Superior Supplements, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
UNDERWRITING AGREEMENT
VTR Capital, Inc. __________, 1996
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 the following
securities: (i) 600,000 shares of Common Stock at a public offering price of
$5.00 per share; and (ii) 600,000 Class A Common Stock Purchase Warrants (the
"Warrants") at a public offering price of $.10 per Warrant. Commencing one year
from the Effective Date, each Warrant shall entitle the holder thereof to
purchase one share of Common Stock for a period of four years from the Effective
Date (as hereinafter defined) at a purchase price of $5.00. The Warrants are
subject to redemption by the Company during its exercise period upon 30 days
prior written notice at $0.05 per Warrant, at any time after one year from the
Effective Date, if the closing bid price per share of the shares of Common Stock
closes at no less than $10.00 per share for a period of twenty out of thirty
consecutive trading days prior to any such call for redemption. The 600,000
shares of Common Stock and the 600,000 Warrants are hereinafter sometimes
referred to as the "Firm Common Stock," and the "Firm Warrants," respectively.
The Firm Common Stock, and the Firm Warrants are sometimes hereinafter 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 90,000 shares of Common Stock, and
90,000 Warrants for the purpose of covering over-allotments. Such additional
shares of Common Stock and Warrants are hereinafter sometimes referred to as the
"Optional Common Stock" and the "Optional Warrants," respectively. The Optional
Common Stock and Optional Warrants are sometimes hereinafter 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) and the terms of the
Warrants 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-________ ) 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
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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.
(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
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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 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
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
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will not have any and will not be issued in violation of any preemptive rights.
The Common Stock and Warrants will be delivered in accordance with this
Agreement and the Warrant Agreement between the Company and American Stock
Transfer & Trust Company. 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 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,
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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 or the
Warrants 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 Stock Warrants to purchase Common Stock
and/or the Representative's Warrants to purchase Warrants (the Representative's
Stock Warrants and the Representative's Warrants collectively hereinafter
referred to as the "Representative's Securities") 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 Securities and
underlying Warrants in accordance with the provisions of the Warrant Agreement
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 and Warrants to be paid by the
several Underwriters shall be $4.50 and $.09, respectively (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-
6
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, and/or Warrant as that set forth in the preceding paragraph; and
each Underwriter 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 effectivness 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). 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
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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.
(e) At the time of making payment for the Firm Securities, the Company
also hereby agrees to sell to the Representative, Representative's Stock
Warrants to purchase 60,000 shares of Common Stock at any time on or after
Effective Time until five years from the Effective Time, and Representative's
Warrants to purchase 60,000 Warrants at an aggregate purchase price of $120. The
Representative's Stock Warrants will be exercisable at a price of $8.25 per
share equal to 165% of the public offering price of the shares of Common Stock.
The Representative's Warrants will be exercisable at a price of $.165 per
Warrant at any time on or after the Effective Time until five years from the
Effective Time, but in no event after the Termination Date of the public
Warrants. The Warrants underlying the Representative's Warrants shall be
identical in all respects to the Warrants sold to the public. From the
Effective Date and until one (1) year thereafter, such Representative
Securities and underlying securities 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, and Warrants
to the public as soon as practicable after the Effective Date, at the initial
offering price of $5.00 and $.10, respectively 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
8
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 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
9
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 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
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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, the Company agrees to qualify its Securities for listing on the
NASDAQ System Small-Cap Issues on the Effective Date and will take all necessary
and appropriate action so that the Securities continue to be listed for trading
in the NASDAQ System Small-Cap Issues for at least ten years from the Effective
Date provided the Company otherwise complies with the prevailing maintenance
requirements of NASDAQ System Small-Cap. In addition, at such time as the
Company qualifies for listing its securities on the National Market System of
NASDAQ, the Company will take all steps necessary to have the Company's
Securities thereof listed on the National Market System of NASDAQ in lieu of
listing as Small-Cap Issues. 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.
(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.
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(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.
12
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 Underwriters 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; (v) costs of qualifying the Securities for listing on NASDAQ and (vi)
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.
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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 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
14
"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 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
15
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 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
16
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 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.
17
(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 the extent that any decrease is disclosed in or
contemplated by the Prospectus.
(f) The authorization of the Common Stock and Warrants, 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
18
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 the Warrants and any other
outstanding options or warrants and when issued in accordance with such terms
contained in the Prospectus, 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.
(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
19
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 Securities 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 Securities and Underlying Warrants, and such
stock, when issued and paid for upon exercise of the Representative's Securities
and Underlying 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 sell the
Securities on the terms and conditions set forth herein and in the Registration
Statement
20
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
21
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;
(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
22
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 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
23
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 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.
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
24
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 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
25
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
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
26
Company or the securities market or (ii) the inability to market the securities.
SECTION 15. Registration of the Representative's Securities 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 Securities and/or the
underlying securities issuable upon exercise of the Representative's Securities,
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 Securities 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 Securities 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 Securities and/or the underlying
securities. (The registration rights provided herein apply to the
Representative's Securities 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 Securities and underlying securities in
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 Securities and underlying securities and
will supply all information required therefor, but such additional Registration
27
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 Securities and underlying
securities according to the aggregate sales price of the securities being
issued. The holders of the Representative's Securities may include such Warrants
in any such filing without exercising the Representative's Securities, 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 reorganizations 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;
28
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 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 Warrant was exercised was greater than the Warrant
exercise price on that date; (2) exercise of the Warrant was solicited by a
member of the NASD and the NASD member is designated in writing by the Warrant
holder; (3) the 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 Warrant; and (5) the solicitation of the exercise of
the 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 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 Warrant certificate which has been properly completed
and delivered for exercise by holders of 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 Warrants. It is understood
that this agreement is on an exclusive basis to solicit the exercise of the
Warrants and that the Company may not engage other broker-dealers to solicit the
exercise of Warrants without the consent of VTR. It is understood that no
solicitation fee will be paid where the 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
29
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.
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.
30
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.
31
SCHEDULE I
================================================================================
Underwriter Firm Securities to be
Purchased
--------------------------------------------------------------------------------
Number of Number of
Common Shares Warrants
--------------------------------------------------------------------------------
VTR Capital, Inc.
Total 600,000 600,000
32
