Superior Supplements, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
UNDERWRITING AGREEMENT
VTR Capital, Inc. __________, 199__
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
Superior Supplements, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to VTR Capital, Inc. ("VTR" or the "Representative")
and to each of the other underwriters named in Schedule I hereto (the
"Underwriters"), for each of whom you are acting as Representative, 500,000
shares of Common Stock at a public offering price of $6.00 per share. The
500,000 shares of Common Stock are hereinafter sometimes referred to as the
"Firm Securities." Upon the request of the Representative, and as provided in
Section 3 hereof, the Company will also issue and sell to the Underwriters up to
a maximum of an additional 75,000 shares of Common Stock. Such additional shares
of Common Stock are hereinafter sometimes referred to as the "Optional
Securities." Both the Firm Securities and the Optional Securities are sometimes
collectively referred to herein as the "Securities." All of the securities which
are the subject of this Agreement are more fully described in the Prospectus of
the Company described below. In the event that the Representative does not form
an underwriting group but decides to act as the sole Underwriter, then all
references to VTR herein as Representative shall be deemed to be to it as such
sole Underwriter and Section 14 hereof shall be deemed deleted in its entirety.
In an alternate Prospectus, the Registration Statement also covers certain
additional securities for sale by Selling Security Holders. Such reoffering by
Selling Security Holders is not the subject of this Underwriting Agreement,
except for the restrictions against resale until the exercise or termination of
the Optional Securities.
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representative deems advisable after
the Registration Statement hereinafter referred to becomes effective. The
Company hereby confirms its agreement with the Representative and the other
Underwriters as follows:
SECTION 1. Description of Securities. The Company's authorized and
outstanding capitalization when the public offering of securities contemplated
hereby is permitted to commence, under the Securities Act of 1933, as amended
(the "Act"), and at the Closing Date (hereinafter defined) will be as set forth
in the Prospectus (hereinafter defined).
SECTION 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to, and agrees with, the Underwriters as follows:
(a) A Registration Statement on Form SB-2 and amendments thereto
(No. 333-9761) with respect to the Securities, including a form of prospectus
relating thereto, copies of which have been previously delivered to you, has
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission under the Act. The Company, subject to the provisions of Section 6(a)
hereof, may file one or more amendments to such Registration Statement and
Prospectus. The Underwriters will receive copies of each such amendment.
The date on which such Registration Statement is declared
effective under the Act and the public offering of the Securities as
contemplated by this Agreement is therefore authorized to commence, is herein
called the "Effective Date." The Registration Statement and Prospectus, as
finally amended and revised immediately prior to the Effective Date, are herein
called respectively the "Registration Statement" and the "Prospectus." If,
however, a prospectus is filed by the Company pursuant to Rule 424(b) of the
Rules and Regulations which differs from the Prospectus, the term "Prospectus"
shall also include the prospectus filed pursuant to Rule 424(b).
(b) The Registration Statement (and Prospectus), at the time it
becomes effective under the Act, (as thereafter amended or as supplemented if
the Company shall have filed with the Commission an amendment or supplement),
and, with respect to all such documents, on the Closing Date (hereinafter
defined), will in all material respects comply with the provisions of the Act
and the Rules and Regulations, and will not contain an untrue statement of a
material fact and will not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties contained in this subsection (b)
shall extend to the Underwriters in respect of any statements in or omissions
from the Registration Statement and/or the Prospectus, based upon information
furnished in writing to the Company by the Underwriters specifically for use in
connection with the preparation thereof.
(c) The Company has been duly incorporated and is now, and on the
Closing Date will be, validly existing as a corporation in good standing under
the laws of the State of Delaware, having all required corporate power and
authority to own its properties and conduct its business as described in the
Prospectus. The Company is now, and on the Closing Date will be, duly qualified
to do business as a foreign corporation in good standing in all of the
jurisdictions in which it conducts its business or the character or location of
its properties requires such qualifications except where the failure to so
qualify would not materially adversely affect the Company's business, properties
or financial condition. The Company has no subsidiaries, except as are set forth
in the Prospectus.
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(d) The financial statements of the Company (audited and unaudited)
included in the Registration Statement and Prospectus present fairly the
financial position and results of operations and changes in financial condition
of the Company at the respective dates and for the respective periods to which
they apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved, and are in accordance with the books and records of the
Company.
(e) Xxxxx Xxxxxxxxxx & Co., LLP, independent public accountants, who
have given their report on certain financial statements which are included as a
part of the Registration Statement and the Prospectus are independent public
accountants as required under the Act and the Rules and Regulations.
(f) Subsequent to the respective dates as of which information is
given in the Prospectus and prior to the Closing Date and, except as set forth
in or contemplated in the Prospectus, (i) the Company has not incurred, nor will
it incur, any material liabilities or obligations, direct or contingent, nor has
it, nor will it have entered into any material transactions, in each case not in
the ordinary course of business; (ii) there has not been, and will not have
been, any material change in the Company's Certificate of Incorporation or in
its capital stock or funded debt; and (iii) there has not been, and will not
have been, any material adverse change in the business, net worth or properties
or condition (financial or otherwise) of the Company whether or not arising from
transactions in the ordinary course of business.
(g) Except as otherwise set forth in the Prospectus, the real and
personal properties of the Company as shown in the Prospectus and Registration
Statement to be owned by the Company are owned by the Company by good and
marketable title free and clear of all liens and encumbrances, except those
specifically referred to in the Prospectus, and except those which do not
materially adversely affect the use or value of such assets and except the lien
for current taxes not now due, or are held by the Company by valid leases, none
of which is in default. Except as disclosed in the Prospectus and Registration
Statement, the Company in all material respects has full right and licenses,
permits and governmental authorizations required to maintain and operate its
business and properties as the same are now operated and, to its best knowledge,
none of the activities or business of the Company is in material violation of,
or causes the Company to violate any laws, ordinances and regulations applicable
thereto, the violation of which would have a material adverse impact on the
condition (financial or otherwise), business, properties or net worth of the
Company.
(h) The Company has no material contingent obligations, nor are its
properties or business subject to any material risks, which may be reasonably
anticipated, which are not disclosed in the Prospectus.
(i) Except as disclosed in the Prospectus and Registration
Statement, there are no material actions, suits or proceedings at law or in
equity of a material nature pending, or to the Company's knowledge, threatened
against the Company which are not adequately covered by insurance, which might
result in a material adverse change in the
3
condition (financial or otherwise), properties or net worth of the Company, and
there are no proceedings pending or, to the knowledge of the Company, threatened
against the Company before or by any Federal or State Commission, regulatory
body, or administrative agency or other governmental body, wherein an
unfavorable ruling, decision or finding would materially adversely affect the
business, properties or net worth or financial condition or income of the
Company, which are not disclosed in the Prospectus.
(j) All of the outstanding shares of Common Stock and preferred
stock are duly authorized and validly issued and outstanding, fully paid,
non-assessable, and do not have any and were not issued in violation of any
preemptive rights. All of the Common Stock as described in the Prospectus when
paid for shall be duly authorized and validly issued and outstanding, fully
paid, non-assessable, and will not have any and will not be issued in violation
of any preemptive rights. The Common Stock issuable upon exercise of the
outstanding Warrants when issued and paid for in accordance with the Warrant
Agreement shall be duly authorized and validly issued and outstanding, fully
paid, non-assessable, and will not have any and will not be issued in violation
of any preemptive rights. The Common Stock will be delivered in accordance with
this Agreement. The Underwriters will receive good and marketable title to the
Securities purchased by them from the Company, free and clear of all liens,
encumbrances, claims, security interests, restrictions, stockholders' agreements
and voting trusts whatsoever. Except as set forth in the Prospectus, there are
no outstanding options, warrants, or other rights, providing for the issuance
of, and no commitments, plans or arrangements to issue, any shares of any class
of capital stock of the Company, or any security convertible into, or
exchangeable for, any shares of any class of capital stock of the Company. All
of the Securities of the Company to which this Agreement relates conform to the
statements relating to them that are contained in the Registration Statement and
Prospectus.
(k) The certificate or certificates required to be furnished to the
Underwriters pursuant to the provisions of Section 11 hereof will be true and
correct.
(l) The execution and delivery by the Company of this Agreement has
been duly authorized by all necessary corporate action and it is a valid and
binding obligation of the Company, enforceable against it in accordance with its
terms except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws pertaining to creditors
rights generally.
(m) Except as disclosed in the Prospectus, no default exists, and no
event has occurred which, with notice or lapse of time, or both, would
constitute a default in the due performance and observance of any material term,
covenant or condition by the Company or any other party, of any material
indenture, mortgage, deed of trust, note or any other material agreement or
instrument to which the Company is a party or by which it or its business or its
properties may be bound or affected, except as disclosed in the Prospectus. The
Company has full power and lawful authority to authorize, issue and sell the
Securities to be sold by it hereunder on the terms and conditions set forth
herein and in the Registration Statement and in the Prospectus. No consent,
approval, authorization or other order of any regulatory authority is required
for such authorization, issue or sale, except as may be required under the Act
or State securities laws. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, and
4
compliance with the terms hereof will not conflict with, or constitute a default
under any indenture, mortgage, deed of trust, note or any other agreement or
instrument to which the Company is now a party or by which it or its business or
its properties may be bound or materially affected; the Certificate of
Incorporation and any amendments thereto; the by-laws of the Company, as
amended; or to the best knowledge of the Company, any law, order, rule or
regulation, writ, injunction or decree of any government, governmental
instrumentality, or court, domestic or foreign, having jurisdiction over the
Company or its business or properties.
(n) No officer or director of the Company has taken, and each
officer and director has agreed that he will not take, directly or indirectly,
any action designed to stabilize or manipulate the price of the Common Stock in
the open market following the Closing Date or any other type of action designed
to, or that may reasonably be expected to cause or result in such stabilization
or manipulation, or that may reasonably be expected to facilitate the initial
sale, or resale, of any of the securities which are the subject of this
Agreement.
(o) The Representative's Warrants to be issued to the Representative
hereunder will be, when issued and paid for, duly and validly authorized and
executed by the Company and will constitute valid and binding obligations of the
Company, legally enforceable in accordance with their terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws pertaining to creditors rights
generally), and the Company will have duly authorized, reserved and set aside
the shares of its Common Stock issuable upon exercise, and such stock, when
issued and paid for upon exercise of the Representative's Warrants in accordance
with the provisions thereof will be duly authorized and validly issued,
fully-paid and non-assessable.
(p) All of the aforesaid representations, agreements, and warranties
shall survive delivery of, and payment for, the Securities.
SECTION 3. Issuance, Sale and Delivery of the Firm Securities, the
Optional Securities and the Representative's Warrants.
(a) Upon the basis of the representations, warranties, covenants and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the several
Underwriters, and the Underwriters, severally and not jointly, agree to purchase
from the Company, the number of the Firm Securities set forth opposite the
respective names of the Underwriters in Schedule I hereto, plus any additional
Securities which such Underwriter may become obligated to purchase pursuant to
the provisions of Section 14 hereof.
The purchase price of the Common Stock to be paid by the
several Underwriters shall be $5.40 (the initial public offering price less a
ten percent discount).
In addition, and upon the same basis, and subject to the same
terms and conditions, the Company hereby grants an option to you to purchase,
but only for the purpose of covering over-allotments, upon not less than two
days' notice from the Representative, the Optional Securities, or any portion
thereof, at the same price per share of Common Stock as that set forth in the
preceding paragraph; and each Underwriter
5
agrees, severally and not jointly, to purchase Optional Securities in the same
proportion in which it has agreed to purchase Firm Securities. Notwithstanding
anything contained herein to the contrary, you individually and not as
Representative may provide in the Agreement Among Underwriters for the
Representative to purchase all or any part of the Optional Securities and are
not obligated to offer the Optional Securities to the other Underwriters. The
Optional Securities may be exercised at any time, and from time to time,
thereafter within a period of 30 calendar days following the Effective Date. The
time(s) and date(s) (if any) so designated for delivery and payment for the
Optional Securities shall be set forth in the notice to the Company. Such dates
are herein defined as the Additional Closing Date(s).
(b) Payment for the Firm Securities shall be made by certified or
official bank checks in New York Clearing House funds, payable to the order of
the Company, at the offices of the Representative, or its clearing agent, or at
such other place as shall be agreed upon by the Representative and the Company,
upon delivery of the Firm Securities to the Representative for the respective
accounts of the Underwriters. In making payment to the Company, the
Representative may first deduct all sums due to it for the non-accountable
expense allowance and under the Financial Consulting Agreement (as hereinafter
defined). Such delivery and payment shall be made at ______ A.M., New York City
Time on the third business day after the effectiveness of this Agreement, which
may be extended by the Representative to not later than the fifth business day
following the Effective Date (unless postponed in accordance with the provisions
of Section 14 hereof). The time and date of such delivery and payment are hereby
defined as the Closing Date. It is understood that each Underwriter has
authorized the Representative, for the account of such Underwriter, to accept
delivery of, receipt for, and make payment of the purchase price for, the Firm
Securities which it has agreed to purchase. You, individually, and not as
Representative may (but shall not be obligated to) make payment of the purchase
price for the Firm Securities to be purchased by any Underwriter whose check
shall not have been received by the Closing Date, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from its
obligations hereunder.
(c) Payment for the Optional Securities shall be made at the offices
of the Representative, or its clearing agent or at such other place as shall be
agreed upon by the Representative and the Company, in accordance with the notice
delivered pursuant to Section 3(a) which shall be no later than seven business
days from the expiration of the thirty day option period.
(d) Certificates for the Firm Securities and for the Optional
Securities shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two business
days prior to the Closing Date, and the Additional Closing Date(s) (if any). The
Company shall permit the Representative to examine and package said certificates
for delivery at least one full business day prior to the Closing Date and prior
to the Additional Closing Date(s). The Company shall not be obligated to sell or
deliver any of the Firm Securities except upon tender of payment by the
Underwriters for all of the Firm Securities agreed to be purchased by them
hereunder. The Representative, however, shall have the sole discretion to
determine the number of Optional Securities, if any, to be purchased.
6
(e) At the time of making payment for the Firm Securities, the
Company also hereby agrees to sell to the Representative, Warrants to purchase
50,000 shares of Common Stock (the "Representative's Warrants") at any time on
or after the Effective Time until five years thereafter at a price of $.001 per
Warrant. The Representative's Warrants will be exercisable at a price of $9.90
per share equal to 165% of the public offering price of the shares of Common
Stock. From the Effective Date and until one (1) year thereafter, such
Representative Warrants may be transferred only to officers or partners of the
Representative and selling group members and their officers or partners.
(f) On and subject to the Closing Date, the Company will give
irrevocable instructions to its transfer agent to deliver to the Representative
(at the Company's expense) for a period of five years from the Closing Date,
daily advice sheets showing any transfers of the Securities and from time to
time during the aforesaid period a complete stockholders' list will be promptly
furnished by the Company when requested by the Representative on not more than
two occasions per year.
SECTION 4. Public Offering. The several Underwriters agree, subject to the
terms and provisions of this Agreement, to offer the Common Stock to the public
as soon as practicable after the Effective Date, at the initial offering price
of $6.00 and upon the terms described in the Prospectus. The Representative may,
from time to time, decrease the public offering price, after the initial public
offering, to such extent as the Representative may determine, however, such
decreases will not affect the price payable to the Company hereunder.
SECTION 5. Registration Statement and Prospectus. The Company will furnish
the Representative, without charge, two signed copies of the Registration
Statement and of each amendment thereto, including all exhibits thereto and such
amount of conformed copies of the Registration Statement and Amendments as may
be reasonably requested by the Representative for distribution to each of the
Underwriters and Selected Dealers.
The Company will furnish, at its expense, as many printed copies of
a Preliminary Prospectus and of the Prospectus as the Representative may request
for the purposes contemplated by this Agreement. If, while the Prospectus is
required to be delivered under the Act or the Rules and Regulations, any event
known to the Company relating to or affecting the Company shall occur which
should be set forth in a supplement to or an amendment of the Prospectus in
order to comply with the Act (or other applicable law) or with the Rules and
Regulations, the Company will forthwith prepare, furnish and deliver to the
Representative and to each of the other Underwriters and to others whose names
and addresses are designated by the Representative, in each case at the
Company's expense, a reasonable number of copies of such supplement or
supplements to or amendment or amendments of, the Prospectus.
The Company authorizes the Underwriters and the selected dealers, if
any, in connection with the distribution of the Securities and all dealers to
whom any of the Securities may be sold by the Underwriters, or by any Selected
Dealer, to use the Prospectus, as from time to time amended or supplemented, in
connection with the offering
7
and sale of the Securities and in accordance with the applicable provisions of
the Act and the applicable Rules and Regulations and applicable State Securities
Laws.
SECTION 6. Covenants of the Company. The Company covenants and agrees with
each Underwriter that:
(a) After the date hereof, the Company will not at any time, whether
before or after the Effective Date, file any amendment to the Registration
Statement or the Prospectus, or any supplement to the Prospectus, of which the
Representative shall not previously have been advised and furnished with a copy,
or to which the Representative or the Underwriters' counsel, shall have
reasonably objected in writing on the ground that it is not in compliance with
the Act or the Rules and Regulations.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective as promptly as reasonably practicable and will
advise the Representative, (i) when the Registration Statement shall have become
effective and when any amendment thereto shall have become effective, and when
any amendment of or supplement to the Prospectus shall be filed with the
Commission, (ii) when the Commission shall make request or suggestion for any
amendment to the Registration Statement or the Prospectus or for additional
information and the nature and substance thereof, and (iii) of the issuance by
the Commission of an order suspending the effectiveness of the Registration
Statement or of the initiation of any proceedings for that purpose, and will use
every reasonable effort to prevent the issuance of such an order, or if such an
order shall be issued, to obtain the withdrawal thereof at the earliest possible
moment.
(c) The Company will prepare and file with the Commission, promptly
upon the request of the Representative, such amendments, or supplements to the
Registration Statement or Prospectus, in form and substance satisfactory to
counsel to the Company, as in the reasonable opinion of Xxxxxx Xxxxx P.C., as
counsel to the Underwriters, may be necessary or advisable in connection with
the offering or distribution of the Securities, and will use its best efforts to
cause the same to become effective as promptly as possible.
(d) The Company will, at its expense, when and as requested by the
Representative, supply all necessary documents, exhibits and information, and
execute all such applications, instruments and papers as may be required or
desirable, in the opinion of the Underwriters' counsel; to qualify the
Securities or such part thereof as the Representative may determine, for sale
under the so-called "Blue Sky" Laws of such states as the Representative shall
designate, and to continue such qualification in effect so long as required for
the purposes of the distribution of the Securities, provided, however, that the
Company shall not be required to qualify as a foreign corporation or to file a
consent to service of process in any state in any action other than one arising
out of the offering or sale of the Securities.
(e) The Company will, at its own expense, file and provide, and
continue to file and provide, such reports, financial statements and other
information as may be required by the Commission, or the proper public bodies of
the States in which the
8
Securities may be qualified for sale, for so long as required by applicable law,
rule or regulation and will provide the Representative with copies of all such
registrations, filings and reports on a timely basis.
(f) During the period of five years from the Effective Date, the
Company will deliver to the Underwriter a copy of each annual report of the
Company, and will deliver to the Underwriter (i) within 50 days after the end of
each of the Company's first three quarter-yearly fiscal periods, a balance sheet
of the Company as at the end of such quarter-yearly period, together with a
statement of its income and a statement of changes in its cash flow for such
period (Form 10-QSB), all in reasonable detail, signed by its principal
financial or accounting officer, (ii) within 105 days after the end of each
fiscal year, a balance sheet of the Company as at the end of such fiscal year,
together with a statement of its income and statement of changes in cash flow
for such fiscal year (Form 10-KSB), such balance sheet and statement of cash
flow for such fiscal year to be in complete detail and to be accompanied by a
certificate or report of independent public accountants, (who may be the regular
accountants for the Company), (iii) as soon as available a copy of every other
report (financial or other) mailed to the shareholders, and (iv) as soon as
available a copy of every report and financial statement furnished to or filed
with the Commission or with any securities exchange pursuant to requirements by
or agreement with such exchange or the Commission pursuant to the Securities
Exchange Act of 1934, as amended, or any regulations of the Commission
thereunder. If the Company has one or more active subsidiaries, the financial
statements required by (i) and (ii) above shall be furnished on a consolidated
basis in respect of the Company and its subsidiaries. Separate financial
statements shall be furnished for each subsidiary, the accounts of which are not
so consolidated. The financial statements referred to in (ii) shall also be
furnished to all of the shareholders of the Company as soon as practicable after
the 105 days referred to therein.
(g) The Company represents that with respect to the Securities, it
will prepare and file a Registration Statement with the Commission pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended, prior to the
Effective Date with a request that such Registration Statement will become
effective on the first day following the Effective Date. The Company understands
that, to register, it must prepare and file with the Securities and Exchange
Commission a General Form of Registration of Securities (Form 8-A or Form 10).
In addition, upon the request of the Representative, the Company agrees to
utilize its best efforts to qualify its Common Stock for listing on the NASDAQ
System and will take all necessary and appropriate action in this regard. The
Company shall comply with all periodic reporting and proxy solicitation
requirements imposed by the Commission pursuant to the 1934 Act, and shall
promptly furnish you with copies of all material filed with the Commission
pursuant to the 1934 Act or otherwise furnished to shareholders of the Company.
(h) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than 15 months after the
Effective Date, an earnings statement of the Company (which need not be audited)
in reasonable detail, covering a period of at least twelve months beginning
after the Effective Date, which earnings statement shall satisfy the provisions
of Section 11(a) of the Act.
9
(i) The Company shall, on the Effective Date, apply for listing in
Standard and Poor's Corporation Records (requesting coverage in the Daily News
Supplement) and Standard & Poor's Monthly Stock Guide and shall use its best
efforts to have the Company listed in such reports for a period of not less than
ten (10) years from the Closing Date.
(j) The Company shall employ the services of an auditing firm
acceptable to the Representative in connection with the preparation of the
financial statements required to be included in the Registration Statement and
shall continue to appoint such auditors or such other auditors as are reasonably
acceptable to the Representative for a period of five (5) years following the
Effective Date of the Registration Statement. Said financial statements shall be
prepared in accordance with Regulation S-X under the General Rules and
Regulations of the 1933 Act. The firm of Xxxxx Xxxxxxxxxx & Co., LLP are deemed
acceptable to the Underwriter. The Company shall appoint Continental Stock
Transfer & Trust Company transfer agent for the Securities.
(k) Until such time as the securities of the Company are listed on
the New York Stock Exchange, the American Stock Exchange, or the NASDAQ/NMS; the
Company shall cause its legal counsel or an independent firm acceptable to the
Representative to provide the Representative with a survey, to be updated at
least semi-annually, of those states in which the securities of the Company may
be traded in non-issuer transactions under the Blue Sky laws of the states and
the basis for such authority. The first such survey shall be delivered by
Company's counsel at closing; the second such survey shall be delivered by
Company's counsel within five business days of publication of the Company in
Standard & Poor's Corporation Records and, thereafter, on a semi-annual basis on
April 30 and October 31 of each year.
(l) As soon as practicable after the Closing Date, the Company will
deliver to the Representative and its counsel a total of two bound volumes of
copies of all documents relating to the public offering which is the subject of
this Agreement.
(m) The Company, for a period of at least three years following the
public offering, shall retain the services of a financial public relations
firm(s) satisfactory to the Representative, said agreement(s) to commence no
later than 30 days after the Closing of the public offering.
(n) For a period of two years after the Effective Date, the Company
will not increase the number of authorized shares under its existing Stock
Option Plan as described in the Prospectus or establish any other plans pursuant
to which stock options or securities will be issued without the prior written
consent of the Representative. Further, for a period of two years after the
Effective Date, the Company will not issue or agree to issue any securities of
the Company without the prior written consent of the Representative. The
foregoing restriction does not apply to the Company's obligations to issue
securities as described in the Prospectus. The foregoing shall not prevent the
Company from seeking bank financing on commercially reasonable terms so long as
no capital stock, options to purchase capital stock or securities convertible
into capital stock are granted.
10
SECTION 7. Expenses of the Company.
(a) The Company shall be responsible for and shall bear all expenses
directly and necessarily incurred in connection with the proposed financing,
including: (i) the preparation, printing and filing of the Registration
Statement and amendments thereto, including NASD and SEC filing fees,
preliminary and final Prospectus and the printing of the Underwriting Agreement,
the Agreement Among the Underwriters and the Selected Dealers' Agreement, a Blue
Sky Memorandum and material to be circulated to the Under writers by us; (ii)
the issuance and delivery of certificates representing the Securities, including
original issue and transfer taxes, if any; (iii) the qualifications of the
Company's Securities (covered by the "firm commitment" offering) under State
Securities or Blue Sky Laws, including counsel fees of Xxxxxx Xxxxx P.C.
relating thereto in the sum of Thirty ($30,000) Dollars ($_________ of which has
been paid, together with appropriate state filing fees) plus disbursements
relating to, but not limited to, long-distance telephone calls, photocopying,
messengers, excess postage, overnight mail and courier services; (iv) the fees
and disbursements of counsel for the Company and the accountants for the
Company; and (v) post closing tombstone advertisements not to exceed $10,000.
Upon the commencement of the necessary state Blue Sky filings by our counsel,
the Company shall supply him at his request, all necessary state filing fees.
(b) In addition, the Company shall bear each of the following costs: (i)
investigative reports (such as Xxxxxx'x Reports) of the Company's executive
officers, directors and principal shareholders, not to exceed $5,000 in the
aggregate; and (ii) otherwise unreimbursed postage, including mailing of
preliminary and final prospectuses incurred by or on behalf of the
Representative and the Underwriters in preparation for, or in connection with
the offering and sale and distribution of the Securities on an accountable
basis.
SECTION 8. Payment of Underwriters' Expenses.
On the Closing Date and Additional Closing Date(s) (if any) the
Company will pay to you an expense allowance equal to three (3%) percent of the
total gross proceeds derived from the public offering contemplated by this
Agreement for the fees and disbursements of counsel to the Underwriters and for
costs of otherwise unreimbursed advertising, traveling, postage, telephone and
telegraph expenses and other miscellaneous expenses incurred by or on behalf of
the Representative and the Underwriters in preparation for, or in connection
with the offering and sale and distribution of the Securities; and you shall not
be obligated to account to the Company for such disbursements and expenses.
Further, in the event that this Agreement is terminated pursuant to Section 12
hereof, the Company will be obligated to reimburse the Representative on an
accountable basis for its reasonable out-of-pocket expenses incurred in
connection hereunder.
SECTION 9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters, and each person who controls each of the Underwriters within the
meaning of Section 15 of the Act, from and against any and all losses, claims,
damages, expenses, or liabilities, joint or several, to which they or any of
them may become subject under the
11
Act or any other statute or at common law or otherwise, and to reimburse persons
indemnified as above for any reasonable legal or other expense (including the
cost of any investigation and preparation) incurred by them (as incurred), or
any of them, in connection with investigating, defending against or appearing as
a third party witness in connection with any claim or litigation, whether or not
resulting in any liability, but only insofar as such losses, claims,
liabilities, expenses or litigation arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented, if amended
or supplemented), or in any "Blue Sky" application, or arising out of or based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading;
provided, however, that the indemnity agreement contained in this subsection (a)
shall not apply to amounts paid in settlement of any such claims or litigation
if such settlement is effected without the consent of the Company, nor shall it
apply to the Underwriters or any person controlling the Underwriters in respect
of any such losses, claims, damages, expenses, liabilities or litigation arising
out of, or based upon, any such untrue statement or alleged untrue statement, or
any such omission or alleged omission, if such statement or omission was made in
reliance upon and in conformity with written information furnished in writing to
the Company by such Underwriter, or on its behalf, specifically for use in
connection with the preparation of the Registration Statement or the Prospectus
or any such amendment thereof or supplement thereto or any such blue sky
application and further provided, however, that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
Preliminary Prospectus but eliminated or remedied in the Prospectus, such
indemnity agreement shall not inure to the benefit of the Underwriters (or the
benefit of any person who controls such Underwriter) if a copy of the Prospectus
was not sent or given to such person with or prior to the confirmation of the
sale of such securities to such person.
(b) Each of the Underwriters severally agrees, in the same manner
and to the same extent as set forth in subsection (a) above, to indemnify and
hold harmless the Company, each of the directors and officers who have signed
the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act, with respect to any statement in or
omission from the Registration Statement, or the Prospectus (as amended or as
supplemented, if amended or supplemented), or in any "Blue Sky" application, if
such statement or omission was made in reliance upon and in conformity with
written information furnished in writing to the Company by such Underwriter, or
on its behalf, specifically for use in connection with the preparation of the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, or any such application. An Underwriter shall not be liable
for amounts paid in settlement of any such claim or litigation if such
settlement was effected without its consent.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any claim asserted against it and of any action commenced
against it in respect of which indemnity may be sought hereunder. The omission
to so notify an indemnifying party shall relieve such party of its obligation to
indemnify pursuant to this Agreement, but
12
failure to so notify an indemnifying party shall not relieve it from any
liability which it may have otherwise than on account of this indemnity
agreement. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 9 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that the fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party or (ii) the
defendants in any such action include both the indemnified and the indemnifying
party and the indemnified party shall have reasonably concluded that there may
be a conflict between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of such indemnified party or parties), it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the indemnified party which firm shall be
designated in writing by the indemnified party.
(d) The respective indemnity agreements between the Underwriters and
the Company contained in subsections (a) and (b) above, and the representations
and warranties of the Company set forth in Section 2 hereof or elsewhere in this
Agreement, shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the Underwriters or by or on behalf of
any controlling person of the Underwriters or the Company or any such officer or
director or any controlling person of the Company, and shall survive the
delivery of the Securities. Any successor of the Company, or of the
Underwriters, or of any controlling person of the Underwriters or the Company,
as the case may be, shall be entitled to the benefit of such respective
indemnity agreements.
(e) In order to provide for just and equitable contribution under
the Act in any case in which (i) any person entitled to indemnification under
this Section 9 makes claim for indemnification pursuant hereto 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 this Section 9 provides for
13
indemnification in such case, or (ii) contribution under the Act may be required
on the part of any such person in circumstances for which indemnification is
provided under this Section 9, then, and in each such case, the Company and the
Underwriters shall contribute to the aggregate losses, claims, damages, expenses
or liabilities to which they may be subject (after any contribution from others)
in such proportions so that the Underwriters are responsible in the aggregate
for the proportion of such losses, claims, damages or labilities represented by
the percentage that the underwriting discounts and commissions appearing on the
cover page of the Prospectus bears to the public offering price appearing
thereon, and the Company is responsible for the remaining portion; provided,
that, in any such case, no person guilty of a 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.
Within twenty days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "contributing party"), notify
the contributing party, in writing, of the commencement thereof, but the
omission so to notify the contributing party will not relieve it from any
liability which it may have to any other party other than for contribution
hereunder. In case any such action, suit or proceeding is brought against any
party, and such party so notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid twenty days, the
contributing party will be entitled to participate therein with the notifying
party and any other contributing party similarly notified. Any such contributing
party shall not be liable to any party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 9 are in addition to any other
rights or remedies which either party hereto may have with respect to the other
or hereunder.
SECTION 10. Effectiveness of Agreement. This Agreement shall become
effective (i) at 10:00 A.M., New York Time, on the first full business day after
the Effective Date, or (ii) at the time of the initial public offering by the
Underwriters of the Securities whichever shall first occur. The time of the
initial public offering by the Underwriters of the Securities for the purposes
of this Section 10, shall mean the time, after the Registration Statement
becomes effective, of the release by the Representative for publication of the
first newspaper advertisement which is subsequently published relating to the
Securities, or the time, after the Registration Statement becomes effective,
when the Securities are first released by the Representative for offering by the
Underwriters or dealers by letter or telegram, whichever shall first occur. The
Representative agrees to notify the Company immediately after it shall have
taken any action, by release or otherwise, whereby this Agreement shall have
become effective. This Agreement shall, nevertheless, become effective at such
time earlier than the time specified above, after the Effective Date, as the
Representative may determine by notice to the Company.
SECTION 11. Conditions of the Underwriters' Obligations. The obligations
of the several Underwriters to purchase and pay for the Securities which the
Underwriters have
14
agreed to purchase hereunder are subject to: the accuracy, as of the date hereof
and as of the Closing Dates of all of the representations and warranties of the
Company contained in this Agreement; the Company's compliance with, or
performance of, all of its covenants, undertakings and agreements contained in
this Agreement that are required to be complied with or performed on or prior to
each of the Closing Dates and to the following additional conditions:
(a) On or prior to the Closing Date, no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or be pending or, to the
knowledge of the Company, shall be threatened by the Commission; any request for
additional information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of the Commission; and neither the Registration
Statement nor any amendment thereto shall have been filed to which counsel to
the Underwriters shall have reasonably objected, in writing.
(b) The Representative shall not have disclosed in writing to the
Company that the Registration Statement or Prospectus or any amendment or
supplement thereto contains an untrue statement of a fact which, in the opinion
of counsel to the Underwriters, is material, or omits to state a fact which, in
the opinion of such counsel, is material and is required to be stated therein,
or is necessary to make the statements therein not misleading.
(c) Between the date hereof and the Closing Date, the Company shall
not have sustained any loss on account of fire, explosion, flood, accident,
calamity or other such cause, of such character as materially adversely affects
its business or property, whether or not such loss is covered by insurance.
(d) Between the date hereof and the Closing Date, there shall be no
litigation instituted or threatened against the Company, and there shall be no
proceeding instituted or threatened against the Company before or by any federal
or state commission, regulatory body or administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding would materially adversely affect the business, licenses, permits,
operations or financial condition or income of the Company.
(e) Except as contemplated herein or as set forth in the
Registration Statement and Prospectus, during the period subsequent to the
Effective Date and prior to the Closing Date, (A) the Company shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the filing of the initial Registration Statement and
(B) except in the ordinary course of its business, the Company shall not have
incurred any material liabilities or obligations (direct or contingent), or
disposed of any of its assets, or entered into any material transaction, and (c)
the Company shall not have suffered or experienced any material adverse change
in its business, affairs or in its condition, financial or otherwise. On the
Closing Date, the capital stock and surplus accounts of the Company shall be
substantially as great as at its last financial report without considering the
proceeds from the sale of the Securities except to
15
the extent that any decrease is disclosed in or contemplated by the Prospectus.
(f) The authorization of the Common Stock, the Registration
Statement, the Prospectus and all corporate proceedings and other legal matters
incident thereto and to this Agreement, shall be reasonably satisfactory in all
respects to counsel to the Underwriters.
(g) The Company shall have furnished to the Representative the
opinions, dated the Closing Date, and Additional Closing Date(s), addressed to
you, of its counsel that:
(i) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the State of Delaware
with full corporate power and authority to own and operate its properties and to
carry on its business as set forth in the Registration Statement and Prospectus;
it has authorized and outstanding capital as set forth in the Registration
Statement and Prospectus; and the Company is duly licensed or qualified as a
foreign corporation in all jurisdictions in which by reason of maintaining an
office in such jurisdiction or by owning or leasing real property in such
jurisdiction it is required to be so licensed or qualified except where failure
to be so qualified or licensed would have no material adverse effect.
(ii) All of the outstanding shares of Common Stock and
Preferred Stock are duly and validly issued and outstanding, fully paid, and
non-assessable, and do not have any, and were not issued in violation of any,
preemptive rights. The Company will have duly authorized, reserved and set aside
shares of Common Stock issuable upon exercise of any outstanding options or
warrants and when issued in accordance with such terms, will be duly and validly
authorized and issued, fully paid and non-assessable.
(iii) All of the Securities of the Company to which this
Agreement relates conform to the statements relating to them that are contained
in the Registration Statement and Prospectus (excluding financial statements).
(iv) The Underwriters against payment therefor, will receive
good and marketable title to the Securities purchased by them from the Company
in accordance with the terms and provisions of this Agreement.
(v) To the best of the knowledge of such counsel, except as
set forth in the Prospectus, there are no outstanding options, warrants, or
other rights, providing for the issuance of, and, no commitments, plans or
arrangements to issue, any shares of any class of capital stock of the Company,
or any security convertible into, or exchangeable for, any shares of any class
of capital stock of the Company.
(vi) To the best of such counsel's knowledge, no consents,
approvals, authorizations or orders of agencies, officers or other regulatory
authorities are necessary for the valid authorization, issue or sale of the
Securities hereunder, except such as may be required under the Act or state
securities or Blue Sky Laws.
16
(vii) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or contemplated under the
Act, and the Registration Statement and Prospectus, and each amendment thereof
and supplement thereto, comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations (except that no opinion
need be expressed as to financial statements and financial data contained in the
Registration Statement or Prospectus), and in the course of the preparation of
the Registration Statement, nothing has come to the attention of said counsel to
cause them to believe that either the Registration Statement or the Prospectus
or any such amendment or supplement contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and such counsel is
familiar with all contracts referred to in the Registration Statement or in the
Prospectus and such contracts are sufficiently summarized or disclosed therein,
or filed as exhibits thereto, as required, and such counsel does not know of any
other contracts required to be summarized or disclosed or filed; and such
counsel does not know of any legal or governmental proceedings pending or
threatened to which the Company is a party, or in which property of the Company
is the subject, of a character required to be disclosed in the Registration
Statement or the Prospectus which are not disclosed and properly described
therein.
(viii) The Representative's Warrants to be issued to the
Representative hereunder will be, when issued against payment therefor duly and
validly authorized and executed by the Company and will constitute valid and
binding obligations of the Company, legally enforceable in accordance with their
terms (except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally), and the Company will have duly
authorized, reserved and set aside the shares of its Common Stock issuable upon
exercise of the Representative's Warrants, and such stock, when issued and paid
for upon exercise of the Representative's Warrants in accordance with the
provisions thereof, will be duly and validly authorized and issued, fully-paid
and non-assessable.
(ix) The Company holds by valid lease, its properties as shown
in the Prospectus, and is in all material respects complying with all laws,
ordinances and regulations applicable thereto.
(x) This Agreement has been duly authorized and executed by
the Company and is a valid and binding agreement of the Company.
(xi) To the best of the knowledge of such counsel, no default
exists, and no event has occurred which, with notice or lapse of time, or both,
would constitute a default in the due performance and observance of any material
term, covenant or condition by the Company or any other party, of any indenture,
mortgage, deed of trust, note or any other agreement or instrument known to
counsel to which the Company is a party or by which it or its business or its
properties may be bound or affected, except as disclosed in the Prospectus. The
Company has full power and lawful authority to authorize, issue and
17
sell the Securities on the terms and conditions set forth herein and in the
Registration Statement and in the Prospectus. No consent, approval,
authorization or other order of any regulatory authority is required for such
authorization, issue or sale, except as may be required under the Act or State
securities laws. The execution and delivery of this Agreement, the consummation
of the transactions herein contemplated, and compliance with the terms hereof
will not conflict with, or constitute a default under any indenture, mortgage,
deed or trust, note or any other agreement or instrument known to counsel to
which the Company is now a party or by which it or its business or its
properties may be bound or affected; the Articles of Incorporation and any
amendments thereto; the by-laws of the Company; or any law, order, rule or
regulation, writ, injunction or decree of any government, governmental
instrumentality, or court, domestic or foreign, having jurisdiction over the
Company or its business or properties known to counsel.
(xii) To the best of the knowledge of such counsel, there are
no material actions, suits or proceedings at law or in equity of a material
nature pending or to such counsel's knowledge threatened against the Company
which are not adequately covered by insurance and there are no proceedings
pending, or to the knowledge of such counsel threatened, against the Company
before or by any Federal or State Commission, regulatory body, or administrative
agency or other governmental body, wherein an unfavorable ruling, decision or
finding would materially adversely affect the business, business prospects,
franchise, licenses, permits, operation or financial condition or income of the
Company, which are not disclosed in the Prospectus.
(xiii) The description of any statutes, regulations and laws,
applicable to the Company's business contained in the Registration Statements,
is in all respects true and correct.
Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement as the Representative shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact.
(h) The Company shall have furnished to the Representative
certificates of the President or Chairman of the Board and the Secretary of the
Company, dated as of the Closing Date, and Additional Closing Date(s), to the
effect that:
(i) Each of the representations and warranties of the Company
contained in Section 2 hereof are true and correct in all material respects at
and as of such Closing Date, and the Company has performed or complied with all
of its agreements, covenants and undertakings contained in this Agreement and
has performed or satisfied all the conditions contained in this Agreement on its
part to be performed or satisfied at the Closing Date;
(ii) The Registration Statement has become effective and no
order suspending the effectiveness of the Registration Statement has been
issued, and, to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission;
18
(iii) The respective signers have each carefully examined the
Registration Statement and the Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and the
Prospectus and any amendments and supplements thereto and all statements
contained therein are true and correct in all material respects, and neither the
Registration Statement nor 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, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth except changes which the
Registration Statement and Prospectus indicate might occur.
(iv) Except as set forth or contemplated in the Registration
Statement and Prospectus, since the respective dates as of which, or periods for
which, information is given in the Registration Statement and Prospectus and
prior to the date of such certificate (A) there has not been any material
adverse change, financial or otherwise, in the business, business prospects,
earnings, general affairs or condition (financial or otherwise), of the Company
(in each case whether or not arising in the ordinary course of business), and
(B) the Company has not incurred any liabilities, direct or contingent, or
entered into any transactions, otherwise than in the ordinary course of business
other than as referred to in the Registration Statement or Prospectus and except
changes which the Registration Statement and Prospectus indicate might occur.
(i) The Company shall have furnished to the Representative on the
Closing Date, such other certificates, additional to those specifically
mentioned herein, as the Representative may have reasonably requested, as to:
the accuracy and completeness of any statement in the Registration Statement or
the Prospectus, or in any amendment or supplement thereto; the representations
and warranties of the Company herein; the performance by the Company of its
obligations hereunder; or the fulfillment of the conditions concurrent and
precedent to the obligations of the Underwriters hereunder, which are required
to be performed or fulfilled on or prior to the Closing Date.
(j) At the time this Agreement is executed, and on the Closing Date
you shall have received a letter from Xxxxx, Xxxxxxxxxx & Co., LLP, addressed to
the Representative, as Representative of the Underwriters, and dated,
respectively, as of the date of this Agreement and as of the Closing Date and
Additional Closing Date as the case may be (based upon information not more than
five business days prior to such Effective Date, Closing Date and Additional
Closing Date as the case may be), in form and substance reasonably satisfactory
to the Representative, to the effect that:
(i) They are independent public accountants with respect to
the Company within the meaning of the Act and the applicable published Rules and
Regulations of the Commission;
(ii) In their opinion, the financial statements and related
schedules of the Company included in the Registration Statement and Prospectus
and covered by
19
their reports comply as to form in all material respects with the applicable
accounting requirements of the Act and the published Rules and Regulations of
the Commission issued thereunder;
(iii) On the basis of limited procedures, not constituting an
audit, including a review of the latest interim unaudited financial statements
of the Company on the basis specified by the American Institute of Certified
Public Accountants for a review of interim financial information, a reading of
the minutes of meetings of the boards of directors, and stockholders of the
Company, inquiries of officials of the Company responsible for financial and
accounting matters and such other inquiries and procedures as may be specified
in such letter, nothing came to their attention which caused them to believe:
(A) that at the date of the latest balance sheet read by them
and at a subsequent specified date not more than five business days prior to the
date of such letter, there was any change in the capital stock or increase in
long-term debt of the Company as compared with amounts shown in the most recent
balance sheet included in the Prospectus, except for changes which the
Prospectus discloses have occurred or may occur or which are described in such
letter;
(B) that at the date of the latest balance sheet read by them
and at a subsequent specified date not more than five business days prior to the
date of such letter, there were any decreases, as compared with amounts shown in
the most recent balance sheet included in the Prospectus, in total assets, net
current assets or stockholder's equity of the Company except for decreases which
the Prospectus discloses have occurred or may occur or which are described in
such letter; or
(C) that for the period from the date of the most recent
financial statements in the Registration Statement to a subsequent specified
date not more than five business days prior to the date of such letter, there
were any decreases, as compared with the corresponding period of the preceding
year, in gross profit or the total or per share amounts of net income of the
Company except for decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter.
(iv) In addition to the audit referred to in their report
included in the Registration Statement and the Prospectus and the limited
procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are derived from the
general accounting records of the Company which appear in the Prospectus under
the captions "Summary Financial Data," "Capitalization", "Management",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Certain Transactions", Summary of Financial Data", "Dilution" and
"Risk Factors," as well as such other financial information as may be specified
by the Representative, and that they have compared such amounts, percentages and
financial information with the accounting records of the Company and have found
them to be in agreement.
All the opinions, letters, certificates and evidence mentioned
above or
20
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel to the Representative, whose approval shall not be unreasonably
withheld, conditioned or delayed.
If any of the conditions specified in this Section shall not
have been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and all obligations of the Underwriters hereunder may be terminated
and canceled by the Representative by notifying the Company of such termination
and cancellation in writing or by telegram at any time prior to, or on, the
Closing Date and any such termination and cancellation shall be without
liability of any party hereto to any other party, except with respect to the
provisions of Sections 7 and 8 hereof. The Representative may, of course, waive,
in writing, any conditions which have not been fulfilled or extend the time for
their fulfillment.
21
SECTION 12. Termination.
(a) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company at any time before it becomes
effective pursuant to Section 10.
(b) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company, at any time after it becomes
effective, in the event that the Company, after notice from the Representative
and an opportunity to cure, shall have failed or been unable to comply with any
of the terms, conditions or provisions of this Agreement on the part of the
Company to be performed, complied with or fulfilled within the respective times
herein provided for, including without limitation Section 6(g) hereof, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Representative in writing. This Agreement may also be
terminated if (i) qualifications are received or provided by the Company's
independent public accountants or attorneys to the effect of either difficulties
in furnishing certifications as to material items including, without limitation,
information contained within the footnotes to the financial statements, or as
affecting matters incident to the issuance and sale of the securities
contemplated or as to corporate proceedings or other matters or (ii) there is
any action, suit or proceeding, threatened or pending, at law or equity against
the Company, or by any Federal, State or other commission, board or agency
wherein any unfavorable result or decision could materially adversely affect the
business, property, or financial condition of the Company which was not
disclosed in the Prospectus.
(c) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company at any time after it becomes
effective, if the offering of, or the sale of, or the payment for, or the
delivery of, the Securities is rendered impracticable or inadvisable because (i)
additional material governmental restriction, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New York
Stock Exchange or trading in securities generally on such exchange shall have
been suspended or a general banking moratorium shall have been established by
Federal or New York State authorities or (ii) a war or other national calamity
shall have occurred involving the United States or (iii) the condition of the
market for securities in general shall have materially and adversely changed, or
(iv) the condition of the Company or its business or business prospects is
materially affected so that it would be undesirable, impractical or inadvisable
to proceed with, or consummate, this Agreement or the public offering of the
Securities.
(d) Any termination of this Agreement pursuant to this Section 12
shall be without liability of any character (including, but not limited to, loss
of anticipated profits or consequential damages) on the part of any party
hereto, except that the Company shall remain obligated to pay the costs and
expenses provided to be paid by it specified in Sections 6, 7 and 8, to the
extent therein provided.
SECTION 13. Finder. The Company and the Underwriters mutually represent
that
22
they know of no person who rendered any service in connection with the
introduction of the Company to the Underwriters and that they know of no claim
by anyone for a "finder's fee" or similar type of fee, in connection with the
public offering which is the subject of this Agreement. Each party hereby
indemnifies the other against any such claims by any person known to it, and not
known to the other party hereto, who shall claim to have rendered services in
connection with the introduction of the Company to the Underwriters and/or to
have such a claim.
SECTION 14. Substitution of Underwriters.
(a) If one or more Underwriters default in its or their obligations
to purchase and pay for Securities hereunder and if the aggregate amount of such
Securities which all Underwriters so defaulting have agreed to purchase does not
exceed 10% of the aggregate number of Securities constituting the Securities,
the non-defaulting Underwriters shall have the right and shall be obligated
severally to purchase and pay for (in addition to the Securities set forth
opposite their names in Schedule I) the full amount of the Securities agreed to
be purchased by all such defaulting Underwriters and not so purchased, in
proportion to their respective commitments hereunder. In such event the
Representative, for the accounts of the several non-defaulting Underwriters, may
take up and pay for all or any part of such additional Securities to be
purchased by each such Underwriter under this subsection (a), and may postpone
the Closing Date to a time not exceeding seven full business days; or
(b) If one or more Underwriters (other than the Representative)
default in its or their obligations to purchase and pay for the Securities
hereunder and if the aggregate amount of such Securities which all Underwriters
so defaulting shall have agreed to purchase shall exceed 10% of the aggregate
number of Securities or if one or more Underwriters for any reason permitted
hereunder cancel its or their obligations to purchase and pay for Securities
hereunder, the non-canceling and non-defaulting Underwriters (hereinafter called
the "Remaining Underwriters") shall have the right, but shall not be obligated
to purchase such Securities in such proportion as may be agreed among them, at
the Closing Date. If the Remaining Underwriters do not purchase and pay for such
Securities at such Closing Date, the Closing Date shall be postponed for 24
hours and the remaining Underwriters shall have the right to purchase such
Securities, or to substitute another person or persons to purchase the same or
both, at such postponed Closing Date. If purchasers shall not have been found
for such Securities by such postponed Closing Date, the Closing Date shall be
postponed for a further 24 hours and the Company shall have the right to
substitute another person or persons, satisfactory to you to purchase such
Securities at such second postponed Closing Date. If the Company shall not have
found such purchasers for such Securities by such second postponed Closing Date,
then this Agreement shall automatically terminate and neither the Company nor
the remaining Underwriters (including the Representative) shall be under any
obligation under this Agreement (except that the Company shall remain liable to
the extent provided in Paragraph 7 hereof). As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 14. Nothing in this subparagraph (b) will relieve a defaulting
Underwriter from its liability, if any, to the other Underwriters for damages
occasioned by its default hereunder (and such damages shall be deemed to
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include, without limitation, all expenses reasonably incurred by each
Underwriter in connection with the proposed purchase and sale of the Securities)
or obligate any Underwriter to purchase or find purchasers for any Securities in
excess of those agreed to be purchased by such Underwriter under the terms of
Sections 3 and 14 hereof.
Notwithstanding anything contained herein to the contrary, no provisions
of this Section 14 or any other section of this Underwriting Agreement are
intended to permit an Underwriter to terminate its obligation to purchase the
Firm Securities (as such term is defined in this Underwriting Agreement) from
the Company based upon: (i) the occurrence of non-material events affecting the
Company or the securities market or (ii) the inability to market the securities.
SECTION 15. Registration of the Representative's Warrants and/or the
Underlying Securities. The Company agrees that it will, upon request by any 50%
Holder (as defined below) within the period commencing one year after the
Effective Date, and for a period of four years thereafter, on one occasion only
at the Company's sole expense, cause the Representative's Warrants and/or the
underlying securities issuable upon exercise of the Representative's Warrants,
to be the subject of a post-effective amendment, or a new Registration
Statement, if appropriate (hereinafter referred to as the "demand Registration
Statement"), so as to enable the Representative and/or its assigns to offer
publicly the Representative's Warrants and/or the underlying securities. The
Company agrees to register such securities expeditiously and, where possible,
within forty-five (45) business days after receipt of such requests. The Company
agrees to use its "best efforts" to cause the post-effective amendment, or new
Registration Statement to become effective and for a period of nine (9) months
thereafter to reflect in the post-effective amendment or the new Registration
Statement, financial statements which are prepared in accordance with Section
10(a)(3) of the Act and any facts or events arising which, individually or in
the aggregate, represent a fundamental and/or material change in the information
set forth in such post-effective amendment or new Registration Statement. The
holders of the Representative's Warrants may demand registration without
exercising such Warrants and, in fact, are never required to exercise same. The
term "50% Holder" as used in this section shall mean the registered holder of at
least a majority of the Representative's Warrants and/or the underlying
securities. (The registration rights provided herein apply to the
Representative's Warrants in their entirety and do not provide a separate demand
registration right per security.)
The Company understands and agrees that if, at any time within
the period commencing one year after the Effective Date and ending seven years
after the Effective Date, it should file a registration statement with the
Commission pursuant to the Act, regardless of whether some of the holders of the
Representative's Warrants and underlying securities shall have theretofore
availed themselves of the right above provided, the Company, at its own expense,
will offer to said holders the opportunity to register such securities. This
paragraph is not applicable to a Registration Statement filed by the Company
with the Commission on Form S-8 or any other inappropriate form.
In addition to the rights above provided, the Company will
cooperate with the then holders of the Representative's Warrants and underlying
securities in
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preparing and signing a Registration Statement, on one occasion only in addition
to the Registration Statements discussed above, required in order to sell or
transfer the aforesaid Representative's Warrants and underlying securities and
will supply all information required therefor, but such additional Registration
Statement shall be at the then holders' cost and expense unless the Company
elects to register additional shares of the Company's Shares in which case the
cost and expense of such Registration Statement will be prorated between the
Company and the holders of the Representative's Warrants and underlying
securities according to the aggregate sales price of the securities being
issued. The holders of the Representative's Warrants may include such Warrants
in any such filing without exercising the Representative's Warrants and in fact,
are never required to exercise same.
SECTION 16. Other Agreements.
(a) On the Effective Date, the Company will enter into an agreement
retaining the Representative as a financial consultant pursuant to which the
Representative shall receive a consulting fee in an amount equal to $72,000 for
services for one (1) year from the Effective Date, payable in full in advance on
the Closing Date, which shall include, but not be limited to, advising the
Company in connection with possible acquisition opportunities, advising the
Company regarding shareholder relations including the preparation of the annual
report and other releases, assisting in long-term financial planning, advice in
connection with corporate re-organizations and expansion and capital structure,
and other financial assistance.
(b) The Company agrees to file with the NASD all post-effective amendments
or prospectus supplements disclosing actual price and selling terms by the
selling security holders at the same time they are filed with the SEC and in the
event a portion of the securities being registered on behalf of selling security
holders become underwritten, that prior to commencement of the distribution (I)
copies of all underwriting documents proposed for use will be submitted to the
NASD for review and (ii) the maximum compensation to be paid will be approved by
the Department. The Company also agrees to notify the NASD and the
Representative if subsequent to the filing of this offering any 5% or greater
shareholder of the Company is or becomes an affiliate or associated person of an
NASD member participating in the distribution in this offering.
(c) If the Company shall within five (5) years from the Effective Date,
enter into any agreement or understanding with any person or entity introduced
by the Representative involving (I) the sale of all or substantially all of the
assets and properties of the Company, (ii) the merger or consolidation of the
Company (other than a merger or consolidation effected for the purpose of
changing the Company's domicile) or (iii) the acquisition by the Company of the
assets or stock of another business entity, which agreement or understanding is
thereafter consummated, whether or not during such five (5) year period, the
Company, upon such consummation, shall pay to the Representative an amount equal
to the following percentages of the consideration paid by the Company in
connection with such transaction:
5% of the first $4,000,000 or portion thereof, of such
consideration;
25
4% of the next $1,000,000 or portion thereof, of such consideration;
3% of the next $1,000,00 or portion thereof, of such consideration;
and
2% of such consideration in excess of the first $1,000,000 of such
consideration.
The fee payable to the Representative will be in the same form of
consideration as that paid by or to the Company, as the case may be, in any such
transactions.
(d) Commencing twelve months after the Effective Date, the Company will
pay the Representative as its Warrant solicitation agent an amount equal to four
percent (4%) of the aggregate exercise price of each Class A Warrant exercised
of which a portion may be allowed to the dealer who solicited the exercise
(which may also be the Representative); provided: (1) the market price of the
Common Stock on the date the Class A Warrant was exercised was greater than the
Class A Warrant exercise price on that date; (2) exercise of the Class A Warrant
was solicited by a member of the NASD and the NASD member is designated in
writing by the Class A Warrant holder; (3) the Class A Warrant was not held in a
discretionary account; (4) disclosure of compensation arrangements was made both
at the time of the offering and at the time of exercise of the Class A Warrant;
and (5) the solicitation of the exercise of the Class A Warrant was not in
violation of Rule 10b-6 promulgated under the Securities Exchange Act of 1934.
The Company agrees to pay over to the Representative any fees due it within five
business days after receipt by the Company of Class A Warrant proceeds. Within
ten (10) days of the last day of each month commencing one year from the
Effective Date, the Company will instruct the Warrant Agent to notify the
Representative of each Class A Warrant certificate which has been properly
completed and delivered for exercise by holders of Class A Warrants during each
such month. The Company will instruct the Transfer Agent that the Representative
may at any time during business hours, at its expense, examine the records of
the Company and the Warrant Agent which relate to the exercise of the Class A
Warrants. It is understood that this agreement is on an exclusive basis to
solicit the exercise of the Class A Warrants and that the Company may not engage
other broker-dealers to solicit the exercise of Class A Warrants without the
consent of VTR. It is understood that no solicitation fee will be paid where the
Class A Warrant exercise was not solicited by VTR or another member of the NASD.
(e) For a period of two years from the Effective Date, the Company will
not file a Form S-8 or other Registration Statement for the benefit of officers,
directors, consultants and employees without the prior written consent of the
Representative.
SECTION 17. Notice. Except as otherwise expressly provided in this
Agreement, (A) whenever notice is required by the provisions hereof to be given
to the Company, such notice shall be given in writing, by certified mail, return
receipt requested, addressed to the Company at the address set forth herein on
the first page, copy to Xxxxxxxxx & Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention Xxxxxx X. Xxxxxxxxx; and (B) whenever notice is
required by the provisions hereof to be given to the Underwriters, such notice
shall be in writing addressed to the Representative at VTR, at the address set
forth herein on the first page copy to Xxxxxx Xxxxx, Esq., Xxxxxx Xxxxx P.C.,
Suite 420, 000 Xxxxx Xxxx Xxxx, Xxxxx Xxxx, XX 00000. Any party may change the
address for notices to be sent by giving written notice to the other persons.
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SECTION 18. Representations and Agreements to Survive Delivery.
Except as the context otherwise requires, all representations, warranties,
covenants, and agreements contained in this Agreement shall be deemed to be
representations, warranties, covenants, and agreements as at the date hereof and
as at the Closing Date and the Additional Closing Date(s), and all
representations, warranties, covenants, and agreements of the several
Underwriters and the Company, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any of the
Underwriters or any of their controlling persons, and shall survive any
termination of this Agreement (whensoever made) and/or delivery of the
Securities to the several Underwriters.
SECTION 19. Miscellaneous. This Agreement is made solely for the
benefit of the Underwriters and the Company and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successor" or the term "successors and assigns" as
used in this Agreement shall not include any purchaser, as such, of any of the
Shares. This Agreement shall not be assignable by any party without the other
party's prior written consent. This Agreement shall be binding upon, and shall
inure to the benefit of, our respective successors and permitted assigns. The
foregoing represents the sole and entire agreement between us with respect to
the subject matter hereof and supersedes any prior agreements between us with
respect thereto. This Agreement may not be modified, amended or waived except by
a written instrument signed by the party to be charged. The validity,
interpretation and construction of this Agreement, and of each part hereof,
shall be governed by the internal laws of the State of New York, without giving
effect to the conflict of laws provisions thereof.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall be deemed
to be one and the same instrument.
If a party signs this Agreement and transmits an electronic facsimile of the
signature page to the other party, the party who receives the transmission may
rely upon the electronic facsimile as a signed original of this Agreement.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
the Company and the Underwriters in accordance with its terms.
Very truly yours,
SUPERIOR SUPPLEMENTS, INC.
By:_____________________________________
(Authorized Officer)
CONFIRMED AND ACCEPTED, as of the
date first above written:
VTR CAPITAL, INC.
By_____________________________________
(Authorized Officer)
For itself and as the Representative of the
other Underwriters named in Schedule I hereto.
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SCHEDULE I
===========================================================
Underwriter Firm Securities to be
Purchased
-----------------------------------------------------------
Number of Common Shares
-----------------------------------------------------------
VTR Capital, Inc.
Total 500,000
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