1,000,000 SHARES COMMON STOCK
$.001 PAR VALUE PER SHARE
SHAPSHOT, INC.
UNDERWRITING AGREEMENT
Atlanta, Georgia
___________, 2002
Capstone Partners, L.C.
As Representative of the
Several Underwriters listed
on Schedule A hereto
3475 Lenox Road
Suite 400
Atlanta, Georgia 30326
Ladies and Gentlemen:
Snapshot, Inc., a Nevada corporation (the "Company") confirms its
agreement with Capstone Partners, L.C. ("Capstone") and each of the several
underwriters named in Schedule A hereto (collectively, the "Underwriters", which
term shall also include any underwriter substituted as hereinafter provided in
Section 11) for whom Capstone is acting as representative (in such capacity,
Capstone shall hereinafter be referred to as "you" or the "Representative"),
with respect to the offer and sale by the Company and the placement, on a best
efforts basis, by the Underwriters, acting severally and not jointly as
placement agents, of the respective number of shares of common stock, par value
$.001 per share ("Shares") set forth in Schedule A hereto. The Shares will be
tradable after the effective date of this offering and are hereinafter referred
to as the "Securities."
All funds received from subscribers of the Shares will be deposited in a
segregated account at Wachovia Bank, N.A. ("Bank"), Atlanta, Georgia, pursuant
to an escrow agreement among you, the Company and the Bank ("Escrow Agreement").
The Company will determine, in its sole discretion, to accept or reject
subscriptions for Shares within five days following receipt hereof. Funds of an
investor whose subscription is rejected will be promptly returned directly to
such person by the Bank, without interest thereon or deduction therefrom,
pursuant to the terms of the Escrow Agreement.
The offering of the Shares to the public by the Underwriters shall
continue from the Effective Date of the Registration Statement until 90 days
after the Effective Date, at which time the offer and sale of Shares shall be
terminated, unless the offering period is extended, in the discretion of the
Representative, for an additional period of 60 days. All investor funds received
into the Escrow Account may be immediately transferred to the Company after
acceptance of the subscription agreement applicable to such funds. The Company
reserves the right to refuse to sell Shares to any person at any time.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to, and agrees with,
the Representative as of the date hereof, and as of the Closing Date
(hereinafter defined) as follows:
(i) The Company has prepared and filed with the Securities
and Exchange Commission (the "Commission") a registration statement,
and an amendment or amendments thereto, on Form SB-2 (No. 333-89664),
including any related preliminary prospectus ("Preliminary Prospectus"),
for the registration of the Firm Securities under the Securities Act
of 1933, as amended (the "Act"), which registration statement and
amendment or amendments have been prepared by the Company in conformity
with the requirements of the Act, and the rules and regulations (the
"Regulations") of the Commission under the Act. The Company will not
file any other amendment to said registration statement which the
Representative shall have objected to in writing after having been
furnished with a copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein
(including, but not limited to those documents or information
incorporated by reference therein) and all information deemed to be a
part thereof as of such time pursuant to paragraph (b) of Rule 430(A)
of the Regulations), is hereinafter called the "Registration Statement",
and the form of prospectus in the form first filed with the Commission
pursuant to Rule 424(b) of the Regulations, is hereinafter called the
"Prospectus." For purposes hereof, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Act
or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as applicable.
(ii) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of
any Preliminary Prospectus, the Registration Statement or the
Prospectus or any part of any thereof and no proceedings for a stop
order suspending the effectiveness of the Registration Statement or
any of the Company's securities have been instituted or are pending
or to the Company's knowledge, threatened. Each of the Preliminary
Prospectus, Registration Statement and Prospectus at the time of
filing thereof conformed with the requirements of the Act and the
Rules and Regulations, and none of the Preliminary Prospectus,
Registration Statement or Prospectus at the time of filing thereof
contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein and necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, except that this representation and
warranty does not apply to statements made in reliance upon and in
conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus. The Company has filed all reports, forms or
other documents required to be filed under the Act or the Exchange
Act and the respective Rules and Regulations thereunder, and all such
reports, forms or other documents, when so filed or as subsequently
amended, complied in all material respects with the Act and the
Exchange Act and the respective rules and regulations thereunder.
(iii) When the Registration Statement becomes effective
and at all times subsequent thereto up to the Closing Date, if any,
and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer,
the Registration Statement and the Prospectus will contain all statements
which are required to be stated therein in accordance with the Act and
the Rules and Regulations, and will conform to the requirements of the
Act and the Rules and Regulations; neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, provided, however, that this representation
and warranty does not apply to statements made or statements omitted
in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriters expressly for
use in the Preliminary Prospectus, Registration Statement or Prospectus
or any amendment thereof or supplement thereto.
(iv) The Company has been duly organized and is validly
existing as corporation in good standing under the laws of the state
of its incorporation. The Company is duly qualified and licensed and
in good standing as a foreign corporation in each jurisdiction in which
its ownership or leasing of any properties or the character of its
operations requires such qualification or licensing. Any and all of
the Company shares have been validly issued, are fully paid and
non-assessable, were not issued in violation of any preemptive rights,
and except as set forth in the Prospectus, are owned free and clear
of any liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever. The
Company has all requisite corporate power and authority, and has obtained
any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those
having jurisdiction over environmental or similar matters), to own or
lease its properties and conduct its business as described in the
Prospectus; the Company is and has been doing business in compliance
with all such authorizations, approvals, orders, licenses, certificates,
franchises and permits and all federal, state and local laws, rules and
regulations; and the Company has not received any notice of proceedings
relating to the revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, value,
operation, properties, business or results of operations of the Company.
The disclosures in the Registration Statement concerning the effects
of federal, state and local laws, rules and regulations on the Company's
business as currently conducted and as contemplated are correct in
all material respects and do not omit to state a material fact necessary
to make the statements contained therein, in light of the circumstances
in which they were made, not misleading.
(v) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, under
"Capitalization" and "Description of Securities" and will have the
adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth
therein, and the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this
Agreement and as described in the Prospectus. The Securities and all
other securities issued or issuable by the Company conform or, when
issued and paid for, will conform, in all respects to all statements
with respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-
assessable and the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason
of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company. The
Securities to be sold by the Company hereunder are not and will not
be subject to any preemptive or other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable and will conform to the description
thereof contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the
Securities has been duly and validly taken; and the certificates
representing the Securities will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof of the Securities
to be sold by the Company hereunder, the Underwriters will acquire
good and marketable title to such Securities free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever asserted
against the Company or any affiliate of the Company.
(vi) The financial statements of the Company, together
with the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly present
the financial position, income, changes in cash flow, changes in
stockholders' equity, and the results of operations of the Company and
the Subsidiaries at the respective dates and for the respective periods
to which they apply and the pro forma and the as-adjusted financial
information included in the Registration Statement and Prospectus
presents fairly on a basis consistent with that of the audited financial
statements included therein, what the Company's pro forma and as-adjusted
capitalization would have been for the respective periods and as of the
respective dates to which they apply after giving effect to the adjustments
described therein. Such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules
and Regulations, consistently applied throughout the periods involved.
There has been no adverse change or development involving a material
prospective change in the condition, financial or otherwise, or in the
earnings, position, prospects, stockholders' equity, value, operation,
properties, business, or results of operations of the Company, whether
or not arising in the ordinary course of business, since the date of
the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and
intangible, and the business of the Company conform in all material
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. Financial information set forth in the
Prospectus under the headings "Prospectus Summary," "Selected
Consolidated Financial Data," "Capitalization," "Dilution" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," fairly presents, on the basis stated in the Prospectus,
the information set forth therein, have been derived from or compiled
on a basis consistent with that of the audited financial statements
included in the Prospectus.
(vii) The Company (i) has paid all federal, state, local,
and foreign taxes for which it is liable, including, but not limited
to, withholding taxes and amounts payable under Chapters 21 through
24 of the Internal Revenue Code of 1986, as amended (the "Code"), and
has furnished all information returns it is required to furnish
pursuant to the Code, (ii) has established adequate reserves for such
taxes which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(viii) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i)
the issuance by the Company of the Securities, (ii) the purchase by
the Underwriters of the Firm Securities from the Company, and (iii)
the consummation by the Company of any of its obligations under this
Agreement, or (iv) resales of the Firm Securities in connection with
the distribution contemplated hereby.
(ix) The Company maintains insurance policies, including,
but not limited to, general liability and property insurance, which
insures the Company against such losses and risks generally insured
against by comparable businesses. The Company (A) has not failed to
give notice or present any insurance claim with respect to any matter,
including but not limited to the Company's business, property or
employees, under the insurance policy or surety bond in a due and
timely manner, (B) does not have any disputes or claims against any
underwriter of such insurance policies or surety bonds or has not
failed to pay any premiums due and payable thereunder, or (C) has not
failed to comply with all conditions contained in such insurance policies
and surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company.
(x) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the
properties or business of, the Company which (i) questions the validity
of the capital stock of the Company, this Agreement, the Representative's
Warrant Agreement or the Warrant Agreement or of any action taken or
to be taken by the Company pursuant to or in connection with this
Agreement, the Representative's Warrant Agreement or the Warrant
Agreement, (ii) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in
all material respects), or (iii) might materially and adversely affect
the condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties, business
or results of operations of the Company taken as a whole.
(xi) The Company has full legal right, power and authority
to authorize, issue, deliver and sell the Securities, enter into this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement and to consummate the transactions provided for in such
agreements; and this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement have each been duly and properly
authorized, executed and delivered by the Company. Each of this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
except (i) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws affecting creditors' rights generally,
(ii) as enforceability of any indemnification or contribution
provisions may be limited under applicable laws or the public
policies underlying such laws and (iii) that the remedies of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court
before which any proceedings may be brought. None of the Company's
issue and sale of the Securities, execution or delivery of this
Agreement, the Representative's Warrant Agreement or the Warrant
Agreement, its performance hereunder and thereunder, its consummation
of the transactions contemplated herein and therein, or the conduct
of its business as described in the Registration Statement and the
Prospectus, and any amendments or supplements thereto, conflicts with
or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of
the Company pursuant to the terms of, (i) the certificate of
incorporation or by-laws of the Company, (ii) any license, contract,
indenture, mortgage, lease, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or other
agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company is a party
or by which it is or may be bound or to which any of its properties
or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency
or body (including, without limitation, those having jurisdiction
over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
(xii) No consent, approval, authorization or order of, and
no filing with, any arbitrator, court, regulatory body,
administrative agency, government agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, this Agreement, the
Representative's Warrant Agreement and the Public Warrant Agreement,
the performance of this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement and the transactions contemplated
hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person
may have for the issue and/or sale of any of the Securities, except
such as have been or may be obtained under the Act or may be required
under state securities or Blue Sky laws and the rules of the National
Association of Securities Dealers, Inc. (the "NASD") in connection
with the Underwriters' purchase and distribution of the Securities to
be sold by the Company hereunder.
(xiii) All executed agreements, contracts or other documents
or copies of executed agreements, contracts or other documents filed
as exhibits to the Registration Statement to which the Company is a
party or by which it may be bound or to which any of its assets,
properties or business may be subject have been duly and validly
authorized, executed and delivered by the Company or the Subsidiaries,
and constitute the legal, valid and binding agreements of the Company
enforceable against each of them in accordance with their respective
terms. The descriptions in the Registration Statement of agreements,
contracts and other documents are accurate in all material respects
and fairly present the information required to be shown with respect
thereto by Form B-2, and there are not agreements, contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are
not described or filed as required, and the exhibits which have been
filed are in all material respects complete and correct copies of the
documents of which they purport to be copies.
(xiv) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and the
Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not(i) issued any securities or
incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other
than in the ordinary course of business, or(iii) declared or paid any
dividend or made any other distribution on or in respect of its capital
stock of any class, and there has not been any change in the capital
stock, or any material change in the debt (long or short term) or
liabilities or material adverse change in or affecting the condition,
financial or otherwise, earnings, prospects, stockholders' equity,
value, operations, properties, business or results of operations of
the Company.
(xv) No default exists in the due performance and
observance of any term, covenant or condition of any license,
contract, indenture, mortgage, installment sale agreement, lease,
deed of trust, voting trust agreement, stockholders agreement,
partnership agreement, note, loan or credit agreement, purchase
order, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to
which the Company is a party or by which the Company may be bound
or to which the property or assets (tangible or intangible) of the
Company is subject or affected.
(xvi) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance
with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions
of employment and wages and hours. There are no pending investigations
involving the Company by the U.S. Department of Labor, or any other
governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor
practice charge or complaint of the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the
Company or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company
and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the
Company exists, or is imminent.
(xvii) The Company maintains, sponsors or contributes to
any program or arrangement that is an "employee pension benefit plan,
" an "employee welfare benefit plan," or a "multiemployer plan" as
such terms are defined in Sections 3(2), 3(1) and 3(37), respectively,
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintains or contributes,
now or at any time previously, to a defined benefit plan, as defined
in Section 3(35) of ERISA. No ERISA Plan (or any trust created thereunder)
has engaged in a "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975 of the Code, which could subject the Company
to any tax penalty on prohibited transactions and which has not adequately
been corrected. Each ERISA Plan is in compliance with all reporting,
disclosure and other requirements of the Code and ERISA as they relate
to any such ERISA Plan. Determination letters have been received from
the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA
Plan and the attendant trust are qualified thereunder. The Company has
never completely or partially withdrawn from a "multiemployer plan."
(xviii) The Company, nor any of its employees, directors,
stockholders, partners, or affiliates (within the meaning of the Rules
and Regulations) of any of the foregoing has taken or will take,
directly or indirectly, any action designed to or which has constituted
or which might be expected to cause or result in, under the Exchange
Act, or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities
or otherwise.
(xix) None of the patents, patent applications,
trademarks, service marks, service names, trade names and copyrights
and none of the licenses and rights to the foregoing presently owned
or held by the Company, are in dispute or are in any conflict with the
right of any other person or entity. The Company (i) owns or has the
right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities
of any kind whatsoever, all patents, patent applications, trademarks,
service marks, service names, trade names and copyrights, technology
and licenses and rights with respect to the foregoing, used in the
conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or
claimed right of any person, corporation or other entity under or with
respect to any of the foregoing and (ii) is not obligated or under any
liability whatsoever to make any payment by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
patent application, trademark, service mark, service names, trade name,
copyright, know-how, technology or other intangible asset, with
respect to the use thereof or in connection with the conduct of its
business or otherwise. There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, pending or threatened (or
circumstances that may give rise to the same) against the Company
which challenges the exclusive rights of the Company and the
Subsidiaries with respect to any trademarks, trade names, service
marks, service names, copyrights, patents, patent applications or
licenses or rights to the foregoing used in the conduct of its
business, or which challenge the right of the Company and the
Subsidiaries to use any technology presently used or contemplated to
be used in the conduct of its business.
(xx) The Company owns and has the unrestricted right to use
all trade secrets, know-how (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
inventions, technology, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein
"intellectual property") that are material to the development, manufacture,
operation and sale of all products and services sold or proposed to
be sold by any of the Company, free and clear of and without violating
any right, lien, or claim of others, including without limitation,
former employers of its employees; provided, however, that the
possibility exists that other persons or entities.
(xxi) The Company has good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus, to be owned or leased by it free
and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects, or other restrictions or equities of any kind
whatsoever, other than those referred to in the Prospectus and liens
for taxes not yet due and payable.
(xxii) Pannel Kerr Forster, Certified Public Accountants,
A Professional Corporation ("Pannel Kerr Forster"), whose report is
filed with the Commission as a part of the Registration Statement,
are independent certified public accountants as required by the Act
and the Rules and Regulations.
(xxiii) The Company has caused to be duly executed legally
binding and enforceable agreements ("Lock-Up Agreement") pursuant to
which all of the officers and directors of the Company, holders of
Common Stock and holders of securities exchangeable or exercisable
for or convertible into shares of Common Stock have agreed (i) not
to, directly or indirectly, offer, sell, grant any option for the
sale of, assign, transfer, pledge, hypothecate, distribute or
otherwise encumber or dispose of any shares of Common Stock or
securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of
Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest
therein for a period of not less than twelve (12) months following
the effective date of the Registration Statement without the prior
written consent of the Representative and the Company, and, (ii) for
a period extending twelve (12) months following the effective
date of the Registration Statement, that all sales of such securities
issued by the Company shall be made through the Underwriter in
accordance with its customary brokerage policies. In addition, the
Company shall not sell or offer for sale any of its securities for a
period of twelve (12) months from the effective date of the
Registration Statement without the consent of the Representative
except pursuant to options and warrants issued on the effective date
of the Registration Statement. The Company will cause the Transfer
Agent, as defined below, to mark an appropriate legend on the face of
stock certificates representing all of such securities and to place
"stop transfer" orders on the Company's stock ledgers.
(xxiv) There are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services
in the nature of a finder's or origination fee with respect to the
sale of the Securities hereunder or any other arrangements,
agreements, understandings, payments or issuance with respect to the
Company, or any of its or their respective officers, directors,
stockholders, partners, employees or affiliates that may affect the
Underwriters' compensation, as determined by the NASD.
(xxv) The Common Stock have been approved for quotation
on the Over-the-Counter Electronic Bulletin Board maintained by the
NASD or the SmallCap Stock Market maintained by the Nasdaq Stock Market,
Inc..
(xxvi) The Company, nor any of its directors, officers,
employees, agents, or any other persons acting on behalf of the Company,
has, directly or indirectly, given or agreed to give any money, gift
or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee
or agent of a customer or supplier, or official or employee of any
governmental agency (domestic or foreign) or instrumentality of any
government (domestic or foreign) or any political party or candidate
for office (domestic or foreign) or other person who was, is, or may
be in a position to help or hinder the business of the Company (or assist
any of the Company in connection with any actual or proposed transaction)
which (a) might subject the Company, or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might
have had a materially adverse effect on the assets, business or
operations of any of the Company, or (c) if not continued in the future,
might adversely affect the assets, business, operations or prospects
of the Company. The Company's internal accounting controls are sufficient
to cause the Company to comply with the Foreign Corrupt Practices Act
of 1977, as amended.
(xxvii) The Company confirms as of the date hereof that it
is in compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, An Act Relating to Disclosure of Doing Business with
Cuba, and the Company further agrees that if it or any affiliate
commences engaging in business with the government of Cuba or with
any person or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with
the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the
Company's, or any affiliate's, business with Cuba or with any person
of affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
(xxviii) Except as set forth in the Prospectus, no officer,
director or stockholder of any of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under
the Rules and Regulations) of any of the foregoing persons or entities
has, either directly or indirectly, (i) an interest in any person or
entity which (A) furnishes or sells services or products which are furnished
or sold or are proposed to be furnished or sold by the Company, or
(B) purchases from or sells or furnishes to the Company any goods or
services, or (ii) a beneficial interest in any contract or agreement
to which the Company is a party or by which it may be bound or affected.
Except as set forth in the Prospectus under "Certain Transactions,"
there are no existing agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company, and any officer, director,
or Principal Stockholder (as such term is defined in the Prospectus)
of the Company, or any partner, affiliate or associate of any of the
foregoing persons or entities.
(xxix) Any certificate signed by any officer of the
Company, and delivered to the Representative or to Underwriters' Counsel
(as defined herein) shall be deemed a representation and warranty by
the Company to the Representative as to the matters covered thereby.
(xxx) The minute books of the Company has been made
available to the Representative and contain a complete summary of all
meetings and actions of the directors, stockholders, audit committee,
compensation committee and any other committee of the Board of Directors
of the Company, since the time of its incorporation, and reflects all
transactions referred to in such minutes accurately in all material
respects.
(xxxi) Except and to the extent described in the
Prospectus, no holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of
the Company have the right to include any securities issued by the
Company in the Registration Statement or any registration statement
to be filed by the Company or to require the Company to file a
registration statement under the Act and no person or entity holds
any anti-dilution rights with respect to any
securities of the Company.
(xxxii) The Company is not, and upon the issuance and sale
of the Securities as herein contemplated and the application of the
net proceeds therefrom as described in the Prospectus under the
caption "Use of Proceeds" will not be, 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 (the "1940
Act").
(xxxiii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparations of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorizations; 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.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.
(a) On the basis of the covenants, representations, and warranties
herein contained and subject to the terms and conditions herein set forth:
(i) The Company hereby engages you as its exclusive
agent to solicit subscriptions for the Shares in accordance with the
terms of the Registration Statement, the Prospectus and this Agreement,
and you agree to use your best efforts to procure such subscriptions.
You may, however, discharge your responsibilities under this Agreement
by acting as the Representative of several placement agents and by
forming a group of securities dealers acting as additional placement
agents, including you, to procure subscribers for the Shares. Any
agreement between you and a securities dealer pursuant to which such
securities dealer becomes an Underwriter shall require such dealer to
represent and warrant that it will conduct the Offering and sale of
the Shares in the manner set forth herein. The allocation of Shares
among you and the Underwriters shall be made by you.
(ii) Subject to the terms and condition set forth
herein, in consideration of your execution of this Agreement and
performance of your obligations hereunder, the Company agrees that, at
each Closing (as defined herein), you shall receive (i) selling
commissions in an amount equal to 10% of the aggregate purchase price
of the Shares sold by you (or any Underwriter and (ii) a non-accountable
expense allowance equal to 3% of the aggregate purchase price of the
Shares sold by you (or any Underwriter). The aggregate commissions and
expense allowance payable in connection with the sale of Shares will
be disbursed to you, as provided herein and in Escrow Agreement;
thereupon, you shall pay to each of the other Underwriters, if any,
in such amount (which shall not exceed commissions and expense allowance
in the amounts of 10% and 3%, respectively, of the aggregate purchase
price of the Shares placed by such Underwriter), at such times and
upon such terms and conditions as shall have been agreed upon
between you and such Underwriter, that portion of the aggregate
commissions to which such Underwriter is entitled.
(c) Each subscriber for the Shares must (i) complete and execute a subscription
agreement (in the form included as an Exhibit to the Registration Statement
("Subscription Agreement") and any other documents which may be required by the
Representative or the Company in connection with such subscription
(collectively, "Subscription Documents") and (ii) tender payment in full for the
Shares subscribed for ("Subscription Payment"); checks representing Subscription
Payments should be made payable to "________________ Bank, Escrow Agent"; the
Representative shall deliver Subscription Payments received by you to the Escrow
Agent, at _____________________, by 12:00, noon, on the business day following
such receipt by the Representative, together with a schedule setting forth the
amount of each such Subscription Payment and the name, mailing address and state
of residence of the subscriber. Concurrently with the delivery of each
Subscription Payment to the Escrow Agent, the Representative shall forward to
the Company executed originals of all related Subscription Documents, retaining
copies of all such Subscription Documents for your records.
(d) Within five (5) days following receipt by it of executed Subscription
Documents, the Company shall determine to accept or reject each subscription and
shall notify the Representative and the Escrow Agent orally (to be confirmed in
writing). If the Company elects to reject a subscription, the related
Subscription Payment shall, upon receipt by the Escrow Agent of oral notice (to
be confirmed in writing) from the Company of such rejection, promptly be
returned directly to the rejected subscriber by the Escrow Agent, without
interest thereon or deduction therefrom.
(e) Subject to the terms hereof and of the Escrow Agreement, the first
disbursement of subscription proceeds (including disbursement of amounts due to
the Representative hereunder) shall take place not less than two (2) business
days following the date upon which cleared funds representing the first $100,000
in Subscription Payments have been received by the Escrow Agent under the terms
of the Escrow Agreement; such initial disbursement is referred to herein as the
"Initial Closing," and the date thereof is referred to as the "Initial Closing
Date." Following the Initial Closing, subscription proceeds shall be disbursed
from time to time as agreed among the Representative, the Company and the Escrow
Agent; each such further disbursement of subscription proceeds is referred to
herein as an "Additional Closing," and the date thereof as an "Additional
Closing Date." The Initial Closing and Additional Closings are sometimes
referred to herein as a "Closing" or "Closings"; and the Initial Closing Date
and Additional Closing Dates are sometimes referred to herein as a "Closing
Date" or "Closing Dates."
(f) Each Closing shall take place at the offices of the Escrow Agent, in
_____________, California, or, at the Representative's option, at such other
place as may be agreed upon in writing with the Company. After the final Closing
Date, the Representative will not be considered to have any continuing or future
duty or obligation of any kind to the Company.
3. PUBLIC OFFERING OF THE SHARES. As soon after the Registration Statement
becomes effective as the Representative deems advisable, the Underwriters shall
make a public offering of the Firm Securities as the Representative may
determine (other than to residents of or in any jurisdiction in which
qualification of the Shares is required and has not become effective) at the
price and upon the other terms set forth in the Prospectus. The Representative
may from time to time increase or decrease the public offering price after
distribution of the Shares has been completed to such extent as the
Representative, in its discretion deems advisable. The Underwriters may enter
into one of more agreements as the Underwriters, in each of their sole
discretion, deem advisable with one or more broker-dealers who shall act as
dealers in connection with such public offering.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or Exchange
Act before termination of the offering of the Shares by the Underwriters of
which the Representative shall not previously have been advised and furnished
with a copy, or to which the Representative shall have objected or which is not
in compliance with the Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representative and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities regulatory authority shall enter a
stop order or suspend such qualification at any time, the Company will make
every effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifteenth business day after the effective date of
the Registration Statement.
(d) The Company will give the Representative notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Representative in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the
Representative "Underwriters' Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign corporation
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered under
the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Representative copies
of such amendment or supplement as soon as available and in such quantities as
the Representative may request.
(g) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period beginning on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least twelve (12) consecutive months after the effective
date of the Registration Statement.
(h) During a period of seven (7) years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly reports to
its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and
certified by the Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to
its stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission,
the NASD or any securities exchange;
(v) every press release and every material news item or
article of interest to the financial community in respect of the
Company, or its affairs which was released or prepared by or on
behalf of the Company; and
(vi) any additional information of a public nature
concerning the Company, or its businesses which the Representative may
request.
(vii) During such seven-year period, if the Company has an
active subsidiary, the foregoing financial statements will be on a
consolidated basis to the extent that the accounts of the Company and
its subsidiary(ies) are consolidated, and will be accompanied by
similar financial statements for any significant subsidiary which is
not so consolidated.
(i) The Company will maintain a Transfer Agent ("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.
(j) The Company will furnish to the Representative or on Representative's
order, without charge, at such place as the Representative may designate, copies
of each Preliminary Prospectus, the Registration Statement and any pre-effective
or post-effective amendments thereto (two of which copies will be signed and
will include all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such quantities as the Representative may request.
(k) On or before the effective date of the Registration Statement, the
Company shall provide the Underwriter with originally-executed copies of duly
executed, legally binding and enforceable Lock-Up Agreements which are in form
and substance satisfactory to the Underwriter. On or before the Closing Date,
the Company shall deliver instructions to its transfer agent authorizing such
transfer agent to place appropriate legends on the certificates representing the
securities of the Company subject to the Lock-Up Agreements and to place
appropriate stop transfer orders on the Company's ledgers.
(l) The Company agrees that, for a period of twelve (12) months commencing
on the effective date of the Registration Statement, and except as contemplated
by this Agreement, it and its future Subsidiaries will not, without the prior
written consent of the Underwriter issue, sell, contract or offer to sell, grant
an option for the purchase or sale of, assign, transfer, pledge, distribute or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
option, right or warrant with respect to any shares of Common Stock or any type
of capital stock having voting or dividend rights on a parity with or superior
to the Common Stock, except pursuant to stock options or warrants issued on the
date hereof, for cash at less than the greater of the initial public offering
price of shares of Common Stock or the then market value of such shares.
(m) Neither the Company, nor any of its or their officers, directors,
stockholders, nor any of their respective affiliates (within the meaning of the
Rules and Regulations) will take, directly or indirectly, any action designed
to, or which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company.
(n) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. Except as described in the Prospectus, no portion
of the net proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
(o) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
(p) The Company shall furnish to the Representative as early as practicable
prior to each of the date hereof, the Closing Date, but no later than two (2)
full business days prior thereto, a copy of the latest available unaudited
interim financial statements of the Company (which in no event shall be as of a
date more than thirty (30) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as stated
in its letter to be furnished pursuant to Section 6(j) hereof.
(q) The Company shall cause the Common Stock to be quoted on the
Over-the-Counter Electronic Bulletin Board or the SmallCap Stock Market, use its
best efforts to maintain the listing of the Shares.
(r) For a period of five (5) years from the Closing Date, the Company shall
furnish to the Representative at the Representative's request and at the
Company's sole expense, (i) daily consolidated transfer sheets relating to the
Shares, (ii) the list of holders of all of the Company's securities and (iii) a
Blue Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel to the Company.
(s) As soon as practicable, but in no event more than thirty (30) days
from the effective date of the Registration Statement, the Company agrees to
take all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and Moody's OTC Manual and to continue such inclusion
for a period of not less than seven (7) years.
(t) Until the completion of the distribution of the Firm Securities, the
Company shall not without the prior written consent of the Representative and
Underwriters' Counsel, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
(u) For a period of five (5) years after the effective date of the
Registration Statement, the Representative shall have the right to designate for
election one (1) individual to the Company's Board of Directors (the "Board").
Such person shall be mutually acceptable to the Company and the Representative.
In the event the Representative elects not to exercise such right, then it may
designate one (1) individual to attend meetings of the Company's Board. The
Company shall notify the Representative of each meeting of the Board and the
Company shall send to such individual all notices and other correspondence and
communications sent by the Company to members of the Board. Such individual
shall be reimbursed for all out-of-pocket expenses incurred in connection with
his attendance of meetings of the Board.
(v) For a period of twenty-four (24) months after the effective date of
the Registration Statement, the Company shall not restate, amend or alter any
term of any written employment, consulting or similar agreement entered into
between the Company and any officer, director or key employee as of the
effective date of the Registration Statement in a manner which is more favorable
to such officer, director or key employee, without the prior written consent of
the Representative.
(w) For a period of three (3) years after the effective date of the
Registration Statement, the Company, any subsidiaries and any affiliates hereby
grant a thirty-day (30) right of first refusal for any sale of securities to be
made by the Company, any affiliates and any subsidiaries.
(x) The Company will use its best efforts to maintain the effectiveness
of the Registration Statement for a period of five years after the date hereof.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on the Closing Date, all expenses
and fees (other than fees of Underwriters' Counsel, except as provided in (iv)
below) incident to the performance of the obligations of the Company under this
Agreement, the Representative's Warrant Agreement and the Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage, overnight
delivery or courier charges with respect thereto) of the Registration Statement
and the Prospectus and any amendments and supplements thereto and the printing,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Representative's Warrant agreement, the Warrant Agreement,
agreements with selected dealers, and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and of the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriters and
such dealers as the Underwriters may request, in quantities as hereinabove
stated, (iii) the printing, engraving, issuance and delivery of the Securities
including, but not limited to, (x) the purchase by the Underwriters of the
Securities from the Company, (y) the consummation by the Company of any of its
obligations under this Agreement, and (z) resale of the Securities by the
Underwriters in connection with the distribution contemplated hereby, (iv) the
qualification of the Securities under state or foreign securities or "Blue Sky"
laws and determination of the status of such securities under legal investment
laws, including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and disbursements and fees of counsel in connection therewith,
(v) advertising costs and expenses, including but not limited to costs and
expenses in connection with the "road show", information meetings and
presentations, bound volumes and prospectus memorabilia and "tomb-stone"
advertisement expenses, (vi) costs and expenses in connection with due diligence
investigations, including but not limited to the fees of any independent counsel
or consultant retained, (vii) fees and expenses of the transfer agent and
registrar, (viii) applications for assignments of a rating of the Securities by
qualified rating agencies, (ix) the fees payable to the Commission and the NASD,
and (x) the fees and expenses incurred in connection with the quotation of the
Securities on the Over-the-Counter Electronic Bulletin Board and any other
exchange.
(b) If this Agreement is terminated by the Underwriters in accordance
visions of Section 6 or Section 11, (i) the Company shall reimburse
and indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of Underwriters' Counsel, less any amounts
already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the expenses payable
pursuant to subsection (a) of this Section 5, it will pay to the Representative
on the Closing Date by certified or bank cashier's check or, at the election of
the Representative, by deduction from the proceeds of the offering contemplated
herein a non-accountable expense allowance equal to three percent (3%) of the
gross proceeds received by the Company from the sale of the Firm Securities.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date with respect to the Company as if it had been made on and
as of the Closing Date; the accuracy on and as of the Closing Date, if any, of
the statements of the officers of the Company made pursuant to the provisions
hereof; and the performance by the Company on and as of the Closing Date, of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 12:00 Noon, New York time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Representative, and, at the
Closing Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Underwriters' Counsel. If the
Company has elected to rely upon Rule 430A of the Rules and Regulations, the
price of the Shares and any price-related information previously omitted from
the effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the Rules
and Regulations within the prescribed time period, and prior to Closing Date the
Company shall have provided evidence satisfactory to the Representative 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 of the Rules and Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein not misleading, or
that the Prospectus, or any supplement thereto, contains an untrue statement of
fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall have
received from Underwriters' Counsel, such opinion or opinions with respect to
the organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and other related matters as the
Representative may request and Underwriters' Counsel shall have received such
papers and information as they request to enable them to pass upon such matters.
(d) At Closing Date, the Underwriter shall have received the favorable
opinion of Gregory Bartko, Esq., counsel to the Company, dated the Closing Date,
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and is a validly
existing corporation in good standing under the laws of its jurisdiction
of incorporation, (B) is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership
or leasing of any properties or the character of its operations requires
such qualification or licensing, and (C) has all requisite power and
authority (corporate and other) and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; each of the Company
and the Subsidiaries is and has been doing business in compliance in
with all such authorizations, approvals, orders, licenses, certificates
and permits obtained by it from governmental or regulatory officials
and agencies and all federal, state, local and foreign laws, rules and
regulations to which it is subject; and, none of the Company nor the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order,
license, certificate, franchise or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value,
operations, properties, business or results of operations of the
Company and the Subsidiaries taken as a whole. The disclosure in the
Registration Statement concerning the effects of federal, state,
local and foreign laws, rules and regulations on each of the
Company's and the Subsidiaries businesses as currently conducted and
as contemplated is correct in all respects and does not omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading;
(ii) all of the outstanding shares of the Company's common
stock have been validly issued, are fully paid and non-assessable, were
not issued in violation of any preemptive rights, and except as set
forth in the Prospectus, are owned free and clear of any liens, charges,
claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever;
(iii) except as described in the Prospectus, the
Company does not own an interest in any other corporation, partnership,
joint venture, trust or other business entity;
(iv) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization" and
"Description of Securities" and except as set forth in the
Prospectus, the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement and as described in the Prospectus. The Securities and all
other securities issued or issuable by the Company conform, or when
issued and paid for, will conform, in all respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with
respect thereto and are not subject to personal liability by reason
of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of
the Company or any similar contractual right granted by the Company.
The Securities to be sold by the Company hereunder and under the
Representative's Warrant Agreement and the Warrant Agreement are not
and will not be subject to any preemptive or other similar rights of
any stockholder, have been duly authorized and, when issued, paid for
and delivered in accordance with the terms hereof and thereof, will
be validly issued, fully paid and non-assessable and conform to the
descriptions thereof contained in the Prospectus; the holders thereof
will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue
and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities are in due and proper form.
Upon the issuance and delivery pursuant to this Agreement, the
Underwriters will acquire good and marketable title to such Securities,
free and clear of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever.
No transfer tax is payable by or on behalf of the Underwriters in
connection with (A) the issuance by the Company of the Securities, (B)
the purchase by the Underwriters of the Securities from the Company,
(C) the consummation by the Company of any of its obligations under this
Agreement, or (D) resales of the Securities in connection with the
distribution contemplated hereby;
(v) the Registration Statement is effective under the Act,
and, if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and no stop order
suspending the use of the Preliminary Prospectus, the Registration
Statement or the Prospectus or any part of any thereof or suspending
the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act;
(vi) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and schedules and other
financial and statistical data included therein, as to which no
opinion need be rendered) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations;
(vii) (A) there are no agreements, contracts or other
documents required by the Act to be described in the Registration
Statement (or required to be filed under the Exchange Act if upon
such filing they would be incorporated, in whole or in part, by
reference therein) and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits thereto, and the
exhibits which have been filed are correct copies of the documents of
which they purport to be copies; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or
amendment thereto of agreements, contracts and other documents to
which the Company is a party or by which it is bound are accurate and
fairly represent the information required to be shown by Form SB-2;
(C) there is no action, suit, proceeding, inquiry, arbitration, investigation,
litigation or governmental proceeding (including, without limitation,
those pertaining to environmental or similar matters), domestic
or foreign, pending or threatened against (or circumstances that may
give rise to the same) or involving the properties or business of, any
of the Company which (I) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are
accurately summarized in all respects), or (II) questions the
validity of the capital stock of the Company or of this Agreement,
the Representative's Warrant Agreement or the Warrant Agreement or of
any action taken or to be taken by the Company pursuant to or in
connection with any of the foregoing; (D) no statute or regulation or
legal or governmental proceeding required to be described in the
Prospectus is not described as required; and (E) there is no action,
suit or proceeding pending or threatened against or affecting any of
the Company or the Subsidiaries before any court, arbitrator or
governmental body, agency or official (or any basis thereof known to
such counsel) in which there is a reasonable possibility of a
decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, prospects,
stockholders' equity, value, operation, properties, business or
results of operations of any of the Company or the Subsidiaries, which
could adversely affect the present or prospective ability of the Company
to erform its obligations under this Agreement, the Representative's
Warrant Agreement or the Warrant Agreement or which in any manner
draws into question the validity or enforceability of this Agreement,
the Representative's Warrant Agreement or the Warrant Agreement;
(viii) the Company has full legal right, power and
authority to enter into each of this Agreement, the Representative's
Warrant Agreement and the Warrant Agreement and to consummate the
transactions provided for herein and therein; and each of this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of the Representative's Warrant Agreement and the
Warrant Agreement certain provisions of this Agreement assuming due
authorization, execution and delivery by each other party thereto,
constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting the enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as obligations to indemnify or
contribute to losses may be limited by applicable law). None of the
Company's execution or delivery of this Agreement, the
Representative's Warrant Agreement and the Warrant Agreement, its
performance hereunder and thereunder, its consummation of the
transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement and the
Prospectus and any amendments or supplements thereto, conflicts with
or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of
the Company or the Subsidiaries pursuant to the terms of (A) the
certificate of incorporation or bylaws of the Company, (B) any
license, contract, indenture, mortgage, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument
to which any of the Company or the Subsidiaries is a party or by
which it is or may be bound or to which its properties or assets
(tangible or intangible) are or may be subject, (C) any statute
applicable to any of the Company or Subsidiaries or (D) any judgment,
decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic
or foreign, having jurisdiction over any of the Company or the
Subsidiaries or any of their activities or properties;
(ix) no consent, approval, authorization or order of, and
no filing with, any arbitrator, court, regulatory body,
administrative agency, government agency or other body, domestic or
foreign (other than such as may be required under "blue sky" laws and
the rules of the NASD, as to which no opinion need be rendered), is
required in connection with the issuance of the Securities pursuant
to the Prospectus, the Registration Statement, this Agreement, the
Representative's Warrant Agreement and the Warrant Agreement, or the
performance of this Agreement, the Representative's Warrant Agreement
and the Warrant Agreement and the transactions contemplated hereby and
thereby;
(x) the properties and business of each of the Company
conform to the description thereof contained in the Registration
Statement and the Prospectus; and each of the Company and the Subsidiaries
has good and marketable title to, or valid and enforceable leasehold
estates in, all items of real and personal property stated in the
Prospectus to be owned or leased by it, in each case free and clear
of all liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes not
yet due and payable;
(xi) the Company is not in breach of, or in default under,
any term or provision of any license, contract, indenture, mortgage,
lease, deed of trust, voting trust agreement, stockholders' agreement,
note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which any of the Company is a party or by which it is or
may be bound or to which its property or assets (tangible or intangible)
are or may be subject; and the Company is not in violation of any term
or provision of (A) its certificate of incorporation or by-laws, (B)
any authorization, approval, order, license, certificate, franchise or
permit of any governmental or regulatory official or body, or (C) any
judgment, decree, order, statute, rule or regulation to which it is
subject;
(xii) the Common Stock has been accepted for quotation
on the Over-the-Counter Electronic Bulletin Board
maintained by the NASD or the Smallcap Stock Market;
(xiii) the statements in the Prospectus under "Prospectus
Summary," "Risk Factors," "Business," "Management," "Principal
Stockholders," "Certain Transactions," "Shares Eligible For Future
Sale," and "Description of Securities" have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions
of statutes, licenses, rules or regulations or legal conclusions, are
correct in all material respects;
(xiv) the persons listed under the caption "Principal
Stockholders" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in Rule 13d-3 under the Exchange
Act) of the securities set forth opposite their respective names
thereunder as and to the extent set forth therein;
(xv) The Company owns or possesses, free and clear of all
liens or encumbrances and right thereto or therein by third parties,
the requisite licenses or other rights to use all trademarks, service
marks, copyrights, service names, tradenames, patents, patent applications
and licenses necessary to conduct its business (including without
limitation any such licenses or rights described in the Prospectus as
being owned or possessed by the Company) and there is no claim or action
by any person pertaining to, or proceeding, pending or threatened, which
challenges the exclusive rights of the Company with respect to any
trademarks, service marks, copyrights, service names, trade names, patents,
patent applications and licenses used in the conduct of the Company's
businesses (including, without limitation, any such licenses or rights
described in the Prospectus as being owned or possessed by any of the
Company);
(xvi) neither the Company, nor any of its directors, officers,
stockholders, employees, agents or any other person acting on behalf
of the Company has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or any official or employee
of any governmental agency or instrumentality of any government
(domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is or may be in a position
to help or hinder the business of the Company (or assist it in connection
with any actual or proposed transaction) which (A) might subject any
of the Company or any such person to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign),
(B) if not given in the past, might have had material and adverse effect
on the condition, financial or otherwise, or the earnings, prospects,
stockholders' equity, value, operations, properties, business or results
of operations of the Company taken as a whole, or (C) if not continued
in the future, might materially and adversely affect the condition,
financial or otherwise, or the earnings, prospects, stockholders' equity,
value, operations, properties, business or results of operations of the
Company taken as a whole;
(xvii) there are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services
in the nature of a finder's or origination fee with respect to the
sale of the Securities hereunder or financial consulting arrangement
or any other arrangements, agreements, understandings, payments or
issuances that may affect the Underwriters' compensation, as
determined by the NASD;
(xviii) the minute books of the Company contain a complete
summary of all meetings and actions of the directors and stockholders
of each of the Company since the time of its incorporation and reflect
all transactions referred to in such minutes accurately in all material
respects;
(xix) no person, corporation, trust, partnership,
association or other entity has the right to include and/or register
any securities of the Company in the Registration Statement, require
the Company to file any registration statement or, if filed, to
include any security in such registration statement;
(xx) assuming due authorization, execution and delivery by
the parties thereto, the Lock-Up Agreements are legal, valid and
binding obligations of the parties thereto, enforceable against such
parties and any subsequent holder of the securities subject thereto
in accordance with their terms;
(xxi) except as described in the Prospectus, the Company
does not (A) maintains, sponsor or contribute to an ERISA Plans, (B)
maintains or contributes, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA, and (C) has never
completely or partially withdrawn from a "multiemployer plan"; and
(xxii) the Company nor or any of its or their affiliates
shall be subject to the requirements of or shall be deemed an "Investment
Company," pursuant to and as defined under, respectively, the Investment
Company Act.
Such counsel shall state that such counsel has participated in conferences
with officers and other representatives of the Company and representatives of the
independent public accountants for the Company at which conferences such counsel
made inquiries of such officers, representatives and accountants and discussed
the contents of the Preliminary Prospectus, the Registration Statement, the
Prospectus, 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 Preliminary
Prospectus, the Registration Statement and Prospectus, on the basis of the
foregoing, no facts have come to the attention of such counsel which lead them
to believe that either the Registration Statement or any amendment thereto, at
the time such Registration Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion 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 (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus), or any supplements or
amendments thereto.
Such opinion shall not state that it is to be governed or qualified by,
or that it is otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991), or any comparable State bar
accord.
In rendering such opinion, such counsel may rely (A) as to matters involving
the application of laws other than the laws of the United States and jurisdictions
in which they are admitted, to the extent such counsel deems proper and to the
extent specified in such opinion, if at all, upon an opinion or opinions (in
form and substance satisfactory to Underwriters' Counsel) of other counsel
acceptable to Underwriters' Counsel, familiar with the applicable laws; (B) as
to matters of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of each of the Company and the Subsidiaries,
and certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and the Subsidiaries, provided that
copies of any such statements or certificates shall be delivered to
Underwriters' Counsel if requested. The opinion shall also state that the
Underwriters' Counsel is entitled to rely thereon. The opinion of such counsel
for the Company and the Subsidiaries shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and that the Underwriters
and they are justified in relying thereon.
(e) On or prior to each of the Closing Date, Underwriters' Counsel shall
have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in subsection (c) of this Section 6, or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions of the Company, or herein contained.
(f) Prior to the Closing Date, (i) there shall have been no material
adverse change or development involving a prospective adverse change in the
condition, financial or otherwise, or the earnings, stockholders' equity, value,
operations, properties, prospects, business or results of operations of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such matters are set forth in the Registration Statement and
the Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company from the latest date as of which
the financial condition of the Company is set forth in the Registration
Statement and the Prospectus; (iii) the Company shall be in default under any
provision of any instrument relating to any outstanding indebtedness; (iv) none
of the Company nor the Subsidiaries shall have issued any securities (other than
the Securities) or declared or paid any dividend or made any distribution in
respect of its capital stock of any class and there shall not have been any
change in the capital stock, debt (long or short term) or liabilities or
obligations of the Company (contingent or otherwise) from the latest dates as of
which such matters are set forth in the Registration Statement and the
Prospectus; (v) no material amount of the assets of the Company shall have been
pledged or mortgaged, except as set forth in the Registration Statement and the
Prospectus; (vi) no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental or other proceeding, domestic or
foreign, shall be pending or threatened (or circumstances giving rise to same)
against the Company affecting any of its properties or business before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may materially and
adversely affect the condition, financial or otherwise, or the earnings,
stockholders' equity, value, operations, properties, business or results of
operations of the any of the Company or the Subsidiaries, except as set forth in
the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Act with respect to the Registration Statement and no
proceedings therefor shall have been initiated, threatened or contemplated by
the Commission.
(g) At the Closing Date, if any, the Underwriters shall have received a
certificate of the Company signed by the principal executive officer and by the
chief financial or chief accounting officer of the Company, dated the Closing
Date, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the
Closing Date, and the Company has complied with all agreements and
covenants and satisfied all conditions contained in this Agreement
on its part to be performed or satisfied at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and,
if any, each amendment and each supplement thereto, contain all
statements and information required to be included therein, and none
of the Registration Statement, the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and neither
the Preliminary Prospectus or any supplement thereto included any
untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) the Company has not incurred up to and including the
Closing Date, other than in the ordinary course of its business,
any material liabilities or obligations, direct or contingent; (b)
the Company has not paid or declared any dividends or other distributions
on its capital stock; (c) the Company has not entered into any transactions
not in the ordinary course of business; (d) there has not been any
change in the capital stock of any of the Company or any material
change in the debt (long or short-term) of any of the Company; (e)
the Company has not sustained any material loss or damage to its
property or assets, whether or not insured; (g) there is no
litigation which is pending or threatened (or circumstances giving
rise to same) against the Company, or any affiliated party of any of
the foregoing which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (h) there has
occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (g) are to such documents as amended and supplemented at the date of
such certificate.
(h) By the Closing Date, the Underwriters will have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the
Underwriters in form and substance satisfactory (including the
non-material nature of the changes or decreases, if any, referred to
in clause (iii) below) in all respects to the Underwriters and Underwriters'
Counsel, from Pannel Kerr Forster, Certified Public Accountants, A
Professional Corporation;
(i) confirming that they are independent certified public
accountants with respect to the Company and the Subsidiaries within
the meaning of the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and
Regulations thereunder and that the Underwriters may rely upon the
opinion of Pannel Kerr Forster, Certified Public Accountants, A Professional
Corporation, with respect to such financial statements and supporting
schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
financial statements of the the Company, a reading of the latest
available minutes of the stockholders and board of directors and the
various committees of the boards of directors each the Company,
consultations with officers and other employees each of the Company
responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention which
would lead them to believe that (A) the pro forma and as-adjusted
financial information contained in the Registration Statement and
Prospectus does not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or is not fairly presented in conformity with generally
accepted accounting principles applied on a basis consistent with that
of the audited financial statements of the Company or the unaudited pro
forma or as-adjusted financial information included in the Registration
Statement, (B) the unaudited financial statements and supporting
schedules of the Company and the Subsidiaries included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Rules and Regulations or are not fairly presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
of the Company included in the Registration Statement, or (C) at a
specified date not more than five (5) days prior to the effective date
of the Registration Statement, there has been any change in the capital
stock of the Company, any change in the long-term debt of the Company,
or any decrease in the stockholders' equity of the Company or any
decrease in the net current assets or net assets of the Company as
compared with amounts shown in the July 31, 2001 balance sheets
included in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any change
or decrease, setting forth the amount of such change or decrease, and
(D) during the period from July 31, 2001 to a specified date not more
than five (5) days prior to the effective date of the Registration
Statement, there was any decrease in net revenues or net earnings of
the Company or increase in net earnings per common share of the Company,
other than as set forth in or contemplated by the Registration Statement,
or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) setting forth, at a date not later than five (5) days
prior to the effective date of the Registration Statement, the amount
of liabilities of the Company (including a break-down of commercial
paper and notes payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company
set forth in the Prospectus in each case to the extent that such amounts,
numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the Company
and excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may request.
(j) At the Closing Date, the Underwriters shall have received from
Pannel Kerr Forster, Certified Public Accountants, A Professional Corporation, a
letter, dated as of the Closing Date, to the effect that they reaffirm the
statements made in the letter furnished pursuant to SUBSECTION (j) of this
Section hereof except that the specified date referred to shall be a date not
more than five days prior to the Closing Date or the Option Closing Date, as the
case may be, and, if the Company has elected to rely on Rule 430A of the Rules
and Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of SUBSECTION (j) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriters and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (v).
(k) The Company shall have delivered to the Representative a letter from
Pannel Kerr Forster addressed to the Company stating that they have not during
the immediately preceding two year period brought to the attention of the
Company's management any "weakness" as defined in Statement of Auditing
Standards No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit," in any of the Company's internal controls.
(l) On the Closing Date, there shall be duly tendered to the
Representative the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any jurisdiction
designated by the Representative pursuant to subsection (e) of Section 4 hereof
shall have been issued on the Closing Date, and no proceedings for that purpose
shall have been instituted or shall be contemplated.
(n) On or before the Closing Date, the Common Stock shall have been duly
approved for quotation on the Over-the-Counter Electronic Bulletin Board
maintained by the NASD or the Smallcap Stock Market, subject to official notice
of issuance.
(o) On or before the Closing Date, there shall have been delivered to the
Representative all of the Lock-up Agreements, in form and substance satisfactory
to Representative's Counsel.
(p) At least two (2) full business days prior to the date hereof, the
Closing Date, the Company shall have delivered to the Underwriter the unaudited
interim financial statements required to be so delivered pursuant to SECTION
4(p) of this Agreement.
If any condition to the Representative's obligations hereunder
to be fulfilled prior to or at the Closing Date, is not so fulfilled, the
Representative may terminate this Agreement or, if the Representative so elects,
it may waive any such conditions which have not been fulfilled or extend the time
for their fulfillment.
7. INDEMNIFICATION.
(a) The Company, agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7, "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, and suits in respect thereof),
whatsoever (including but not limited to any and all costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
such action, proceeding, investigation, inquiry or suit, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon (A) any untrue statement
or alleged untrue statement of a material fact contained (i) in any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon exercise of the Securities; or (iii) in any
application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company filed, delivered or used in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the Over-the-Counter Electronic Bulletin Board maintained by the NASD or any
other securities exchange, (B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made), or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriters expressly for use in any Preliminary Prospectus, the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriter but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriter expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in
addition to any liability which the Underwriters may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure to so notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action, investigation, inquiry, suit or proceeding on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action, investigation,
inquiry, suit or proceeding or separate but similar or related actions,
investigations, inquiries, suits or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances. Anything in this Section 7
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, investigation, inquiry,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party form all
liability arising out of such claim, action, suit or proceeding and (ii) doe
snot include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution in any case
in which (i) an indemnified party makes claim for indemnification pursuant to
this Section 7, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof) (A)
in such proportion as is appropriate to reflect the relative benefits received
by each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Securities or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions, investigations, inquiries,
suits or proceedings in respect thereof) referred to above in this subdivision
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action, claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit, inquiry,
investigation or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subparagraph (d), or to
the extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date, and such representations, warranties and agreements of the Company and the
indemnity agreements contained in Section 7 hereof, shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
any Underwriter, the Company, any controlling person of any Underwriter or the
Company, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters.
9. EFFECTIVE DATE.
(a) This Agreement shall become effective at 10:00 a.m., New York City
time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such shares for offering or the release by the Representative
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. TERMINATION.
(a) Subject to subsection (b) of this Section 10, the Representative
shall have the right to terminate this Agreement, after the date hereof, (i) if
any domestic or international event or act or occurrence has materially
disrupted, or in the Representative's opinion will in the immediate future
materially adversely disrupt the financial markets; or (ii) any material adverse
change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Boston Stock Exchange, the
Chicago Board of Trade, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Commission or any other government authority having
jurisdiction; or (iv) if trading of any of the securities of the Company shall
have been suspended, or any of the securities of the Company shall have been
delisted, on any exchange or in any over-the-counter market; or (v) if the
United States shall have become involved in a war or major hostilities, or if
there shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (vi) if a
banking moratorium has been declared by a state or federal authority; or (vii)
if a moratorium in foreign exchange trading has been declared; or (viii) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
delivery of the Securities; or (viii) if there shall have occurred any outbreak
or escalation of hostilities or any calamity or crisis or there shall have been
such a material adverse change in the conditions or prospects of the Company, or
such material adverse change in the general market, political or economic
conditions, in the United States or elsewhere as in the Representative's
judgment would make it inadvisable to proceed with the offering, sale and/or
delivery of the Securities.
(b) If this Agreement is terminated by the Representative in accordance
with the provisions of Section 10(a) the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(c) above). Notwithstanding any
contrary provision contained in this Agreement, if this Agreement shall not be
carried out within the time specified herein, or any extension thereof granted
to the Representative, by reason of any failure on the part of the Company to
perform any undertaking or satisfy any condition of this Agreement by it to be
performed or satisfied (including, without limitation, pursuant to Section 6 or
Section 12) then, the Company shall promptly reimburse and indemnify the
Underwriter for all of their actual out-of-pocket expenses, including the fees
and disbursements of counsel for the Underwriter (less amounts previously paid
pursuant to Section 5(c) above). In addition, the Company shall remain liable
for all Blue Sky counsel fees and expenses and filing fees. Notwithstanding any
contrary provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
Sections 6, 10 and 12 hereof), and whether or not this Agreement is otherwise
carried out, the provisions of Section 5 and Section 7 shall not be in any way
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
11. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date, to sell and deliver the number of Securities which it is obligated to sell
hereunder on such date, then this Agreement shall terminate without any
liability on the part of any non-defaulting party other than pursuant to Section
5, Section 7 and Section 10 hereof. No action taken pursuant to this Section
shall relieve the Company from liability, if any, in respect of such default.
12. NOTICES. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at Capstone Partners, L.C. 3475 Lenox Road, Suite 400, Atlanta, GA
30326, Attention: Gregory Bartko. Notices to the Company shall be directed to
the Company at 907 Rivergate Parkway, Suite A-5, Rivergate Executive Park,
Goodlettsville, TN 37072, Attention: Roger D. Finchum, Sr., Chief Executive
Officer, with a copy to Gregory Bartko, Esq., 3475 Lenox Road, Suite 400,
Atlanta, Georgia 30326, Attention: Gregory Bartko, Esq.
13. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from the Underwriters shall be deemed to
be a successor by reason merely of such purchase.
14. CONSTRUCTION. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia without giving
effect to the choice of law or conflict of laws principles.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
16. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
SNAPSHOT, INC.
By: ________________________________
Name: Roger D. Finchum, Sr.
Title: Chief Executive Officer
Confirmed and accepted as of
the date first above written.
CAPSTONE PARTNERS, L.C.
By:___________________________________
Name: Gregory Bartko, Esq.
Title: Chief Executive Officer
SCHEDULE A
----------
Underwriter Number of Shares
- ----------- ---------------
Capstone & Company, Inc.
TOTAL 1,000,000
Snapshot Inactive
Filed: 2 Aug 02, 12:00am