by the Company.
This Agreement
has been duly and validly authorized, executed and delivered by the
Company and
constitutes and will constitute legal, valid and binding
obligations of the
Company enforceable against the Company in accordance with its
terms, except as
the enforceability thereof may be limited by bankruptcy,
insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of
creditors' rights generally and by general equitable
principles.
(s) Neither the
Company nor its subsidiary is involved in any
labor dispute nor, to the knowledge of the Company, is any such
dispute
threatened, which dispute would have a Material Adverse Effect. The
Company is
not aware of any existing or imminent labor disturbance by the
employees of any
of its principal suppliers or contractors which would have a
Material Adverse
Effect. The Company is not aware of any threatened or pending
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litigation between the Company or its subsidiary and any of its
executive
officers which, if adversely determined, could have a Material
Adverse Effect
and has no reason to believe that such officers will not remain in
the
employment of the Company.
(t) No
relationship, direct or indirect, exists between or among
the Company, on the one hand, and the current or prior directors,
officers,
stockholders, customers or suppliers of the Company, on the other
hand, which is
required to be described in the Registration Statement and the
Prospectus that
is not so described.
(u) The Company
has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be
expected to
cause or result in, or which has constituted or which might
reasonably be
expected to constitute, the stabilization or manipulation of the
price of the
Common Stock or any security of the Company to facilitate the sale
or resale of
any of the Shares.
(v) The Company
and its subsidiary have filed all Federal, state,
local and foreign tax returns which are required to be filed
through the date
hereof, which returns are true and correct in all material respects
or has
received timely extensions thereof, and has paid all taxes shown on
such returns
and all assessments received by it to the extent that the same are
material and
have become due. There are no tax audits or investigations pending,
which if
adversely determined would have a Material Adverse Effect; nor are
there any
material proposed additional tax assessments against the Company or
its
subsidiary.
(w) The Shares
have been duly authorized for quotation on the
National Association of Securities Dealers Automated Quotation
("Nasdaq")
National Market System and listed and duly admitted to trading on
the Nasdaq
National Market. A registration statement has been filed on Form
8-A pursuant to
Section 12 of the Exchange Act, which registration statement
complies in all
material respects with the Exchange Act.
(x) The Company
has taken no action designed to, or likely to have
the effect of, terminating the registration of the Common Stock
under the
Exchange Act or the quotation of the Common Stock on the Nasdaq
National Market,
nor has the Company received any notification that the Commission
or the Nasdaq
National Market is contemplating terminating such registration or
quotation.
(y) The books,
records and accounts of the Company and its
subsidiary accurately and fairly reflect, in reasonable detail, the
transactions
in, and dispositions of, the assets of, and the results of
operations of, the
Company and its subsidiary. The Company and its subsidiary
maintains a system of
internal accounting 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 accordance with generally
accepted
accounting principles and to maintain asset accountability, (iii)
access to
assets is permitted only in accordance with management's general or
specific
authorization and (iv) the recorded accountability for assets is
compared with
the existing assets at reasonable intervals and appropriate action
is taken with
respect to any differences.
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(z) The Company
and its subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks
and in such
amounts as are customary in the businesses in which they are
engaged or propose
to engage after giving effect to the transactions described in the
Prospectus,
all of which insurance is in full force and effect. The Company and
its
subsidiary are in compliance with the terms of such policies and
instruments in
all material respects; and neither the Company nor its subsidiary
has any 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 is not
materially greater than the current cost. Neither the Company nor
its subsidiary
has been denied any insurance coverage which it has sought or for
which it has
applied.
(aa) Each approval,
consent, order, authorization, designation,
declaration or filing of, by or with any regulatory, administrative
or other
governmental body necessary in connection with the execution and
delivery by the
Company of this Agreement and the consummation of the transactions
herein
contemplated required to be obtained or performed by the Company
(except such
additional steps as may be required by the National Association of
Securities
Dealers, Inc. (the "NASD") or may be necessary to qualify the
Shares for public
offering by the Underwriters under the state securities or Blue Sky
laws) has
been obtained or made and is in full force and effect.
(bb) Except as
disclosed in the Registration Statement and the
Prospectus, there is no action, suit, claim, proceeding or
investigation pending
or, to the Company's knowledge, threatened against the Company
before or by any
court, regulatory body or administrative agency or any other
governmental agency
or body, domestic or foreign, that (i) questions the validity of
the capital
stock of the Company or this Agreement or any action taken or to be
taken by the
Company pursuant to or in connection with this Agreement, (ii) is
required to be
disclosed in the Registration Statement and the Prospectus and is
not do
disclosed (and such proceedings, if any, as are summarized in the
Registration
Statement and the Prospectus are accurately summarized in all
material
respects); or (iii) may have a Material Adverse Effect.
(cc) There are no
affiliations with the NASD among the Company's
officers, directors or, to the best of the knowledge of the
Company, any five
percent or greater stockholder of the Company, except as set forth
in the
Registration Statement or otherwise disclosed in writing to the
Representative.
(dd) (i) Each of the
Company and its subsidiary is in compliance in
all material respects with all rules, laws and regulations relating
to the use,
treatment, storage and disposal of toxic substances and protection
of health or
the environment ("Environmental Laws") which are applicable to its
business;
(ii) neither the Company nor its subsidiary has received any notice
from any
governmental authority or third party of an asserted claim under
Environmental
Laws; (iii) each of the Company and its subsidiary has received all
permits,
licenses or other approvals required of it under applicable
Environmental Laws
to conduct its business and is in compliance with all terms and
conditions of
any such permit, license or approval; (iv) to the Company's
knowledge, no facts
currently exist that will require the Company or its subsidiary to
make future
material capital expenditures to comply with Environmental Laws;
and (v) no
property which is or has been owned, leased or occupied by the
Company or its
subsidiary has
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been designated as a Superfund site pursuant to the Comprehensive
Environmental
Response, Compensation of Liability Act of 1980, as amended (42
U.S.C. Section
9601, et. seq.) ("CERCLA") or otherwise designated as a
contaminated site under
applicable state or local law. Neither the Company nor its
subsidiary has been
named as a "potentially responsible party" under CERCLA.
(ee) In the ordinary
course of its business, the Company
periodically reviews the effect of Environmental Laws on the
business,
operations and properties of the Company and its subsidiary, in the
course of
which the Company identifies and evaluates associated costs and
liabilities
(including, without limitation, any capital or operating
expenditures required
for clean-up, closure of properties or compliance with
Environmental Laws, or
any permit, license or approval, any related constraints on
operating activities
and any potential liabilities to third parties). On the basis of
such review,
the Company has reasonably concluded that such associated costs and
liabilities
would not, singly or in the aggregate, have a Material Adverse
Effect.
(ff) The Company is
not and, after giving effect to the offering
and sale of the Shares and the application of proceeds thereof as
described in
the Prospectus, will not be an "investment company" within the
meaning of the
Investment Company Act of 1940, as amended (the "Investment Company
Act").
(gg) At the time of
filing of the Registration Statement and at the
date hereof, the Company was not and is not an "ineligible issuer,"
as defined
in Rule 405 under the Securities Act.
(hh) Neither (i) the
Issuer-Represented General Free Writing
Prospectus(es) and the Prospectus, all considered together
(collectively, the
"General Disclosure Package"), nor (ii) any individual
Issuer-Represented
Limited-Use Free Writing Prospectus, when considered together with
the General
Disclosure Package, included any untrue statement of a material
fact or omitted
to state any material fact necessary in order to make the
statements therein, in
light of the circumstances under which they were made, not
misleading. The
preceding sentence does not apply to statement in or omissions from
the
Prospectus or any Issuer-Represented Free Writing Prospectus based
upon and in
conformity with written information furnished to the Company by the
Underwriters
through the Representative specifically for use therein. As used in
this
paragraph and elsewhere in this Agreement:
(1)
"Issuer-Represented Free Writing Prospectus" means
any "issuer free writing prospectus" as defined in Rule 433,
relating to the
Shares that (A) is required to be filed with the Commission by the
Company, (B)
is a "road show that is a written communication" within the meaning
of Rule
433(d)(8)(i), whether or not required to be filed with the
Commission, or (C) is
exempt from filing pursuant to Rule 433(d)(5)(i) because it
contains a
description of the Shares or of the offering of the Shares pursuant
to this
Agreement.
(2)
"Issuer-Represented General Free Writing
Prospectus" means any Issuer-Represented Free Writing Prospectus
that is
intended for general distribution to prospective investors, as
evidenced by its
specified on Schedule II to this Agreement.
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(3)
"Issuer-Represented Limited-Use Free Writing
Prospectus" means any Issuer-Represented Free Writing Prospectus
that is not an
Issuer-Represented General Free Writing Prospectus.
(ii) Each
Issuer-Represented Free Writing Prospectus, as of its
issue date and all subsequent times through each Closing Date, did
not, does not
and will not include any information that conflicted, conflicts or
will conflict
with the information contained in the Registration Statement. If at
any time
following issuance of an Issuer-Represented Free Writing Prospectus
there
occurred or occurs an event or development as a result of which
such
Issuer-Represented Free Writing Prospectus included or would
include an untrue
statement of a material fact or omitted or would omit to state a
material fact
necessary in order to make the statements therein, in light of
the
circumstances, not misleading, the Company has notified or will
notify promptly
the Representative so that any use o
