Ehibit 99.6
SILVER STAR FOODS, INC.
UNDERWRITING AGREEMENT
New York, New York
December __, 1998
Royal Xxxxxx Securities Corp., as Representative of
the Several Underwriters as Listed in Schedule A
Boca Raton,Florida
Dear Sirs:
The undersigned, Silver Star Foods, Inc., a New York corporation (the
"Company"), hereby confirms its agreement with Royal Xxxxxx Securities, Inc., as
representative of the several underwriters listed in Schedule A
("Representative" or "Royal Xxxxxx" or "you" or the "Underwriter(s)") with
respect to the sale by the Company to the Underwriters, acting severally and not
jointly, of the respective number of shares ("Shares") of the common stock of
the Company, par value $.0001 per share ("Common Stock") and redeemable common
stock purchase warrants ("Public Warrants") each to purchase one share of Common
Stock, as set forth in Schedule A hereto. The aggregate 1,100,000 Shares and
2,200,000 Public Warrants will be separately tradable upon issuance and are
sometimes herein referred to as the "Firm Securities".
1. INTRODUCTION. Each Public Warrant is exercisable commencing on
______________, 1999 [1st Anniversary of the closing] until ____________, 2003
[5th Anniversary of the closing]
unless previously redeemed by the Company, at an initial exercise price of $6.00
per share of Common Stock. The Public Warrants may be redeemed by the Company
at a redemption price of $.01 per Public Warrant at any time after
______________, 1999 [1st Anniversary of the closing] on thirty (30) days prior
written notice, provided that the closing bid price of the Common Stock equals
or exceeds $8.50 for any ten (10) consecutive trading day period ending on the
10th days prior to the date of the notice of redemption, in accordance with the
terms and conditions of the Warrant Agreement between the Company and American
Stock Transfer & Trust Company ("Warrant Agreement"). Upon the giving of notice
of redemption, the Public Warrants will become exercisable if they were not
otherwise exercisable.
Upon your request, as provided in this Agreement, the Company shall also
issue and sell to you up to an additional 165,000 Shares and/or 330,000 Public
Warrants for the purpose of covering over-allotments in the sale of the Firm
Securities (the "Over-allotment Option"). Such additional securities are
hereinafter referred to as the "Option Securities." The Firm Securities and the
Option Securities are hereinafter sometimes referred to as the "Securities."
The Company also proposes to issue and sell to you, pursuant to the terms of the
warrant agreement, dated ______, 1998 between you and the Company (the
"Underwriters' Warrant Agreement"), warrants (the "Underwriters' Warrants") to
purchase up to 110,000 Shares and/or 220,000 Public Warrants. The Underwriters'
Warrants shall be exercisable during the four year period commencing one (1)
year from the date of the Prospectus (as defined in Section 2(a) hereof) at a
price of $8.663 per Share and $.4125 per Public Warrant, subject to adjustment
in certain events to protect against dilution. The Securities issuable upon
exercise of the Underwriters' Warrants are hereinafter sometimes referred to as
the "Underwriters' Securities." The Securities, the Underwriters' Warrants and
the Underwriters' Securities are more fully described in the Registration
Statement and the Prospectus referred to below.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Underwriters as of the date hereof that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement"), and an amendment or amendments thereto, on Form SB-2 (No.
333-_______), including any related preliminary prospectus (the "Preliminary
Prospectus"), for the registration of the Securities and the Underwriters'
Securities,
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under the Securities Act of 1933, as amended (the "Act"), which registration
statement and amendment or amendments have been prepared by the Company in
conformity with the requirements of the Act, and the rules and regulations (the
"Regulations") of the Commission promulgated under the Act. Before the
registration becomes effective, the Company will not file any amendment to such
registration statement to which you shall have reasonably objected after having
been furnished with a copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement," and the form
of prospectus, in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations (or included in the Registration Statement, if no
filing under Rule 424 is required), is hereinafter called the "Prospectus."
(b) On the date upon which the Registration Statement is
declared effective by the Commission (the "Effective Date") and at all times
subsequent thereto up to Closing Date I and Closing Date II, if any (as such
terms are defined in Section 3(d) hereof), the Registration Statement and the
Prospectus will comply in all material respects with the applicable provisions
of the Act and the Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The representation
and warranty made in this Section 2(b) does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company by the Underwriters expressly for use in the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto.
(c) This Agreement, the Warrant Agreement, the Underwriters'
Warrant Agreement and the Financial Advisory and Investment Banking Agreement
(as defined in Section 5(s) hereof), have been duly and validly authorized by
the Company, and this Agreement constitutes, and the Public Warrant Agreement,
the Underwriters' Warrant Agreement and the Financial Advisory and Investment
Banking Agreement, when executed and delivered pursuant to this Agreement, will
(assuming due execution by the
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Underwriters) each constitute a valid and binding agreement of the Company,
enforceable against the Company in accordance with its respective terms, except
(i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification,
contribution or exculpation provision may be limited under applicable Federal
and state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The Securities and the Underwriters' Warrants to be issued and
sold by the Company pursuant to this Agreement, the Underwriters' Securities
issuable upon exercise of the Underwriters' Warrants and payment therefor, have
been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities,
the Underwriters' Warrants and the Underwriters' Securities are not and will not
be subject to the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company; and all corporate
action required to be taken for the authorization, issuance and sale of the
Securities, the Underwriters' Warrants and the Underwriters' Securities has been
duly and validly taken. The Underwriters' Warrants constitute a valid and
binding obligation of the Company, enforceable in accordance with its terms, to
issue and sell, upon exercise in accordance with the terms thereof, the number
and type of the Company's securities called for thereby; except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification, contribution or
exculpation provision may be limited under applicable Federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(d) All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the issuances and sales of all such securities complied in all material respects
with applicable Federal and state securities laws; the holders thereof have no
rights of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights
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of any holders of any security of the Company or similar contractual rights
granted by the Company.
(e) Except as set forth in the Registration Statement and the
Prospectus, the Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, respectively, free and clear of
all liens, encumbrances, claims, security interests, defects and restrictions of
any material nature whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable.
(f) There is no action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding pending or to the knowledge
of the Company threatened, against or involving the properties or business of
the Company or which if adversely determined could reasonably be expected to
materially and adversely affect the financial position, or prospects, or
business of the Company, except as referred to in the Prospectus.
(g) All contracts and other documents required to be described
in the Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement have been described in the Registration Statement or
the Prospectus or filed with the Commission as Exhibits to the Registration
Statement, as required.
(h) The financial statements of the Company, together with the
related notes, included in the Registration Statement and Prospectus fairly
present the financial positions and the results of operations of the Company, at
the dates and for the 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. There has been no
material adverse change in financial conditions or results of operations of the
Company, or to the knowledge of the Company, any development involving a
prospective change in the condition or prospects of the Company, financial or
otherwise, since the date of the financial statements included in the
Prospectus, except as disclosed therein.
(i) Xxxxxxx Xxxxxxx, Xxxxxxxxx & Co., LLP, whose reports are
filed with the Commission as a part of the Registration Statement, are
independent accountants as required by the Act and the Regulations.
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(j) Except as otherwise set forth in the Prospectus, the Company
does not own, directly or indirectly, an interest in any corporation,
partnership, joint venture, trust or other business entity. The Company is duly
qualified and licensed and in good standing as foreign corporation in each
jurisdiction in which its ownership of property or business operations require
such qualification or licensing, except where the failure to be so qualified or
licensed would not have a material adverse affect on the Company. The Company
has all requisite corporate power and authority, and all necessary material
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies, to own or lease its
properties and conduct its business as described in the Prospectus. The Company
is and has been doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates and permits and with all applicable
Federal, state and local laws, rules and regulations, including but not limited
to laws and regulations relating to environmental matters and employee health
and safety matters, and none of the aforementioned authorizations, approvals,
orders, licenses, certificates or permits have been suspended or revoked, nor
are there any proceedings pending or to the knowledge of the Company threatened
which could result in a suspension or revocation thereof. The Company has all
requisite corporate power and authority to enter into this Agreement, the
Warrant Agreement, the Underwriters' Warrant Agreement and the Financial
Advisory and Investment Banking Agreement and to carry out the provisions and
conditions hereof and thereof, and all consents, authorizations, approvals and
orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the issuance of the Securities and the Underwriters'
Securities, pursuant to this Agreement, the Warrant Agreement, and the
Underwriters' Warrant Agreement, and as contemplated by the Prospectus, except
with respect to applicable Federal and state securities laws.
(k) The outstanding debt, the property and the business of the
Company conforms in all material respects to the descriptions thereof contained
in the Registration Statement and Prospectus.
(l) The Securities, the Underwriters' Warrants, the
Underwriters' Securities and any other securities issued or to be issued by the
Company on or before the Closing Dates (as defined in Section 3(d) hereof)
described herein conform, or will conform when issued, in all material respects
to all statements
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with respect thereto contained in the Registration Statement and the Prospectus.
(m) Except as set forth in the Prospectus, no material default
exists in the due performance and observance of any term, covenant or condition
of any license, contract, indenture, mortgage, deed of trust, note, loan or
credit agreement, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company is
a party or by which the Company may be bound or to which any of the property or
assets of the Company are subject which default would reasonably be expected to
have a materially adverse effect on the financial condition or business of the
Company.
(n) The Company is not in violation of any term or provision of
its Certificate of Incorporation or By-Laws. Neither the execution and delivery
of this Agreement, nor the issuance and sale of the shares of Common Stock, the
Public Warrants, the Underwriters' Warrants and the Underwriters' Securities,
nor the consummation of any of the transactions contemplated herein, nor the
compliance by the Company with the terms and provisions hereof has materially
conflicted with or will materially conflict with, or has resulted in or will
result in a material breach of, any of the terms and provisions of, or has
constituted or will constitute a material default under, or has resulted in or
will result in the creation or imposition of any lien, charge or encumbrance
upon the property or assets of the Company pursuant to the terms of any
indenture, mortgage, deed of trust, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party, or by which the
Company is or may be bound, or to which any of the property or assets of the
Company is subject; nor will such action result in any material violation of the
provisions of the Certificates of Incorporation or the By-Laws of the Company or
any contract or agreement, or any statute or any order, rule or regulation
applicable to the Company or any other regulatory authority or other
governmental body having jurisdiction over the Company.
(o) Except as disclosed in the Prospectus, all taxes which are
due from the Company have been paid in full, unless being contested in good
faith by the Company, and the Company does not have any tax deficiency or claim
outstanding, proposed or assessed against it.
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(p) Subsequent to the respective dates as of which information
is given in the most recently circulated Preliminary Prospectus included as a
part of the Registration Statement, and except as may otherwise be indicated or
contemplated herein or therein, (i) the Company has not issued any securities,
(ii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock; (iii) incurred any material liability or
obligation, direct or contingent, for borrowed money; or (iv) entered into any
transaction other than in the ordinary course of business.
(q) To the Company's knowledge, the Commission has not issued
any order preventing or suspending the use of any Preliminary Prospectus or part
thereof.
(r) On the Effective Date, (i) the authorization of capital
stock of the Company is as set forth in the Registration Statement, and (ii) not
more than an aggregate of 3,276,000 shares of Common Stock shall be issued and
outstanding excluding: (A) the 1,100,000 shares of Common Stock and the
2,200,000 shares of Common Stock issuable upon the exercise of the Public
Warrants; (B) up to an additional 165,000 shares of Common Stock issuable upon
the exercise of the Over-allotment Option or the 330,000 shares issuable upon
the exercise of the Public Warrants issuable upon the exercise of the
Over-allotment Option; (C) up to an additional 110,000 shares issuable upon
exercise of the Underwriters' Warrants or the 220,000 shares issuable upon
exercise of the Public Warrants issuable upon the exercise of the Underwriters'
Warrants (which warrants are identical to the Public Warrants); and (D) up to
500,000 shares of Common Stock issuable upon the exercise of options granted, or
to be granted, under the Company's 1998 Employee Stock Option Plan. Other than
the shares of Common Stock referred to in the immediately preceding sentence, no
other shares of capital stock or securities convertible into capital stock shall
be outstanding or reserved for issuance at the completion of the proposed public
offering without the consent of the Underwriters.
(s) Except for the registration rights granted under the
Underwriters' Warrant Agreement, to the Selling Stockholder named in the
Registration Statement, or as disclosed in the Prospectus, no holders of any
securities of the Company or of any options, warrants or convertible or
exchangeable securities of the Company exercisable for or convertible or
exchangeable for securities of the Company have the right to include any
securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company.
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(t) Assuming that there will be two "market makers" for the
Common Stock, at least 300 beneficial owners of the Common Stock and a
sufficient "public float" of the Shares, and that the Company's registration of
the Common Stock pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act") becomes effective (all as contemplated by the requirements of the National
Association of Securities Dealers, Inc.), the Common Stock is eligible for
quotation on the Nasdaq Stock Market ("Nasdaq"). The Company has filed a
registration statement with the Commission pursuant to Section 12(g) of the
Exchange Act, and has used its best efforts to have same declared effective by
the Commission on an accelerated basis on the Effective Date.
(u) Except as described in the Prospectus, to the Company's
knowledge, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or any other arrangements,
agreements, understandings, commitments, payments or issuances of securities
with respect to the Company that may affect the Underwriters' compensation, as
determined by the National Association of Securities Dealers, Inc. ("NASD").
(v) Neither the Company, nor, to the knowledge of the Company,
any of its employees or officers or directors, agents or any other person acting
on behalf of the Company has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer, supplier, or official or governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist it
in connection with any actual or proposed transaction) which (i) could
reasonably be expected to subject the Company to any material damage or penalty
in any civil, criminal or governmental litigation or proceeding, (ii) if not
given in the past, could reasonably be expected to have had a materially adverse
effect on the assets, business or operations of the Company as reflected in any
of the financial statements contained in the Prospectus, or (iii) if not
continued in the future, could reasonably be expected to materially adversely
affect the assets, business, operations or prospects of the Company.
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(w) Except as described in the Prospectus, to the Company's
knowledge, the Company owns or possesses the requisite licenses or rights to use
all trademarks, service marks, service names, trade names, patents and patent
applications, copyrights, methods, protocols, techniques, technologies,
procedures and other rights (collectively the "Intangibles") described as owned
or used by the Company in the Registration Statement. There is no claim, action
or proceeding by any person pending or, to the Company's knowledge, threatened,
which pertains to or challenges the rights of the Company with respect to any
Intangibles used in the conduct of the business of the Company, except as
described in the Prospectus. To the Company's knowledge, current products,
services and processes of the Company do not infringe on any Intangibles held by
any third party; provided, however, that the possibility exists that other
persons or entities, completely independently of the Company, or employees or
agents, could have developed trade secrets or items of technical information
similar or identical to those of the Company.
(x) Except as set forth in the Registration Statement, the
Company is not under any obligation to pay royalties or fees of any kind
whatsoever to any third party with respect to Intangibles it has developed,
uses, employs or intends to use or employ.
(y) The Company has generally enjoyed satisfactory
employer/employee relationships with its employees and is in material compliance
in all material respects with all Federal, state and local laws and regulations
respecting the employment of their respective employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. To the Company's knowledge, there are no pending or threatened
investigations involving the Company by the U.S. Department of Labor or
corresponding foreign agency, or any other governmental agency responsible for
the enforcement of such Federal, state or local laws and regulations. To the
Company's knowledge, there is no unfair labor practice charge or complaint
against the Company pending before the National Labor Relations Board or
corresponding foreign agency or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the Company, or
any predecessor entity, and none has occurred. No representation question
exists respecting the employees of the Company. No collective bargaining
agreement or modification thereof is currently in effect or being negotiated by
the Company and its employees. No grievance or arbitration proceeding is
pending under any expired or existing collective bargaining agreements of the
Company.
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(z) Neither the Company, nor, to the Company's knowledge, any of
its officers or directors or any of its employees or stockholders, have taken,
directly or indirectly, any action designed to or which has constituted or which
could reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(aa) The Company does not maintain nor has it maintained,
sponsored or contributed to any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan" or a "multiemployer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"), except for the Stock Option Plan described in the Prospectus.
The Company neither presently maintains or contributes or at any time in the
past, maintained or contributed to a defined benefit plan, as defined in
Section 3(35) of ERISA. The Company has never completely or partially withdrawn
from a "multiemployer plan."
(ab) Except as set forth in the Prospectus under "MANAGEMENT" or
"CERTAIN TRANSACTIONS," the Company is not a party to any agreement with any
officer, director or stockholder of the Company or any affiliate or associate of
any such person or entity which is required to be disclosed in the Prospectus
pursuant to Regulation SB. Except as set forth in the Prospectus, to the
Company's knowledge, no officer, director or stockholder of the Company or any
"affiliate" or "associate" (as these terms are defined in Rule 405 promulgated
under the Regulations) of any such person or entity or the Company, has or has
had, either directly or indirectly, (i) an interest in any person or entity
which (A) furnishes or sells services or products which are furnished or sold or
are proposed to be furnished or sold by the Company, or (B) purchases from or
sells or furnishes to the Company any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected.
(ac) The minute books of the Company have been made available to
counsel to the Underwriters and contain a complete summary of all director and
shareholder meetings and actions by unanimous written consent of directors and
actions by written consent of stockholders holding a majority of the then issued
and outstanding shares since the time of incorporation and
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reflect all transactions referred to in such minutes accurately in all material
respects.
(ad) The Company has all requisite corporate power and authority
to enter into and to carry out the provisions and conditions hereof, and all
consents, authorizations, approvals and orders required in connection herewith
have been obtained. Neither the execution and delivery of this Agreement, nor
the consummation of any of the transactions contemplated herein, nor the
compliance by the Company with the terms and provisions hereof has materially
conflicted with or will materially conflict with, or has resulted in or will
result in a material breach of, any of the terms and conditions or provisions
of, or has constituted or will constitute a material default under, or has
resulted in or will result in the creation or imposition of any lien, charge or
encumbrance upon the property or assets of the Company pursuant to the terms of
any indenture, mortgage, deed of trust, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party, or by which
the Company is or may be bound, or to which any of the property or assets of the
Company is subject; nor will such action result in any material violation of the
provisions of the Certificates of Incorporation or the By-Laws of the Company or
any contract or agreement, or any statute or any order, rule or regulation
applicable to the Company or any other regulatory authority or other
governmental body having jurisdiction over the Company.
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND UNDERWRITERS'
WARRANTS.
(a) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriters 1,100,000 Shares of Common Stock and
2,200,000 Public Warrants, and the Underwriters agree to purchase such
Securities from the Company on a firm commitment basis at a purchase price of
$4.725 per Share and $.225 per Public Warrant, to be sold by the Underwriters at
an initial public offering price of $5.25 per share and $.25 per Public Warrant.
(b) In addition, upon not less than two (2) days' notice from
the Underwriters to the Company, for a period of forty-five (45) days from the
date of the Prospectus, the Company agrees to sell to the Underwriters at a
purchase price of $4.725 per Share and/or $.225 per Public Warrant, all or any
part of the Option Securities, to be sold by the Underwriters hereunder at an
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initial public offering price of $5.25 per Share or $.25 per Public Warrant.
Delivery of the Option Securities shall be made concurrently with tender of
payment therefore. Option Securities may be purchased by the Underwriters only
for the purpose of covering over-allotments in the sale of the Firm Securities,
and the Underwriters shall have no obligation to make any over-allotments. No
Option Securities shall be delivered unless the Firm Securities shall be
simultaneously delivered or shall theretofore have been delivered as herein
provided.
(c) On Closing Date I (defined below in Section 3(d)), the
Company shall issue and sell to the Underwriters the Underwriters' Warrants,
which warrants shall entitle the holders thereof to purchase up to 110,000
Shares and/or 220,000 Public Warrants. The total purchase price of the
Underwriters' Warrants shall be $10. The Underwriters' Warrants shall be
exercisable in whole or in part for up to an additional 110,000 shares and/or
220,000 Public Warrants for a period of four (4) years commencing one (1) year
from the date of the Prospectus at a price of $8.25 per Share and $.4125 per
Public Warrant. The Underwriters' Warrant Agreement and form of Underwriters'
Warrant Certificate shall be substantially in the form filed as Exhibits to the
Registration Statement.
(d) Payment for the Underwriters' Warrants shall be made on
Closing Date I. Payment for the Firm Securities and the Option Securities shall
be made on each of Closing Date I and Closing Date II, respectively, at the
Underwriters' election by certified or bank cashier's check in New York Clearing
House funds, payable to the order of the Company, or by wire transfer, at the
offices of one of the Underwriters, or at such other place as agreed upon by the
Underwriters and the Company, upon delivery of certificates (in form and
substance reasonably satisfactory to the Underwriters) representing the
Securities or by confirmation of electronic transfer of the Securities to the
Underwriters for the accounts of the Underwriters. Delivery and payment for the
Firm Securities shall be made at 10:00 A.M. New York time, on or before the
third business day following the public offering or at such earlier time as the
Underwriters shall determine, or at such other time as shall be agreed upon by
the Underwriters and the Company. The hour and date of delivery and payment for
the Firm Securities are called "Closing Date I." The Firm Securities shall be
registered in such name or names and in such authorized denominations as the
Underwriters may request in writing at least two (2) full business days prior to
Closing Date I. The Company will permit the Underwriters to examine and package
any certificates representing the Firm Securities for delivery, at least one
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(1) full business day prior to Closing Date I. Delivery for each of the Option
Securities as provided above shall be made within the two (2) business day
period after notice of exercise to the Company, and against payment therefor, as
provided above. The hour and date of such delivery and payment made subsequent
to Closing Date I for Option Securities is referred to as "Closing Date II" and
Closing Date I and Closing Date II are collectively referred to as Closing Date
I. The Option Securities shall be registered in such name or names and in such
denominations as the Underwriters may request in writing at the time of exercise
of the Overallotment Option.
(e). The Company shall not be obligated to sell or deliver any
Firm Securities except upon tender of payment by the Underwriters for all the
Firm Securities.
4. PUBLIC OFFERING. The Underwriters are to make a public
offering of the Firm Securities and such of the Option Securities as they may
determine. The Securities are to be initially offered to the public at the
offering price set forth on the cover page of the Prospectus (such price being
hereinafter called the "Public Offering Price"). The Underwriters may, at their
own expense, enter into one or more agreements as the Underwriters, in their
sole discretion, deem advisable with one or more broker-dealers who shall act as
dealers or co-underwriters in connection with such public offering.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees
that it will:
(a) Use its best efforts to cause the Registration Statement to
become effective and will notify the Underwriters immediately, and confirm the
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto becomes effective, (ii) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceeding for
that purpose, (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Securities and the
Underwriters' Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, and (iv) of
the receipt of any comments from the Commission. If the Commission or any state
securities commission shall enter a stop order or suspend such qualification at
any time, the Company will make every reasonable effort to obtain promptly the
lifting of such order.
14
(b) File the Prospectus (in form and substance reasonably
satisfactory to the Underwriters) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission in accordance with
Rule 424, if the Prospectus is required to be so filed.
(c) During the time when a prospectus is required to be
delivered under the Act, use its reasonable best efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Regulations, as from time to time in force, so far
as necessary to permit the continuance of sales of or dealings in the Securities
and the Underwriters' Securities in accordance with the provisions hereof and
the Prospectus. If at any time when a prospectus relating to the Securities or
the Underwriters' Securities is required to be delivered under the Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for any Underwriter, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act.
(d) Deliver to the Underwriters, without charge, such number of
copies of each Preliminary Prospectus and the Prospectus as the Underwriters may
reasonably request and, as soon as the Registration Statement or any amendment
or supplement thereto becomes effective, deliver to the Underwriters two (2)
signed copies of the Registration Statement, including exhibits, and all
post-effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and signed copies of all consents of certified
experts.
(e) Endeavor in good faith, in cooperation with the
Underwriters, and Gersten, Savage, Kaplowitz, Fredericks , LLP at or prior to
the time the Registration Statement becomes effective, to qualify the Securities
for offering and sale under the securities laws of such jurisdictions as the
Underwriters may reasonably designate, provided that no such qualification shall
be required in any jurisdiction where, as a result thereof, the Company (i)
would be subject to service of general process or to taxation as a foreign
corporation doing business in such
15
jurisdiction; or (ii) would be subject to qualification or "blue sky" in any
state which requires a lock-up of inside securities for a period greater than
two (2) years. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Underwriters agree that such action is not at the
time necessary or advisable, use its reasonable best efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction.
(f) Make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Section 11(a) of the Act) covering a period of at least twelve
(12) consecutive months beginning after the Effective Date.
(g) For a period of five (5) years from the Effective Date,
furnish to the Underwriter copies of such financial statements and other
periodic and special reports as the Company from time to time furnishes
generally to holders of any class of its securities, and promptly furnish to
each Underwriter (i) a copy of each periodic report the Company shall file with
the Commission, (ii) a copy of every press release and every news item and
article with respect to the Company or its affairs, which was released by the
Company, (iii) a copy of each Form 8-K or Schedule 13D, 13G, 14D-1 or 13E-4
received or prepared by the Company, and (iv) such additional documents and
information with respect to the Company or any future subsidiaries or affiliates
of the Company as the Underwriters may from time to time reasonably request.
(h) Apply the net proceeds from the offering received by it in a
manner consistent in all material respects with the caption "USE OF PROCEEDS" in
the Prospectus.
(i) Deliver to the Underwriters, prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and not file any such amendment or supplement to which
the Underwriters shall reasonably object, after being furnished such copy, in
writing with reasonable specificity as to the nature and extent of any
objection.
(j) Furnish to the Underwriters as early as practicable prior to
Closing Date I, but not later than two (2)
16
full business days prior thereto, a copy of the latest available unaudited
interim financial statements of the Company (which in no event shall be as of a
date more than thirty (30) days prior to the Effective Date) which have been
read by the Company's independent accountants as stated in their letter to be
furnished to the Underwriter(s) pursuant to Section 7(g) hereof.
(k) For a period of three (3) years from Closing Date I, provide
the Underwriter(s), upon their reasonable request, at the Company's sole
expense, (i) with access to daily consolidated financial transfer sheets
relating to the Common Stock and designate American Stock Transfer & Trust Co.
as transfer agent for the Company's securities or such other transfer agent
mutually agreeable to the Company and the Underwriter(s) and (ii) to cause the
Company's depository to fax a "special security position report" to each
Underwriter on a weekly basis.
(l) For a period of three (3) years after Closing Date I,
nominate and use its best efforts to engage a designee of the Representative as
a nonvoting advisor to the Company's Board of Directors (the "Advisor") or in
lieu thereof to designate an individual for election as a director, in which
case the Company shall use its best efforts to have such individual elected as a
director. The designee may be a director, officer, partner, employee or
affiliate of the Representative and the Representative shall designate such
person in writing to the Board. In the event the Representative shall not have
designated such individual at the time of any meeting of the Board or such
person is unavailable to serve, the Company shall notify the Representative of
each meeting of the Board. An individual, if any, designated by the
Representative shall receive all notices and other correspondence and
communications sent by the Company to members of the Board. Such Advisor or
director, as the case may be shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings including, but not limited
to, food, lodging, and transportation. In addition, such Advisor or Director
shall be entitled to the same compensation as the Company gives to other
non-employee directors for acting in such capacity. The Company further agrees
that, during said three (3) year period, it shall schedule no less than four (4)
formal and "in person" meetings of its Board of Directors in each such year at
which meetings such Advisor shall be permitted to attend as set forth herein;
said meetings shall be held quarterly each year and thirty (30) days advance
notice of such meetings shall be given to the Advisor. Further, during such
three (3) year period, the Company shall give notice to the Representative with
respect to
17
any proposed acquisitions, mergers, reorganizations or other similar
transactions.
The Company agrees to indemnify and hold harmless the
Underwriter(s) and such Advisor against any and all claims, actions, damages,
costs and expenses, and judgments arising solely out of the attendance and
participation of the Advisor at any such meeting described herein. In the event
the Company maintains a liability insurance policy affording coverage for the
acts of its officers and directors, it agrees, if possible, to include the
Advisor as an insured under such policy.
(m) Until the sooner of (i) seven (7) years from the date
hereof, or (ii) the sale to the public of the Underwriters' Securities, not take
any action or actions which may prevent or disqualify the Company's use of Form
SB-2 (or another appropriate form) for the registration under the Act of the
Underwriters' Securities and the shares of Common Stock underlying the Public
Warrants.
(n) For a period of five (5) years from the Effective Date, use
its best efforts to maintain the quotation of the Securities by Nasdaq [as well
as the listing thereof on the Boston Stock Exchange ("BSE")].
(o) Supply each Underwriter with one (1), and Xxxxxxx, Savage,
Kaplowitz, Xxxxxxxxxx LLP, counsel to the Underwriters, with two (2) bound
volumes of the underwriting materials within a reasonable time after the latest
Closing Date.
(p) For a period of two (2) years from the Effective Date, not
issue any other shares of Common Stock or Preferred Stock or securities
convertible into or exercisable for Common Stock or Preferred Stock without the
prior written consent of the Representative. Notwithstanding the foregoing, the
Company may issue securities (A) upon the exercise of any warrants or options
outstanding on the date hereof pursuant to the terms thereof; (B) pursuant to
contracts in force and effect on the date hereof in accordance with the terms
thereof; (C) the grant of stock options (and the issuance of securities
thereunder) pursuant to stock option plans in force on the date hereof; and (D)
the exercise of the Underwriters' Warrant.
(q) So long as the Securities or the Underwriters' Securities
are registered under the Exchange Act, hold an annual meeting of stockholders
for the election of directors within 180 days after the end of each of the
Company's
18
fiscal years and, within 150 days after the end of each of the Company's fiscal
years, provide the Company's stockholders with the audited financial statements
of the Company as of the end of the fiscal year just completed prior thereto.
Such financial statements shall be those required by Rule 14a-3 under the
Exchange Act and shall be included in an annual report pursuant to the
requirements of such Rule.
(r) Engage a financial public relations firm reasonably
satisfactory to the Underwriter(s) as soon as possible after Closing Date I, and
continuously engage such firm, or an acceptable substitute firm for at least the
period ending twenty four (24) months after Closing Date I.
(s) Enter into the Underwriters Warrant Agreement and the
Financial Advisory and Investment Banking Agreement (the "Consulting Agreement")
in substantially the form filed as Exhibits to the Registration Statement.
(t) As soon as possible after Closing Date I, take all necessary
and appropriate actions to be included in Standard and Poor's Corporation
Descriptions or other equivalent manual and to maintain its listing therein for
a period of five (5) years from the Effective Date.
(u) Cause all of the Company's officers and directors and
stockholders to enter into written agreements (the "Lock-up Agreements") that,
for a period of 24 months from the Effective Date, they will not, without the
consent of the Representative, (i) publicly sell any securities of the Company
owned directly or indirectly by them or owned beneficially by them (as defined
in the Exchange Act), or (ii) otherwise sell, or transfer such securities unless
the transferee agrees in writing to be bound by an identical lock-up.
(v) Use its best efforts to obtain key-man life insurance in the
amount of $1,000,000 per policy on the lives of such executive officers of the
Company as the Representative shall request, with the Company named as
beneficiary of such policies.
(w) Use its best efforts to qualify its Common Stock and Public
Warrants for quotation on the NASDAQ system [and listing on the BSE].
(x) For a period of two years from the Effective Date, the
Company shall not issue any of its securities in any
19
offering pursuant to Regulation S under the 1933 Act, without the prior written
consent of the Representative.
Grant to the Representative a preferential right on the terms and
subject to the conditions set forth in this Section, for a period of three (3)
years from the Effective Date, to purchase for its account, or to sell for the
account of the any stockholders listed in the Prospectus under the caption
"PRINCIPAL STOCKHOLDERS" (the "Principal Stockholders"), any securities of the
Company, on terms not more favorable to the Principal Stockholders than they can
secure elsewhere, to purchase or sell any such securities. If the
Representative fails to notify the Principal Stockholder in writing of its
intention to act as underwriter or placement agents or otherwise participate or
introduce a third party to participate in such offering within fifteen (15) days
after receipt of a notice containing such proposal, then the Representative
shall have no further claim or right with respect to the proposal contained in
such notice. If, thereafter, such proposal is materially modified, the
Principal Stockholders shall in all respects have the same obligations and adopt
the same procedures with respect to such proposal as are provided hereinabove
with respect to the original proposal;
(z) Designate Royal Xxxxxx as the Company's exclusive Warrant
Solicitation Agents in the event of any solicitation of the exercise of the
Public Warrants, in connection with a redemption of the Public Warrants or
otherwise, and shall pay to the Underwriters a Warrant Solicitation fee of five
(5%) percent of the exercise price of all solicited and exercised Public
Warrants, subject to the rules and regulations of the NASD with regard to such
fees.
(aa) Neither the Company nor any representative of the Company
has made or shall make any written or oral representation in connection with the
Offering and sale of the Securities or the Underwriter's Warrant which is not
contained in the Prospectus, which is otherwise inconsistent with or in
contravention of anything contained in the Prospectus, or which shall constitute
a violation of the Act, the Rules and Regulations, the Exchange Act or the rules
and regulations promulgated under the Exchange Act.
(ab) For so long as any Public Warrant is outstanding, the
Company shall, at its own expense: (i) use its reasonable best efforts to cause
post-effective amendments to the Registration Statement, or new registration
statements relating to the Public Warrants and the Common Stock underlying the
Public
20
Warrants to become effective in compliance with the Act and without any lapse of
time between the effectiveness of the Registration Statement and of any such
post-effective amendment or new registration statement; provided, however, that
the Company shall have no obligation to maintain the effectiveness of such
Registration Statement or file a new Registration Statement, or to keep
available a prospectus at any time at which such registration or prospectus is
not then required; (ii) cause a copy of each Prospectus, as then amended, to be
delivered to each holder of record of a Public Warrant; (iii) furnish to the
Underwriters and dealers as many copies of each such Prospectus as the
Underwriters or dealers may reasonably request; and (iv) maintain the "blue sky"
qualification or registration of the Public Warrants and the Common Stock
underlying the Public Warrants, or have a currently available exemption
therefrom, in each jurisdiction in which the Securities were so qualified or
registered for purposes of the Offering.
6. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay all expenses (other than
fees of counsel to the Underwriters) in connection with the offering, including
but not limited to, (i) the preparation, printing, filing and mailing (including
the payment of postage and overnight delivery with respect to such mailing) of
the Registration Statement and the Prospectus and the printing and mailing of
this Agreement and related documents, including the cost of all copies thereof
and of the Preliminary Prospectus and of the Prospectus and any amendments or
supplements thereto supplied to the Underwriter(s) in quantities as hereinabove
stated, (ii) the printing, engraving, issuance and delivery of the shares of
Common Stock, the Public Warrants, and the Underwriters Warrants, including any
transfer or other taxes payable thereon, (iii) the qualification of the
Securities, the Underwriters Warrants and the Underwriters Securities under
state or foreign securities or "Blue Sky" laws and determination of the status
of such securities under legal investment laws, including the costs of printing
and mailing the "Preliminary Blue Sky Memorandum," and "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and the fees and
disbursements of counsel for the Underwriters relating to Blue Sky matters
(which fees shall be payable by the Company in the sum of $35,000, $5,000 of
which has previously been paid), (iv) advertising costs and expenses including
but not limited to the reasonable costs and expenses in connection with the
"road show," information meetings and presentations, bound volumes and
"tombstones" in publications selected by the Underwriters and prospectus
memorabilia, (v) costs
21
and expenses in connection with due diligence investigations, including but not
limited to the reasonable fees of any independent counsel or consultant
retained, phone calls relating to due diligence investigations, and all
reasonable travel and lodging expenses incurred by you and/or counsel to the
Underwriters in connection with visits to, and examination of, the Company's
premises, (vi) fees and expenses of the transfer agent and warrant agent,
(vii) application and listing fees for inclusion in Xxxxx'x OTC Manual or
Standard and Poor's Corporation Descriptions or other equivalent manuals, and
(viii) the fees payable to the NASD and Nasdaq. The $35,000 payment to counsel
for the Underwriters shall not include fees of special counsel if same is
required to be incurred in a merit review state which may require local counsel.
In this connection, Blue Sky applications shall be made in such states and
jurisdictions as shall be requested by the Underwriters. Payments with regard
to items (i), (iii), (iv) and (v) shall be made on each of Closing Date I and
Closing Date II.
(b) The Company shall pay to the Representative an aggregate
non-accountable expense allowance, in addition to the expenses payable pursuant
to Section 6(a), equal to three (3%) percent of the gross proceeds received by
the Company from the sale of the Securities. In the event that the
Representative terminates the offering or are unable to consummate the offering
within nine (9) months of the date hereof, the advances toward the
non-accountable expense allowance shall become accountable and shall be
returnable to the Company to the extent its out-of-pocket expenses are less than
the amount advanced to the Underwriters, so that the Representative is
reimbursed only for its actual accountable out-of-pocket expenses.
7. CONDITIONS OF UNDERWRITERS OBLIGATIONS. The obligations of
the Underwriter(s) to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy in all material aspects of the
representations and warranties of the Company as of the date hereof and as of
each of the Closing Dates, to the accuracy in all material respects of the
statements of officers of the Company made pursuant to the provisions hereof and
to the performance by the Company of its obligations hereunder in all material
respects and to the following conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you, and, at each of the
Closing Dates, no stop
22
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Gersten, Savage, Kaplowitz, Fredericks , LLP, counsel
to the Underwriter(s).
(b) At Closing Date I, the Underwriter(s) shall have received
the favorable opinion of Xxxxxxx X Xxxxxx Associates, counsel to the Company,
dated Closing Date I, addressed to the Underwriter(s) and in form and substance
satisfactory to Gersten, Savage, Kaplowitz, Fredericks , LLP, counsel to the
Underwriter(s), in substantially the form attached as Exhibit A hereto.
(c) On or prior to each of Closing Date I and Closing Date II,
counsel for the Underwriters shall have been furnished such documents,
certificates and opinions as it may reasonably require for the purpose of
enabling it to review or pass upon the matters referred to in Section 7(b), or
in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(d) Prior to each of Closing Date I and Closing Date II,
(i) there shall have been no material adverse change, or development involving a
material adverse prospective change, in the conditions or prospects of the
business activities, financial or otherwise, of the Company from the latest
dates as of which such conditions are set forth in the Registration Statement
and Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company from the latest date as of which
their respective financial conditions are set forth in the Registration
Statement and Prospectus which is materially adverse to the Company; (iii) the
Company shall not be in material default under any provision of any instrument
relating to any outstanding indebtedness; (iv) no material amount of the assets
of the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (v) no action, suit or proceeding, at law
or in equity, shall be pending or threatened against the Company before or by
any court or Federal or state commission, board or other administrative agency
wherein an unfavorable result, decision, ruling or finding would materially
adversely affect the business, prospects, operations, or financial condition or
income of the Company, except as set forth in the Registration Statement and
Prospectus and except where such a result is deemed remote by counsel to the
Company
23
with respect to such action or proceeding; (vi) no stop order shall have been
issued under the Act and no proceedings with respect thereto shall have been
initiated or threatened by the Commission; (vii) the market for securities in
general or political, financial or economic conditions shall not have materially
adversely changed from those reasonably foreseeable as of the date hereof as to
render it impracticable in the Underwriters reasonable judgment to make a public
offering of the Securities, and there has not been a material adverse change in
market levels for securities in general or financial or economic conditions
which render it inadvisable in the Underwriters judgment to proceed; and
(viii) there shall not have commenced or occurred a war or Act of God or other
calamity which would have a material adverse effect on, or result in a material
loss to, the Company.
The Company agrees and acknowledges that the Underwriter(s)
shall be the sole determining parties as to the presence of any such conditions,
events, occurrences and provisions set forth in this Section 7(d).
(e) At each of Closing Date I and Closing Date II, the
Underwriter(s) shall have received a certificate of the Company signed by the
President and the Secretary of the Company, dated Closing Date I and Closing
Date II, respectively, to the effect that the conditions set forth in section
7(d)(i) through (vi) above have been satisfied and that, as of Closing Date I
and Closing Date II, respectively, the representations and warranties of the
Company set forth in Section 2 hereof are true and correct.
(f) By the Effective Date, the Underwriter(s) shall have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriter(s), as described in the Registration Statement.
(g) At the time this Agreement is executed, and at each of
Closing Date I and Closing Date II, the Underwriter(s) shall have received a
letter, addressed to the Underwriter(s) and in form and substance reasonably
satisfactory in all respects (including the nonmaterial nature of the changes or
decreases, if any, referred to in clause (3) below) to the Underwriter(s) and to
Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx LLP, counsel for the Underwriter(s), from
Xxxxxxx Xxxxxxx Xxxxxxxxx & Co., LLP, dated as of the date of this Agreement and
as of each of Closing Date I and Closing Date II:
24
(i) confirming that they are independent accountants with respect to the
Company within the meaning of the Act and the applicable Regulations;
(ii) stating that in its opinion the financial statements of the Company
included in the Registration Statement and Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Regulations thereunder;
(iii) stating that, they have read all of the minutes of meetings of the
shareholders and the Board of Directors of the Company as set forth in the
minute books from incorporation through [not more than 5 days before date of
letter], officials of the Company having advised us that the minutes of all such
meetings through that date were set forth therein and have carried out other
procedures through _________:
(A) With respect to the three-month periods ended ________, they have:
(1) performed the procedures specified by the American Institute
of Certified Public Accountants for a review of interim financial information on
the unaudited condensed consolidated balance sheet at __________, and the
unaudited statements of operations, stockholders' equity (deficit) and cash
flows for the three-month periods ended ________ and _________, included in the
Registration Statement ("Interim Financials"), and
(2) inquired of certain officials of the Company who have
responsibility for financial and accounting matters as to whether the Interim
Financials, comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules regulations.
(B) With respect to latest interim period ending as of a date not
later than 30 days prior to the Effective Date, they have:
(1) read the unaudited consolidated financial statements for
such periods of both 1997 and 1998 furnished to them by the Company, officials
of the Company having advised us that no such financial statements as of any
date or for any period subsequent to ______ were available; and
(2) Inquired of certain officials of the Company ho have
responsibility for financial and accounting matters as to
25
whether the Interim Financials are stated on a basis substantially consistent
with that of the audited consolidated financial statements in the Registration
Statement.
(C) Nothing came to their attention as a result of the foregoing
procedures that caused them to believe that:
(1) any material modifications should be made to the Financials
, for them to be in conformity with generally accepted accounting principles;
(2) the Interim Financials do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
related published rules and regulations; or
(3) (I) at ________, there was any change in the capital stock,
increase in long-term debt, increase in net current liabilities or increase in
stockholders' deficit of the consolidated companies as compared with the amounts
in the March 31, 1998, balance sheet forming a part of the Interim Financials;
or (II) for the period from _____ to _____, there was any decrease, as compared
with the corresponding period in the preceding year, in consolidated net sales
or any increase in consolidated net loss, except in all instances for changes,
increases, or decreases which the Registration Statement discloses have occurred
or may occur, except as stated therein:
(D) Stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Prospectus in each case
to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including
worksheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement;
and
(iv) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriters may reasonably request.
26
(h) All proceedings taken in connection with the authorization,
issuance or sale of the Securities, the Underwriters' Warrants and the
Underwriters' Securities as herein contemplated shall be reasonably satisfactory
in form and substance to the Underwriters and to Xxxxxxx, Savage, Kaplowitz,
Xxxxxxxxxx LLP counsel to the Underwriters.
(i) On each of Closing Date I and Closing Date II, there shall
have been duly tendered to you for your account the appropriate number of
Securities and individually for each Underwriter's own account the Underwriters'
Warrants.
(j) No order suspending the sale of the Securities in any
jurisdiction designated by you pursuant to Section 5(e) hereof shall have been
issued on either Closing Date I or Closing Date II, and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Underwriters or
the Company, shall be contemplated.
(k) Prior to each of Closing Date I and Closing Date II there
shall not have been received or provided by the Company's independent public
accountants or attorneys, qualifications to the effect of either difficulties in
furnishing certifications as to material items including, without limitation,
information contained within the footnotes to the financial statements, or as
affecting matters incident to the issuance and sale of the Securities or as to
corporate proceedings or other matters.
(l) On or prior to Closing Date I, the Underwriter's Warrant
Agreement and the Financial Advisory and Investment Banking Agreement shall have
been executed and delivered by the Company, and the Lock-Up Agreements shall
have been executed and delivered by all of the Company's officers, directors and
stockholders.
Any certificate signed by any officer of the Company and
delivered to the Underwriters or to counsel to the Underwriter shall be deemed a
representation and warranty by the Company to the Underwriters as to the
statements made therein. If any condition to the Underwriter's obligations
hereunder to be fulfilled prior to or at any Closing Date is not so fulfilled,
the Underwriters may terminate this Agreement or, if the Underwriter so elects,
may waive any such conditions which have not been fulfilled or extend the time
for their fulfillment.
8. INDEMNIFICATION.
27
(a) The Company shall indemnify and hold harmless each of the
Underwriter(s), and each controlling person, if any, who controls each of the
Underwriters (within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act), against any and all liabilities, claims, lawsuits, including
any and all awards and/or judgments to which it may become subject under the
Act, the Exchange Act or any other Federal or state statute, at common law or
otherwise, insofar as said liabilities, claims and lawsuits (including awards
and/or judgments) arise out of or are in connection with the Registration
Statement, Prospectus and related Exhibits filed under the Act, except for any
liabilities, claims and lawsuits (including awards and/or judgments), arising
out of acts or omissions of the Underwriter(s). In addition, the Company shall
also indemnify and hold harmless the Underwriter(s) against any and all costs
and expenses, including reasonable counsel fees, incurred or relating to the
foregoing liabilities, claims and lawsuits to which the indemnity applies.
The Underwriter(s) shall give the Company prompt notice of
any such liability, claim or lawsuit which the Underwriter(s) contend is the
subject matter of the Company's indemnification, and the Company thereupon shall
be granted the right to take any and all necessary and proper action, at its
sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise and dispose of such liability, claim
or lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
The Underwriter(s) shall indemnify and hold harmless the
Company, and each controlling person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all liabilities, claims, lawsuits, including any and all awards
and/or judgments to which it may become subject under the Act, the Exchange Act
or any other Federal or state statute, at common law or otherwise, insofar as
said liabilities, claims and lawsuits (including awards and/or judgments) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact required to be stated or necessary to make the statement therein,
not misleading, which statement or omission was made in reliance upon
information furnished in writing to the Company by or on behalf of the
Underwriter(s) for inclusion in the Registration Statement or Prospectus or any
amendment or supplement thereto. In addition, the Underwriter(s) shall also
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indemnify and hold harmless the Company against any and all costs and expenses,
including reasonable counsel fees, incurred or relating to the foregoing.
The Company shall give to the Underwriter(s) prompt notice
of any such liability, claim or lawsuit which the Company contends is the
subject matter of the Underwriter's indemnification and the Underwriter(s)
thereupon shall be granted the right to take any and all necessary and proper
action, at their sole cost and expense, with respect to such liability, claim
and lawsuit, including the right to settle, compromise or dispose of such
liability, claim or lawsuit, excepting therefrom any and all proceedings or
hearings before any regulatory bodies and/or authorities.
(b) 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 8 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 8 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 8, then, and in each such case, the Company and each of the
Underwriter(s) shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after any contribution from others) in
such proportion taking into consideration the relative benefits received by each
party from the offering covered by the Prospectus (taking into account the
portion of the proceeds of the offering realized by each), the parties' relative
knowledge and access to information concerning the matter with respect to which
the claim was assessed, the opportunity to correct and prevent any statement or
omission and other equitable considerations appropriate under the circumstances;
provided, however, that notwithstanding the above in no event shall the
Underwriter(s), in the aggregate, be required to contribute any amount in excess
of 10% of the initial public offering price of the Securities; and 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.
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Within fifteen (15) 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 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
notifies a contributing party or his or its representative of the commencement
thereof within the aforesaid fifteen (15) days, the contributing party will be
entitled to participate therein with the notifying party and any other
contributing party similarly notified. Any such contributing party shall not be
liable to any party seeking contribution on account of any settlement of any
claim, action or proceeding effected by such party seeking contribution without
the written consent of such contributing party. The indemnification provisions
contained in this Section 8 are in addition to any other rights or remedies
which either party hereto may have with respect to the other or hereunder.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
Except as the context otherwise requires, all representations, warranties
and agreements contained in this Agreement shall be deemed to be
representations, warranties and agreements at the Closing Dates, and such
representations, warranties and agreements of the Underwriter(s) and the
Company, including the indemnity agreements contained in Section 8 hereof, shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any of the Underwriters, the Company or any controlling
person, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters until the earlier of the
expiration of any applicable statute of limitations and the seventh anniversary
of Closing Date II, at which time the representations, warranties and agreements
shall terminate and be of no further force and effect.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION HEREOF.
(a) This Agreement shall become effective at 9:30 a.m., New York
time, on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by the
Underwriters of the Securities, whichever is earlier. The time of the initial
public
30
offering, for the purpose of this Section 10, shall mean the time, after the
Registration Statement becomes effective, of the release by the Underwriters 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 Underwriter(s) for
offering by the Underwriter(s) or dealers by letter or telegram, whichever shall
first occur. The Underwriter(s) may prevent this Agreement from becoming
effective without liability to any other party, except as noted below, by giving
the notice indicated below in this Section 10 before the time this Agreement
becomes effective. The Underwriters agree to give the undersigned notice of the
commencement of the offering described herein.
(b) The Underwriter(s) shall have the right, in their sole
discretion, to terminate this Agreement, including without limitation, the
obligation to purchase the Firm Securities and the obligation to purchase the
Option Securities after the exercise of the Over-Allotment Option, by notice
given to the Company prior to delivery and payment for all the Firm Securities
or the Option Securities, as the case may be, if any of the conditions
enumerated in Section 7 are not either fulfilled or waived by the Underwriter(s)
on or before any Closing Date.
(c) If the Underwriter(s) elect to prevent this Agreement
from becoming effective or to terminate this Agreement as provided in this
Section 10, the Company shall be notified on the same day as such election is
made by the Underwriter(s) by telephone or telegram, confirmed by letter.
(d) Anything herein to the contrary notwithstanding, if this
Agreement shall not be carried out within the time specified herein, or any
extensions thereof granted by the Underwriters, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied then, in addition to the
obligations assumed by the Company pursuant to Section 6(a) hereof, the
Underwriters shall provide the Company with a statement of the Underwriters'
accountable expenses.
(e) In the event of litigation between the parties arising
hereunder, the prevailing party shall be entitled to costs and reasonable
attorney's fees.
(f) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or termination of this Agreement, and whether
or not this Agreement is otherwise
31
carried out, the provisions of Section 8 shall not be in any way affected by
such election or termination or failure to carry out the terms of this Agreement
or any part hereof.
11. NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to the Underwriters,
shall be mailed, delivered or telegraphed and confirmed to Royal Xxxxxx
Securities Corp., 0000 Xxxxx Xxxxx Xxxxxxx, Xxxx Xxxxx, Xxxxxxx 00000,
Attention: President, with a copy to Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx LLP
000 X. 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxx, Esq., and
if to the Company, shall be mailed, delivered or telegraphed and confirmed to it
at 0000 Xxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000 with a copy to Xxxxxxx X.
Xxxxxx and Associates, Xxxxxxxx Xxxxxx Xxxxx, 0000 Xxxxx 0, Xxxxx X, Xxxxxxxx,
XX 00000.
12. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 8 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
13. CONSTRUCTION. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to conflict of laws. The parties agree to submit themselves to the
jurisdiction of the courts of the State of New York or of the United States of
America for the Southern District of New York, which shall be the sole tribunals
in which any parties may institute and maintain a legal proceeding against the
other party arising from any dispute in this Agreement. In the event either
party initiates a legal proceeding in a jurisdiction other than in the courts of
the State of New York or of the United States of America for the Southern
District of New York, the other party may assert as a complete defense and as a
basis for dismissal of such legal proceeding that the legal proceeding was not
initiated and maintained in the courts of the State of New York or of the United
States of America for the Southern District of New York, in accordance with the
provisions of this Section 13.
14. ENTIRE AGREEMENT. This Agreement, the Warrant Agreement, the
Underwriter's Warrant Agreement and the Financial Advisory and Investment
Banking Agreement contain the entire
32
agreement between the parties hereto in connection with the subject matter
hereof and thereof.
If the foregoing correctly sets forth the understanding between
the Underwriter(s) and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement between us.
Very truly yours,
Silver Star Foods, Inc.
By:
-----------------------------
Name: Xxxxxxx Xxxxxx
Title: President
Accepted as of the date
first above written.
New York, New York
Royal Xxxxxx Securities Corp.
By:
---------------------------
Name:
Title:
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