Exhibit 1.1
2,500,000 Shares
FORTUNET, INC.
Common Stock, $0.001 par value
UNDERWRITING AGREEMENT
________, 2006
▇.▇. ▇▇▇▇▇▇▇▇▇ + Co, LLC
as Representative of the several
Underwriters named in Schedule I hereto
▇/▇ ▇.▇. ▇▇▇▇▇▇▇▇▇ + Co, LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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.
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 ▇.▇. ▇▇▇▇▇▇▇▇▇ + Co, LLC,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ 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 ▇▇▇▇▇, 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) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ 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
▇▇▇▇, service ▇▇▇▇, 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
9
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.
10
(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
11
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.
12
(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 of such Issuer-Represented Free Writing
Prospectus may cease until it is amended or supplemented. The foregoing two
sentences do not apply to statements in or omissions from any Issuer-Represented
Free Writing Prospectus based upon and in conformity with written information
furnished to the Company by any Underwriter through the Representative
specifically for use therein.
(jj) Unless the Company obtains the prior consent of the
Representative, it has not made and will not make any offer relating to the
Shares that would constitute an "issuer free writing prospectus" as defined in
Rule 433, or that would otherwise constitute a "free writing prospectus" as
defined in Rule 405, required to be filed with the Commission. The Company has
complied and will comply with the requirements of Rule 433 applicable to any
Issuer-Represented Free Writing Prospectus, including timely filing with the
Commission where required, legending and recordkeeping. The Company has
satisfied and will satisfy the conditions of Rule 433 to avoid a requirement to
file with the Commission any electronic road show.
(kk) The Company does not, directly or indirectly, including
through any subsidiary, have any outstanding personal loans or other credit
extended to or for any director or executive officer.
(ll) The Company or any other person associated with or acting on
behalf of the Company including, without limitation, any director, officer,
agent or employee of the Company or its subsidiary, has not, directly or
indirectly, while acting on behalf of the Company or its subsidiary (i) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; (iii) violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made
any other unlawful payment.
(mm) The operations of the Company and its subsidiary are and have
been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the USA Patriot Act, the money
laundering statutes of all jurisdictions, the rules and regulations thereunder
and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the "Money
Laundering Laws") and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or its subsidiary with respect to the Money Laundering Laws is pending, or to
the best knowledge of the Company, threatened.
(nn) Neither the Company nor its subsidiary nor, to the knowledge
of the Company, any director, officer, agent, employee or affiliate of the
Company or its subsidiary is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of
13
the U.S. Treasury Department ("OFAC"); and the Company will not directly or
indirectly use the proceeds of the offering, or lend, contribute or otherwise
make available such proceeds to any subsidiary, joint venture partner or other
person or entity, for the purpose of financing the activities of any person
currently subject to any U.S. sanctions administered by OFAC.
(oo) Except as described in the Prospectus, the Company has not
sold or issued any securities during the six-month period preceding the date of
the Prospectus, including any sales pursuant to Rule 144A under, or Regulations
D or S of, the Securities Act.
(pp) The Company has fulfilled its obligations, if any, under the
minimum funding standards of Section 302 of the U.S. Employee Retirement Income
Security Act of 1974 ("ERISA") and the regulations and published interpretations
thereunder with respect to each "plan" as defined in Section 3(3) of ERISA and
such regulations and published interpretations in which its employees are
eligible to participate and each such plan is in compliance in all material
respects with the presently applicable provisions of ERISA and such regulations
and published interpretations. No "Reportable Event" (as defined in 12 ERISA)
has occurred with respect to any "Pension Plan" (as defined in ERISA) for which
the Company could have any liability.
(qq) Except as disclosed in the Registration Statement and the
Prospectus, the Company has not incurred any liability for a fee, commission, or
other compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement other than as
contemplated hereby, or any arrangements, agreements, understandings, payments
of issuance with respect to the Company, its subsidiary or their respective
officers, directors, stockholders, employees or affiliates that may affect the
Underwriters' compensation as determined by the NASD.
(rr) Each of the Company, its directors and officers has not
distributed and will not distribute prior to the later of (i) the Firm Shares
Closing Date, or the Option Shares Closing Date, and (ii) completion of the
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than any Preliminary Prospectus, the
Prospectus, the Registration Statement and other materials, if any, permitted by
the Securities Act.
3. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject to each of
the following terms and conditions:
(a) Notification that the Registration Statement has become
effective shall have been received by the Representative and the Prospectus
shall have been timely filed with the Commission in accordance with Section 4(a)
of this Agreement.
(b) No order preventing or suspending the use of any preliminary
prospectus or the Prospectus shall have been or shall be in effect and no order
suspending the effectiveness of the Registration Statement shall be in effect
and no proceedings for such purpose shall be pending before or threatened by the
Commission, and any requests for additional information on the part of the
Commission (to be included in the Registration Statement or the
14
Prospectus or otherwise) shall have been complied with to the satisfaction of
the Commission and the Representative. If the Company has elected to rely upon
Rule 430A, Rule 430A information previously omitted from the effective
Registration Statement pursuant to Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) within the prescribed time period
and the Company shall have provided evidence satisfactory to the Underwriters of
such timely filing, or a post-effective amendment providing such information
shall have been promptly filed and declared effective in accordance with the
requirements of Rule 430A. If the Company has elected to rely upon Rule 434, a
term sheet shall have been transmitted to the Commission for filing pursuant to
Rule 424(b) within the prescribed time period.
(c) The Representative shall be satisfied that (i) the
representations and warranties of the Company contained in this Agreement and in
the certificates delivered pursuant to Section 3(d) shall be true and correct
when made and on and as of each Closing Date as if made on such date; (ii) since
the Effective Date, no event as occurred that should have been set forth in a
supplement or amendment to the Prospectus that has not been set forth in an
effective supplement or amendment and (iii) since the respective dates as of
which information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in the business, properties, financial condition or
results of operations of the Company, and since such dates, the Company has not
entered into any material transaction not referred to in the Registration
Statement in the form in which it originally became effective and the Prospectus
contained therein. The Company shall have performed all covenants and agreements
and satisfied all the conditions contained in this Agreement required to be
performed or satisfied by them at or before such Closing Date.
(d) The Representative shall have received on each Closing Date a
certificate, addressed to the Representative and dated such Closing Date, of the
chief executive or chief operating officer and the chief financial officer or
chief accounting officer of the Company to the effect that: (i) the
representations, warranties and agreements of the Company in this Agreement were
true and correct when made and are true and correct as of such Closing Date;
(ii) the Company has performed all covenants and agreements and satisfied all
conditions contained herein; (iii) they have carefully examined the Registration
Statement and the Prospectus and, in their opinion (A) as of the Effective Date,
the Registration Statement and Prospectus did not include any untrue statement
of a material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (B) since the
Effective Date no event has occurred which should have been set forth in a
supplement or otherwise required an amendment to the Registration Statement or
the Prospectus; and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and, to their knowledge, no proceedings
for that purpose have been instituted or are pending under the Securities Act.
(e) The Representative shall have received a certificate on each
Closing Date signed by the Secretary of the Company to the effect that, as of
the Closing Date the Secretary certifies as to the accuracy of the Company's
charter and bylaws, the resolutions of the Board of Directors relating to the
offering contemplated hereby, the form of stock certificate representing the
Shares, and copies of all communications with the Commission; as to the
15
execution and delivery of this Agreement; as to the incumbency and signature of
persons signing this Agreement, the Registration Statement and other related
documents; as to the approval of the Shares for listing on the Nasdaq National
Market; as to the Company's compliance with all agreements and performance or
satisfaction of all conditions required hereunder; as to the consideration
received for all outstanding shares of the Company's Common Stock; and as to
such other matters as Underwriters' counsel may reasonably request.
(f) The Representative shall have been furnished evidence in the
usual written or electronic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to the Representative, of the good
standing and qualifications of the Company.
(g) The Representative shall have received, at the time this
Agreement is executed and on each Closing Date a signed letter from ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Ltd. addressed to the Representative and dated,
respectively, the date of this Agreement and each such Closing Date, in form and
substance reasonably satisfactory to the Representative containing statements
and information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectus.
(h) The Representative shall have received a copy of a letter from
▇▇▇▇▇▇▇▇▇ Dokken Kanter ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Ltd. addressed to the Company, stating
that their review of the Company's internal accounting controls, to the extent
they deemed necessary in establishing the scope of their examination of the
Company's financial statements filed with the Registration Statement and the
Prospectus, did not disclose any weakness in internal controls that they
considered to be material weaknesses.
(i) The Representative shall have received on each Closing Date
from ▇▇▇▇▇ and Roca LLP, counsel for the Company, an opinion, addressed to the
Representative and dated such Closing Date, and stating in effect that:
(i) Each of the Company and its subsidiary has been duly
organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation. Each of the
Company and its subsidiary is duly qualified to transact business
and is in good standing as a foreign corporation in each
jurisdiction in which the character or location of its assets or
properties or the nature of its business makes such qualification
necessary, except where the failure to so qualify or to be in good
standing, individually or in the aggregate, would not have a
Material Adverse Effect.
(ii) Each of the Company and its subsidiary has all requisite
corporate power and authority to own, lease and operate its
properties and to conduct its business as now being conducted and as
described in the Registration Statement and the Prospectus and with
respect to the Company to enter into and perform its obligations
under this Agreement and to issue and sell the Shares.
16
(iii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Registration Statement and the
Prospectus under the caption "Capitalization" as of the dates stated
therein and, since such dates, there has been no change in the
capital stock of the Company except for subsequent issuances, if
any, pursuant to this Agreement or pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus
or pursuant to the exercise of convertible securities or options
referred to in the Prospectus; all of the outstanding shares of
capital stock of the Company have been duly and validly authorized
and issued and are fully paid and nonassessable and none of them was
issued in violation of any preemptive or other similar right. The
Shares to be issued and sold by the Company pursuant to this
Agreement have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement against payment
of the consideration set forth herein, will be validly issued, fully
paid and nonassessable, and no holder of the Shares is or will be
subject to personal liability by reason of being such a holder. The
issuance and sale of the Shares by the Company is not subject to any
preemptive or other similar rights of any securityholder of the
Company. Except as disclosed in the Registration Statement and the
Prospectus, there are no preemptive or other rights to subscribe for
or to purchase or any restriction upon the voting or transfer of any
securities of the Company pursuant to the Company's Articles of
Incorporation or by-laws or other governing documents or any
agreements or other instruments to which the Company is a party or
by which it is bound. 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 no
commitment, plan or arrangement to issue, any share of stock of the
Company or any security convertible into, exercisable for, or
exchangeable for stock of the Company. The Common Stock, and the
Shares conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. The form
of certificate used to evidence the Common Stock complies in all
material respects with all applicable statutory requirements, with
any applicable requirements of the Articles of Incorporation or
By-laws of the Company and the requirements of the Nasdaq National
Market. There are no persons with registration rights or other
similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under
the Securities Act.
(iv) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and
performance of this Agreement and the issuance and sale of the
Shares. This Agreement has been duly and validly authorized,
executed and delivered by the Company and this Agreement constitutes
the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
17
(v) 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) nor the execution,
delivery or performance of any other agreement or instrument entered
into or to be entered into by the Company in connection with the
transactions contemplated by the Registration Statement and the
Prospectus 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 any
event which with notice or lapse of time, or both, would constitute
a default) under, or require consent or waiver under, or result in
the execution or imposition of any lien, charge, claim, security
interest or encumbrance upon any properties or assets of the Company
or any Subsidiary pursuant to the terms of, any indenture, mortgage,
deed trust, note 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 assets or properties or businesses
is bound, or any franchise, license, permit, judgment, decree,
order, statute, rule or regulation, domestic or foreign, of which
such counsel is aware, including but not limited to the Nevada
Gaming Control Act and the rules and regulations promulgated
thereunder (the "Nevada Gaming Laws") or orders or decrees issued by
any governmental authority which interprets or implements the Nevada
Gaming Laws, or violate any provision of the charter or by-laws of
the Company or its subsidiary.
(vi) No consent, approval, authorization, license,
registration, qualification or order of any court, governmental,
gaming or other regulatory agency or body is required for the due
authorization, execution, delivery or performance of this Agreement
by the Company or the consummation of the transactions contemplated
hereby or thereby, except such as have been obtained under the
Nevada Gaming Laws, the Securities Act and such as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the several Underwriters.
(vii) Under the Nevada Gaming Laws, no Underwriter is
required, solely by reason of and as a condition to its execution
and delivery of this Agreement, nor is any purchaser of Common Stock
from the Underwriters in connection with the offering contemplated
by this Agreement required, solely by reason of being such, to be
found suitable or licensed by any governmental agency or authority
that adopts, enforces, supervises, implements or interprets the
Nevada Gaming Laws.
(viii) To the best of such counsel's knowledge, there is no
action, suit, proceeding or other investigation, before any court or
before or by any public body or board pending or threatened against,
or involving the assets, properties or businesses of, the Company
which is required to be disclosed in the Registration Statement and
the Prospectus and is not so disclosed or which could reasonably be
expected to have a Material Adverse Effect.
18
(ix) The statements in the Prospectus under the captions "Risk
Factors -- Failure of the Nevada Gaming Commission to adopt
regulations under the Nevada Mobile Gaming Law in the near future
will preclude us from implementing our growth strategy," "Risk
Factors -- Our failure to obtain licenses and approvals under the
regulations promulgated under the Nevada Mobile Gaming Law will
preclude us from implementing our growth strategy," "Risk Factors --
Our failure to obtain gaming licenses or other regulatory approvals
in other jurisdictions would preclude us from expanding our
operations," "Risk Factors -- Our failure to maintain our current
licenses and regulatory approvals or failure to maintain or obtain
licenses or approvals for our gaming devices in any jurisdiction
will prevent us from operating in this, and possible other
jurisdictions," "Risk Factors -- Our failure to comply with tribal
regulation and tribal laws will preclude us from operating in tribal
jurisdictions," "Risk Factors -- The closing of this offering is
conditioned upon our receipt of the approval of the Nevada gaming
authorities," "Description of Capital Stock," "Business --
Government Regulations," "Business -- Legal Proceedings," "Shares
Eligible for Future Sale" and "Certain Relationships and Related
Transactions," insofar as such statements constitute a summary of
documents referred to therein or matters of law, are accurate in all
material respects and accurately present the information with
respect to such documents and matters. Accurate copies of all
contracts and other documents required to be filed as exhibits to,
or described in, the Registration Statement have been so filed with
the Commission or are fairly described in the Registration
Statement, as the case may be.
(x) (A) Each of the Company and its subsidiary is in
compliance in all material respects with all applicable
Environmental Laws; (B) neither the Company nor its subsidiary has
received any notice from any governmental authority or third party
of an asserted claim under any Environmental Law; (C) 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, except where
such failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such
permits, licenses or other approvals would not, singly or in the
aggregate, have a Material Adverse Effect; and (D) no property which
is or has been owned, leased or occupied by the Company or its
subsidiary has been designated as a Superfund site pursuant to the
Comprehensive Environmental Response, Compensation of Liability Act
of 1980, as amended (42 U.S.C. Section 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local
law.
(xi) The Registration Statement, all Preliminary Prospectuses
and the Prospectus and each amendment or supplement thereto (except
for the financial statements and schedules and other financial data
included therein, as to which such counsel expresses no opinion)
comply as to form in all material respects with the requirements of
the Securities Act and the Rules, all Preliminary
19
Prospectuses and the Prospectuses and any further amendment or
supplement to any such incorporated document made by the Company
(except for the financial statements and schedules and other
financial data included therein, as to which such counsel expresses
no opinion) when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder. Although such counsel does not assume any responsibility
for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or Prospectus, except for
those referred to in the opinion in subsection (ix) of this Section
3(i), such counsel has no reason to believe that, as of its
effective date, the Registration Statement or any further amendment
thereto made by the Company prior to the Firm Shares Closing Date
(other than the financial statements and schedules and other
financial data included therein, as to which such counsel expresses
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or that, as
of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to the Firm Shares Closing Date
(other than the financial statements and schedules and other
financial data included therein, as to which such counsel expresses
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading or that, as of the Firm Shares Closing Date, either
the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to the
Firm Shares Closing Date (other than the financial statements and
schedules and other financial data included therein, as to which
such counsel expresses no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading; and such counsel does not know of
any amendment to the Registration Statement required to be filed or
of any contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are
not filed or described as required.
(xii) The Registration Statement is effective under the
Securities Act, and to such counsel's knowledge no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or
are threatened, pending or contemplated. Any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) under
the Securities Act has been made in the manner and within the time
period required by such Rule 424(b).
(xiii) The Shares have been approved for listing on the Nasdaq
National Market.
20
(xiv) The capital stock of the Company conforms in all
material respects to the description thereof contained in the
Prospectus under the caption "Description of Capital Stock."
(xv) The Company is not an "investment company" or an entity
controlled by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended.
To the extent deemed advisable by such counsel, such counsel may rely as
to matters of fact on certificates of responsible officers of the Company and
public officials and on the opinions of other counsel satisfactory to the
Representative as to matters which are governed by laws other than the laws of
the States of Nevada and the Federal laws of the United States; provided that
such counsel shall state that in their opinion the Underwriters and they are
justified in relying on such other opinions. Copies of such certificates and
other opinions shall be furnished to the Representative and counsel for the
Underwriters.
In addition, such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Company,
representatives of the Representative and representatives of the independent
certified public accountants of the Company, at which conferences the contents
of the Registration Statement and the Prospectus and the General Disclosure
Package and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and the Prospectus and the General Disclosure Package (except as
specified in the foregoing opinion), on the basis of the foregoing, no facts
have come to the attention of such counsel which lead such counsel to believe
that (i) the Registration Statement at the time it became effective (except with
respect to the financial statements and notes and schedules thereto and other
financial data, as to which such counsel need express no belief) contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or that the Prospectus as amended or supplemented (except with respect to the
financial statements, notes and schedules thereto and other financial data, as
to which such counsel need make no statement) on the date thereof or the General
Disclosure Package as of its date on the Closing Date contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(j) The legality and sufficiency of the sale of the Shares
hereunder and the validity and form of the certificates representing the Shares,
all corporate proceedings and other legal matters incident to the foregoing, and
the form of the Registration and of the Prospectus (except as to the financial
statements and financial information contained therein) shall have been approved
at or prior to the Closing Date by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the
Underwriters. The Representative shall have received on each Closing Date from
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP an opinion, addressed to the Representative and dated
such Closing Date, with respect to the issuance and sale of the Shares, the
Registration Statement and the Prospectus and such other related matters as the
Underwriters reasonably may request and such counsel shall have received such
documents and other information as they request to enable them to pass upon such
matters.
21
(k) The Representative shall have received copies of the lock up
agreements executed by the directors, executive officers and holders of at least
1% of the Company's outstanding capital stock.
(l) The Shares shall have been approved for quotation on the
Nasdaq National Market, subject only to official notice of issuance.
(m) The Company shall have furnished or caused to be furnished to
the Representative such further certificates or documents as the Representative
shall have reasonably requested.
4. Covenants of the Company.
(a) The Company covenants and agrees as follows:
(i) The Company will (A) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430A; and (B) not file with the Commission any amendment to the
Registration Statement or supplement to the Prospectus of which the Underwriters
shall not previously have been advised and furnished with a copy a reasonable
period of time prior to the proposed filing and as to which the Underwriters
shall not have given their consent or which is not in compliance with the
Securities Act or the Rules.
(ii) The Company shall promptly advise the Representative in
writing (A) when any post-effective amendment to the Registration Statement
shall have become effective or any supplement to the Prospectus shall have been
filed, (B) of any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional information, (C)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus or the institution or threatening of any
proceeding for that purpose and (D) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company shall use its best efforts to prevent the issuance
of any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(iii) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Securities Act and the Rules, any event
occurs as a result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or if it shall be necessary to amend
or supplement the Prospectus to comply with the Securities Act or the Rules, the
Company promptly shall prepare and file with the Commission, subject to
paragraph (i) of this Section 4(a), an amendment or supplement which shall
correct such statement or omission or an amendment which shall effect such
compliance.
(iv) The Company shall make generally available to its
security holders and to the Representative as soon as practicable, but not later
than 45 days after the end
22
of the 12-month period beginning at the end of the fiscal quarter of the Company
during which the Effective Date occurs (or 90 days if such 12-month period
coincides with the Company's fiscal year), an earnings statement (which need not
be audited) of the Company, covering such 12-month period, which shall satisfy
the provisions of Section 11(a) of the Securities Act or Rule 158 of the Rules.
(v) The Company shall furnish to the Representative and
counsel for the Underwriters, without charge, signed copies of the Registration
Statement (including all exhibits thereto and amendments thereof) and to each
other Underwriter a copy of the Registration Statement (without exhibits
thereto) and all amendments thereof and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Securities Act or the Rules, as
many copies of any preliminary prospectus and the Prospectus and any amendments
thereof and supplements thereto as the Representative may reasonably request. If
applicable, the copies of the Registration Statement and Prospectus and each
amendment and supplement thereto furnished to the Underwriters will be identical
to the electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(vi) The Company shall cooperate with the Representative and
their counsel in endeavoring to qualify the Shares for offer and sale in
connection with the offering under the laws of such jurisdictions as the
Representative may designate and shall maintain such qualifications in effect so
long as required for the distribution of the Shares; provided, however, that the
Company shall not be required in connection therewith, as a condition thereof,
to qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction or subject itself to taxation as doing business
in any jurisdiction.
(vii) The Company, during the period when the Prospectus is
required to be delivered under the Securities Act and the Rules or the Exchange
Act, will file all reports and other documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the Exchange Act within the time
periods required by the Exchange Act and the regulations promulgated thereunder.
(viii) Without the prior written consent of ▇.▇. ▇▇▇▇▇▇▇▇▇ +
Co, LLC, for a period of 180 days after the date of this Agreement, the Company
and each of its individual directors and executive officers shall not issue,
sell or register with the Commission (other than on Form S-8 or on any successor
form), or otherwise dispose of, directly or indirectly, any equity securities of
the Company (or any securities convertible into, exercisable for or exchangeable
for equity securities of the Company), except for the issuance of the Shares
pursuant to the Registration Statement and the issuance of shares pursuant to
the Company's existing stock option plan or bonus plan as described in the
Registration Statement and the Prospectus. In the event that during this period,
(A) any shares are issued pursuant to the Company's existing stock option plan
or bonus plan that are exercisable during such 180 day period or (B) any
registration is effected on Form S-8 or on any successor form relating to shares
that are exercisable during such 180 period, the Company shall obtain the
written agreement of such grantee or purchaser or holder of such registered
securities that, for a period of 180 days after the date of this Agreement, such
person will not, without the prior written consent of ▇.▇. ▇▇▇▇▇▇▇▇▇ + Co, LLC,
offer for sale, sell, distribute, grant any option for the sale of, or
23
otherwise dispose of, directly or indirectly, or exercise any registration
rights with respect to, any shares of Common Stock (or any securities
convertible into, exercisable for, or exchangeable for any shares of Common
Stock) owned by such person.
(ix) On or before completion of this offering, the Company
shall make all filings required under applicable securities laws and by the
Nasdaq National Market (including any required registration under the Exchange
Act).
(x) Prior to the Closing Date, the Company will issue no
press release or other communications directly or indirectly and hold no press
conference with respect to the Company, the condition, financial or otherwise,
or the earnings, business affairs or business prospects of any of them, or the
offering of the Shares without the prior written consent of the Representative
unless in the judgment of the Company and its counsel, and after notification to
the Representative, such press release or communication is required by law.
(xi) The Company will apply the net proceeds from the
offering of the Shares in the manner set forth under "Use of Proceeds" in the
Prospectus.
(xii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(xiii) The Company will not take, directly or indirectly, and
will use its best efforts to cause its officers, directors or affiliates not to
take, directly or indirectly, any action designed to, or that might in the
future be expected to cause or result in, stabilization or manipulation of the
price of any securities of the Company.
(xiv) Upon the request of any Underwriters, the Company shall
furnish to such Underwriter an electronic version of the Company's trademarks,
servicemarks and corporate logo for use on the website, if any, operated by such
Underwriters for the purpose of facilitating the on-line offering of the Shares
(the "License"); provided, however, that the License shall be used solely for
the purpose described above and is granted without any fee and may not be
assigned or transferred.
(b) The Company agrees to pay, or reimburse if paid by the
Representative, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the public offering of the Shares and the performance of the obligations of the
Company under this Agreement as listed below: (i) the preparation, printing,
filing and distribution of the Registration Statement including all exhibits
thereto, each preliminary prospectus, the Prospectus, all amendments and
supplements to the Registration Statement and the Prospectus, and the printing,
filing and distribution of this Agreement; (ii) the preparation and delivery of
certificates for the Shares to the Underwriters; (iii) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of the various jurisdictions referred to in Section 4(a)(vi), including the
reasonable fees and disbursements of counsel for the Underwriters in connection
with such registration and qualification and the preparation, printing,
distribution and shipment of preliminary and supplementary Blue Sky memoranda;
(iv) the furnishing (including costs of shipping and
24
mailing) to the Representative and to the Underwriters of copies of each
preliminary prospectus, the Prospectus and all amendments or supplements to the
Prospectus, and of the several documents required by this Section to be so
furnished, as may be reasonably requested for use in connection with the
offering and sale of the Shares by the Underwriters or by dealers to whom Shares
may be sold; (v) the filing fees of the NASD in connection with its review of
the terms of the public offering and reasonable fees and disbursements of
counsel for the Underwriters in connection with such review; (vi) inclusion of
the Shares for quotation on the Nasdaq National Market; (vii) all transfer
taxes, if any, with respect to the sale and delivery of the Shares by the
Company to the Underwriters; and (viii) the performance of the Company's
obligations under Sections 4(a), 5(a) and 6. Subject to the provisions of
Section 7, the Underwriters agree to pay, whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated, all costs
and expenses incident to the performance of the obligations of the Underwriters
under this Agreement not payable by the Company pursuant to the preceding
sentence, including, without limitation, the fees and disbursements of counsel
for the Underwriters.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
against any and all losses, claims, damages and liabilities, joint or several
(including any reasonable investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they, or any of them, may become
subject under the Securities Act, the Exchange Act or other Federal or state law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto, or any Issuer-Represented Free Writing Prospectus
or in any Blue Sky application or other information or other documents executed
by the Company filed in any state or other jurisdiction to qualify any or all of
the Shares under the securities laws thereof (any such application, document or
information being hereinafter referred to as a "Blue Sky Application") or arise
out of or are based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that such indemnity shall not inure
to the benefit of any Underwriter (or any person controlling such Underwriter)
on account of any losses, claims, damages or liabilities arising from the sale
of the Shares to any person by such Underwriter if such untrue statement or
omission or alleged untrue statement or omission was made in such preliminary
prospectus, the Registration Statement or the Prospectus, or such amendment or
supplement thereto, or any Issuer-Represented Free Writing Prospectus or in any
Blue Sky Application in reliance upon and in conformity with information
furnished in writing to the Company by the Representative on behalf of any
Underwriter specifically for use therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have. The Company
hereby agrees to reimburse the Underwriters on a monthly basis for all legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission described in
this Section 5(a), notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the obligations under Section 5 and the
possibility that such payments might later be held to be improper, provided,
however that to the extent that such payment is ultimately held to be improper,
the Underwriters shall promptly refund it.
(b) Each Underwriter agrees to indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, each
director of the Company, and each officer of the Company who signs the
Registration Statement, against any losses, claims,
25
damages or liabilities to which such party may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or any Issuer-Represented Free Writing
Prospectus, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any preliminary prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement or
any Issuer-Represented Free Writing Prospectus in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representative expressly for use therein; provided, however, that
the obligation of each Underwriter to indemnify the Company (including any
controlling person, director or officer thereof) shall be limited to the net
proceeds received by the Company from such Underwriter. The information set
forth in the paragraph describing the "Open IPO" process on the front cover
page, under the subcaption "Open IPO" under the caption "Prospectus Summary,"
and under the caption "Plan of Distribution" in the Registration Statement, any
Preliminary Prospectus and the Prospectus (insofar as such information relates
to the Underwriters or related persons), excluding any information relating to
the engagement or compensation of ▇▇▇▇▇▇▇ Partners, LLC, constitutes the only
written information furnished to the Company by the Underwriters through the
Representative expressly for use in the Registration Statement, any Preliminary
Prospectus or the Prospectus.
(c) Any party that proposes to assert the right to be indemnified
under this Section will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section, notify each
such indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. No indemnification provided for in
Section 5(a) or 5(b) shall be available to any party who shall fail to give
notice as provided in this Section 5(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related and
was prejudiced by the failure to give such notice but the omission so to notify
such indemnifying party of any such action, suit or proceeding shall not relieve
it from any liability that it may have to any indemnified party for contribution
or otherwise than under this Section. In case any such action, suit or
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in, and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and the approval by the indemnified
party of such counsel, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, except as provided below and
except for the reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified party
shall have the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of counsel by such indemnified party has been
authorized in writing by the indemnifying parties, (ii) the indemnified party
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or in addition to those available to
the indemnifying party (in which case the indemnifying parties shall not have
the right to direct the defense of such action on behalf of the indemnified
party) or (iii) the indemnifying parties shall not have employed counsel to
assume the defense of such action within a reasonable time after notice of the
commencement thereof, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying parties.
26
(d) An indemnifying party shall not be liable for any settlement
of any action, suit, and proceeding or claim effected without its written
consent, which consent shall not be unreasonably withheld or delayed.
6. Contribution. In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in Section 5(a) or
5(b) is due in accordance with its terms but for any reason is unavailable to or
insufficient to hold harmless an indemnified party in respect to any losses,
liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate losses, liabilities,
claims, damages and expenses (including any investigation, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting any contribution received by any person entitled hereunder to
contribution from any person who may be liable for contribution) incurred by
such indemnified party, as incurred, in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares pursuant to this
Agreement or, if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to above but also the relative fault of the Company on the one hand and the
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations. The Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 6 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 6, no Underwriter (except as may be provided in the Agreement Among
Underwriters) shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by the Underwriter
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 6, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as such Underwriter, and each
director of the Company including any person who, with his or her consent, is
named in the Registration Statement as about to become a director of the
Company, each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of the Section
15 of the Securities Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Company. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 6, notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties from whom contribution may be sought shall not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may
27
have hereunder or otherwise than under this Section 6. No party shall be liable
for contribution with respect to any action, suit, proceeding or claim settled
without its written consent. The Underwriter's obligations to contribute
pursuant to this Section 6 are several in proportion to their respective
underwriting commitments and not joint.
7. Termination.
(a) This Agreement may be terminated with respect to the Shares to
be purchased on a Closing Date by the Representative by notifying the Company at
any time at or before a Closing Date in the absolute discretion of the
Representative if: (i) there has occurred any material adverse change in the
securities markets or any event, act or occurrence that has materially
disrupted, or in the opinion of the Representative, will in the future
materially disrupt, the securities markets or there shall be such a material
adverse change in general financial, political or economic conditions or the
effect of international conditions on the financial markets in the United States
is such as to make it, in the judgment of the Representative, inadvisable or
impracticable to market the Shares or enforce contracts for the sale of the
Shares; (ii) there has occurred any outbreak or material escalation of
hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in the judgment of the
Representative, inadvisable or impracticable to market the Shares or enforce
contracts for the sale of the Shares; (iii) trading in the Shares or any
securities of the Company has been suspended or materially limited by the
Commission or trading generally on the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. or the Nasdaq National Market has been suspended
or materially limited, or minimum or maximum ranges for prices for securities
shall have been fixed, or maximum ranges for prices for securities have been
required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc., or any other
governmental or regulatory authority; or (iv) a banking moratorium has been
declared by any state or Federal authority; or (v) in the judgment of the
Representative, there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the Prospectus,
any material adverse change in 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, whether or
not arising in the ordinary course of business.
(b) If this Agreement is terminated pursuant to any of its
provisions, the Company shall not have any liability to any Underwriter, and no
Underwriter shall have any liability to the Company; provided, however, that in
the event of any such termination, the Company agrees to indemnify and hold
harmless the Underwriters from the expenses incident to the performance of the
obligations of the Company under this Agreement as provided in paragraph 4(b);
and, provided further, if this Agreement is terminated by the Representatives or
the Underwriters because of any failure, refusal or inability on the part of the
Company to comply with the terms or to fulfill any of the conditions of this
Agreement, the Company shall reimburse the Underwriters for all out-of-pocket
expenses (including the fees and disbursements of their counsel) incurred by
them in connection with the proposed purchase and sale of the Shares or in
contemplation of performing their obligations hereunder. Notwithstanding
anything in this Section 7(b) to the contrary, no Underwriter who shall have
failed or refused to purchase the Shares agreed to be purchased by it under this
Agreement shall be relieved of liability to the Company or the other
Underwriters for damages occasioned by its refusal.
28
8. Substitution of Underwriters. If any Underwriter shall default in its
obligation to purchase on any Closing Date the Shares agreed to be purchased
hereunder on such Closing Date, the Representative shall have the right, within
36 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase such Shares on the terms
contained herein. If, however, the Representative shall not have completed such
arrangements within such 36-hour period, then the Company shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to the Underwriters to purchase such Shares on such
terms. If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the Representative and the
Company as provided above, the aggregate number of Shares which remains
unpurchased on such Closing Date does not exceed 10% of the aggregate number of
all the Shares that all the Underwriters are obligated to purchase on such date,
then the Company shall have the right to require each non-defaulting Underwriter
to purchase the number of Shares which such Underwriter agreed to purchase
hereunder at such date and, in addition, to require each non-defaulting
Underwriter to purchase its pro rata share (based on the number of Shares which
such Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default. In any such case, either the Representative or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
seven days in order to effect any necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus or any other documents), and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in the opinion
of the Company and the Underwriters and their counsel may thereby be made
necessary.
If, after giving effect to any arrangements for the purchase of the Shares
of a defaulting Underwriter or Underwriters by the Representative and the
Company as provided above, the aggregate number of such Shares which remains
unpurchased exceeds 10% of the aggregate number of all the Shares to be
purchased at such date, then this Agreement, or, with respect to a Closing Date
which occurs after the First Closing Date, the obligations of the Underwriters
to purchase and of the Company to sell the Option Shares to be purchased and
sold on such date, shall terminate, without liability on the part of any
non-defaulting Underwriter to the Company, and without liability on the part of
the Company, except as provided in Sections 4(b), 5, 6 and 7. The provisions of
this Section 8 shall not in any way affect the liability of any defaulting
Underwriter to the Company or the nondefaulting Underwriters arising out of such
default. The term "Underwriter" as used in this Agreement shall include any
person substituted under this Section 8 with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
9. Miscellaneous. The respective agreements, representations, warranties,
indemnities and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or the Company or any of their respective officers, directors
or controlling persons referred to in Sections 5 and 6 hereof, and shall survive
delivery of and payment for the Shares. In addition, the provisions of Sections
4(b), 5, 6 and 7 shall survive the termination or cancellation of this
Agreement.
29
This Agreement has been and is made for the benefit of the Underwriters,
the Company and their respective successors and assigns, and, to the extent
expressed herein, for the benefit of persons controlling any of the
Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of Shares from any Underwriter merely
because of such purchase.
The Company acknowledges and agrees that each of the Underwriters is
acting solely in the capacity of an arm's length contractual counterparty to the
Company with respect to the offering of Shares contemplated hereby.
Additionally, neither the Representative nor any of the other Underwriters is
advising the Company or any other person as to any legal, tax, investment,
accounting or regulatory matters in any jurisdiction with respect to the
offering contemplated hereby or the process leading thereto (irrespective of
whether such Representative or Underwriter has advised or is advising the
Company on other matters). The Company has consulted with its own advisors
concerning such matters and shall be responsible for making its own independent
investigation and appraisal of the transactions contemplated hereby, and the
Underwriters shall have no responsibility or liability to the Company or any
other person with respect thereto. The Underwriters advise that the Underwriters
and their affiliates are engaged in a broad range of securities and financial
services and that they or their affiliates may enter into contractual
relationships with purchasers or potential purchasers of the Company's
securities. Any review by the Underwriters of the Company, the transactions
contemplated hereby or other matters relating to such transactions will be
performed solely for the benefit of the Underwriters and shall not be on behalf
of the Company.
All notices and communications hereunder shall be in writing and mailed or
delivered or by telephone or telegraph if subsequently confirmed in writing, (a)
if to the Representative, ▇/▇ ▇.▇. ▇▇▇▇▇▇▇▇▇ + Co, LLC, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇, Esq., with a copy to ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Attention: ▇▇▇▇▇
▇. ▇▇▇▇, Esq., and (b) if to the Company, to its agent for service as such
agent's address appears on the cover page of the Registration Statement with a
copy to ▇▇▇▇▇ and ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES
THEREOF. THE COMPANY AND THE UNDERWRITERS AGREE TO WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF EITHER PARTY WITH
RESPECT TO ANY MATTER WHATSOEVER RELATING TO OR ARISING OUT OF THIS AGREEMENT OR
THE PURCHASE OF THE SHARES HEREUNDER. THE
30
COMPANY ALSO HEREBY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND EACH OF THE PARTIES
HERETO SUBMITS TO THE JURISDICTION OF SUCH COURTS IN ANY PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, AND AGREES NOT TO COMMENCE ANY SUIT, ACTION OR
PROCEEDING RELATING THERETO EXCEPT IN SUCH COURTS, AND WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO MOVE TO DISMISS OR TRANSFER ANY ACTION
BROUGHT IN SUCH COURT ON THE BASIS OF ANY OBJECTION TO PERSONAL JURISDICTION,
VENUE OR INCONVENIENT FORUM.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
Please confirm that the foregoing correctly sets forth the agreement among
us.
Very truly yours,
FORTUNET, INC.
By _____________________________________
▇▇▇▇ ▇▇▇▇▇, Chief Executive Officer
Confirmed:
▇.▇. ▇▇▇▇▇▇▇▇▇ + CO, LLC
----------------------------------
On behalf of itself and as Representative of the several
Underwriters named in Schedule I annexed
hereto.
By ▇.▇. ▇▇▇▇▇▇▇▇▇ + CO, LLC
By _______________________________
Title:
31
SCHEDULE I
Number of
Firm Shares to
Name Be Purchased
---- ------------
▇.▇. ▇▇▇▇▇▇▇▇▇ + Co, LLC ____________________
Total
SCHEDULE II
ISSUER-REPRESENTED GENERAL FREE WRITING PROSPECTUS