TAM RESTAURANTS, INC.
1,000,000 Shares of Common Stock
($.0001 Par Value)
and
Warrants to Purchase 500,000 Shares of Common Stock
UNDERWRITING AGREEMENT
----------------------
Paragon Capital Corporation , 1998
0 Xxxxxxx Xxxxxx - 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
TAM Restaurants, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Paragon Capital Corporation (the "Underwriter") an
aggregate of one million (1,000,000) shares of common stock of the Company (the
"Common Stock"), par value $.0001 per share (the "Offered Shares"), which
Offered Shares are presently authorized but unissued shares of the common stock,
par value $.0001 per share (individually "Common Share" and collectively the
"Common Shares"), of the Company, at a price of Five Dollars ($5.00) per Offered
Share, and Five Hundred Thousand (500,000) Common Share purchase warrants (the
"Offered Warrants"), at a price of Ten Cents ($.10) per Offered Warrant,
entitling the holder of each Offered Warrant to purchase, during the period
commencing _________, 1999 (13 months following the Effective Date) or earlier
upon the consent of the Underwriter and ending at the close of business on
________, 2003 (the last day of the 60th month following the Effective Date),
one (1) Common Share, at an exercise price of Six Dollars ($6.00) (subject to
adjustment in certain circumstances). The Company shall have the right to call
each Offered Warrant for redemption upon not less than thirty (30) days' written
notice at any time at a redemption price of Ten Cents ($.10) per Offered
Warrant, provided that the closing bid quotation of the Common Stock has been at
least 150% (currently $9.00) of the then-effective exercise price of the Offered
Warrants on all twenty (20) of the trading days ending upon the third trading
day prior to the day on which the Company notice of redemption (the "Call Date")
and that the Company obtains the written consent of the Underwriter to such
redemption prior to the Call Date. In addition, the Underwriter, in order to
cover over-allotments in the sale of the Offered Shares and/or Offered Warrants,
may purchase an aggregate of not more than one hundred
fifty thousand (150,000) Common Shares (the "Optional Shares") and/or
seventy-five thousand (75,000) Common Share purchase warrants (the "Optional
Warrants") entitling the holder of each Optional Warrant to purchase one (1)
Common Share on the same terms as the Offered Warrants. The Offered Shares and
the Optional Shares are hereinafter collectively referred to as the "Shares";
and the Offered Warrants and the Optional Warrants are hereinafter collectively
referred to as the "Warrants." The Warrants will be issued pursuant to a Warrant
Agreement (the "Warrant Agreement") to be dated as of the Closing Date (as
hereinafter defined) by and among the Company, the Underwriter and Continental
Stock Transfer & Trust Company, as warrant agent (the "Warrant Agent").
The Company also proposes to issue and sell to the Underwriter
for its own account and the accounts of its designees, warrants (the
"Underwriter's Warrants") to purchase an aggregate of one hundred thousand
(100,000) Common Shares (collectively, the "Underlying Shares") and fifty
thousand (50,000) warrants similar but not identical to the Warrants
(collectively, the "Underlying Warrants"), which sale will be consummated in
accordance with the terms and conditions of the form of Underwriter's Warrant
filed as an exhibit to the Registration Statement. The Underlying Shares and the
Common Shares issuable upon exercise of the Warrants and the Underlying Warrants
are hereinafter sometimes referred to as the "Warrant Shares". The Shares, the
Warrants, the Underwriter's Warrants, the Underlying Warrants and the Warrant
Shares (collectively, the "Securities") are more fully described in the
Registration Statement and the Prospectus, as defined below.
The Company hereby confirms its agreement with the Underwriter
as follows:
1. Purchase and Sale of Offered Shares and Offered Warrants.
On the basis of the representations and warranties herein contained, but subject
to the terms and conditions herein set forth, the Company hereby agrees to sell
the Offered Shares and Offered Warrants to the Underwriter and the Underwriter
agrees to purchase the Offered Shares and Offered Warrants from the Company, at
a purchase price of $4.50 per Offered Share and $.09 per Offered Warrant. The
Underwriter plans to offer the Offered Shares and Offered Warrants to the public
at a public offering price of $5.00 per Offered Share and $.10 per Offered
Warrant.
2. Payment and Delivery.
(a) Payment for the Offered Shares and Offered
Warrants will be made to the Company by certified or official bank check or
checks payable to its order in New York Clearing House, next day, funds, at the
offices of the Underwriter, 0 Xxxxxxx Xxxxxx - 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, against delivery of
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the Offered Shares and Offered Warrants to the Underwriter. Such payment and
delivery will be made at _________________, New York City time, on the third
business day following the Effective Date (as hereinafter defined) or the fourth
business day following the Effective Date if the Shares and Warrants are
released for trading on the day immediately following the Effective Date, the
date and time of such payment and delivery being herein called the "Closing
Date." The certificates representing the Offered Shares and Offered Warrants to
be delivered will be in such denominations and registered in such names as the
Underwriter may request not less than three full business days prior to the
Closing Date, and will be made available to the Underwriter for inspection,
checking and packaging at the office of the Company's transfer agent or
correspondent in New York City, Continental Stock Transfer & Trust Company, Two
Broadway, New York, New York 10004 not less than one full business day prior to
the Closing Date.
(b) On the Closing Date, the Company will sell the
Underwriter's Warrants to the Underwriter or to its designees. The Underwriter's
Warrants will be in the form of, and in accordance with, the provisions of the
Underwriter's Warrant attached as an exhibit to the Registration Statement. The
aggregate purchase price for the Underwriter's Warrants is $105. The
Underwriter's Warrants will be restricted from sale, transfer, assignment or
hypothecation for a period of one year from the Effective Date, except to
officers and directors of the Underwriter and members of the selling group
and/or their officers or directors. Payment for the Underwriter's Warrants will
be made to the Company by check or checks payable to its order on the Closing
Date against delivery of the certificates representing the Underwriter's
Warrants. The certificates representing the Underwriter's Warrants will be in
such denominations and such names as the Underwriter may request prior to the
Closing Date.
3. Option to Purchase Optional Shares and/or Optional
Warrants.
(a) For the purposes of covering any over-allotments
in connection with the distribution and sale of the Offered Shares and Offered
Warrants as contemplated by the Prospectus, the Underwriter is hereby granted an
option to purchase all or any part of the Optional Shares and/or Optional
Warrants from the Company. The purchase price to be paid for the Optional Shares
and Optional Warrants will be the same price per Optional Share and Optional
Warrant as the price per Offered Share or Offered Warrant, as the case may be,
set forth in Section 1 hereof. The option granted hereby may be exercised by the
Underwriter as to all or any part of the Optional Shares and/or the Optional
Warrants at any time within 45 days after the Effective Date. The Underwriter
will not be under any obligation to purchase any
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Optional Shares or Optional Warrants prior to the exercise of such option.
(b) The option granted hereby may be exercised by the
Underwriter by giving oral notice to the Company, which must be confirmed by a
letter, telex or telegraph setting forth the number of Optional Shares and
Optional Warrants to be purchased, the date and time for delivery of and payment
for the Optional Shares and Optional Warrants to be purchased and stating that
the Optional Shares and Optional Warrants referred to therein are to be used for
the purpose of covering over-allotments in connection with the distribution and
sale of the Offered Shares and Offered Warrants. If such notice is given prior
to the Closing Date, the date set forth therein for such delivery and payment
will not be earlier than either two full business days thereafter or the Closing
Date, whichever occurs later. If such notice is given on or after the Closing
Date, the date set forth therein for such delivery and payment will not be
earlier than five full business days thereafter. In either event, the date so
set forth will not be more than 15 full business days after the date of such
notice. The date and time set forth in such notice is herein called the "Option
Closing Date." Upon exercise of such option, the Company will become obligated
to convey to the Underwriter, and, subject to the terms and conditions set forth
in Section 3(d) hereof, the Underwriter will become obligated to purchase, the
number of Optional Shares and Optional Warrants specified in such notice.
(c) Payment for any Optional Shares and Optional
Warrants purchased will be made to the Company by certified or official bank
check or checks payable to its order in New York Clearing House, next day,
funds, at the office of the Underwriter, against delivery of the Optional Shares
and Optional Warrants purchased to the Underwriter. The certificates
representing the Optional Shares and Optional Warrants to be delivered will be
in such denominations and registered in such names as the Underwriter requests
not less than two full business days prior to the Option Closing Date, and will
be made available to the Underwriter for inspection, checking and packaging at
the aforesaid office of the Company's transfer agent or correspondent not less
than one full business day prior to the Option Closing Date.
(d) The obligation of the Underwriter to purchase and
pay for any of the Optional Shares or Optional Warrants is subject to the
accuracy and completeness (as of the date hereof and as of the Option Closing
Date) of and compliance in all material respects with the representations and
warranties of the Company herein, to the accuracy and completeness of the
statements of the Company or its officers made in any certificate or other
document to be delivered by the Company pursuant to this Agreement, to the
performance in all material respects by the Company of its
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obligations hereunder, to the satisfaction by the Company of the conditions, as
of the date hereof and as of the Option Closing Date, set forth in Section 3(b)
hereof, and to the delivery to the Underwriter of opinions, certificates and
letters dated the Option Closing Date substantially similar in scope to those
specified in Section 5, 6(b), (c), (d) and (e) hereof, but with each reference
to "Offered Shares," "Offered Warrants" and "Closing Date" to be, respectively,
to the Optional Shares, Optional Warrants and the Option Closing Date.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full power and authority, corporate and other, to own or lease and operate
its properties and to conduct its business as described in the Registration
Statement and to execute, deliver and perform this Agreement, the Warrant
Agreement, the Consulting Agreement (as hereinafter defined) and the
Underwriter's Warrant Agreement and to consummate the transactions contemplated
hereby and thereby. The Company has no subsidiaries other than the subsidiaries
listed on Schedule A hereto (each a "Subsidiary" and collectively, the
"Subsidiaries"), which are corporations duly organized and validly existing
under the laws of the respective jurisdictions set forth on Schedule A hereto.
Each of the Company and each Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company and the Subsidiaries taken as a whole. Each Subsidiary
has the corporate power and authority to own or lease and operate its properties
and to conduct its business as described in the Prospectus.
The Company owns all of the issued and outstanding shares of
capital stock of each Subsidiary, free and clear of any security interest,
liens, encumbrances, claims and charges, and all of such shares have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
options or warrants for the purchase of, or other rights to purchase, or
outstanding securities convertible into or exchangeable for, any capital stock
or other securities of any Subsidiary.
(b) Each of this Agreement and the consulting
agreement described in Section 5(q) hereof (the "Consulting Agreement") has been
duly executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, and each of the Warrant Agreement and the
Underwriter's Warrant Agree-
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ment, when executed and delivered by the Company on the Closing Date, will be
the valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms. The execution, delivery and
performance of this Agreement, the Consulting Agreement, the Warrant Agreement
and the Underwriter's Warrant Agreement by the Company, the consummation by the
Company of the transactions herein and therein contemplated and the compliance
by the Company with the terms of this Agreement, the Consulting Agreement, the
Warrant Agreement and the Underwriter's Warrant Agreement have been duly
authorized by all necessary corporate action and do not and will not, with or
without the giving of notice or the lapse of time, or both, (i) result in any
violation of the Certificate of Incorporation or By-Laws of the Company; (ii)
result in a breach of or conflict with any of the terms or provisions of, or
constitute a default under, or result in the modification or termination of, or
result in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any
Subsidiary pursuant to any indenture, mortgage, note, contract, commitment or
other agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary or any of their respective properties
or assets is or may be bound or affected, except for such breaches, conflicts or
defaults which do not, individually or in the aggregate, have a material adverse
effect on the Company and the Subsidiaries taken as a whole; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any Subsidiary or any of their respective properties or business,
except for such violations which do not, individually or in the aggregate, have
a material adverse effect on the Company and the Subsidiaries taken as a whole;
or (iv) have any effect on any permit, certification, registration, approval,
consent, license or franchise (the "Permits") necessary for the Company or any
Subsidiary to own or lease and operate their properties and to conduct their
businesses or the ability of the Company to make use thereof, except for those
Permits which do not, individually or in the aggregate, have a material adverse
effect on the Company and the Subsidiaries taken as a whole.
(c) No authorization, approval, consent, order,
registration, license or permit of any court or governmental agency or body,
other than under the Securities Act of 1933, as amended (the "Act"), the
Regulations (as hereinafter defined) and applicable state securities or Blue Sky
laws, is required for the valid authorization, issuance, sale and delivery of
the Shares and Warrants to the Underwriter, and the consummation by the Company
of the transactions contemplated by this Agreement, the Consulting Agreement,
the Warrant Agreement or the Underwriter's Warrant Agreement.
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(d) The conditions for use of a registration
statement on Form SB-2 set forth in the General Instructions to Form SB-2 have
been satisfied with respect to the Company, the transactions contemplated herein
and in the Registration Statement. The Company has prepared in conformity with
the requirements of the Act and the rules and regulations (the "Regulations") of
the Securities and Exchange Commission (the "Commission") and filed with the
Commission a registration statement (File No. 333-____) on Form SB-2 and has
filed one or more amendments thereto, covering the registration of the
securities under the Act, including the related preliminary prospectus or
preliminary prospectuses (each thereof being herein called a "Preliminary
Prospectus") and a proposed final prospectus. Each Preliminary Prospectus was
endorsed with the legend required by Item 501(a)(5) of Regulation S-K of the
Regulations, including, if applicable, Rule 430A of the Regulations. Such
registration statement including any documents incorporated by reference therein
and all financial schedules and exhibits thereto, as amended at the time it
becomes effective, and the final prospectus included therein are herein,
respectively, called the "Registration Statement" and the "Prospectus," except
that, (i) if the prospectus filed by the Company pursuant to Rule 424(b) of the
Regulations differs from the Prospectus, the term "Prospectus" will also include
the prospectus filed pursuant to Rule 424(b), and (ii) if the Registration
Statement is amended or such Prospectus is supplemented after the effective date
of the Registration Statement (the "Effective Date") and prior to the Option
Closing Date (as hereinafter defined), the terms "Registration Statement" and
"Prospectus" shall include the Registration Statement as amended or
supplemented.
(e) Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
(f) The Registration Statement when it becomes
effective, the Prospectus (and any amendment or supplement thereto) when it is
filed with the Commission pursuant to Rule 424(b), and both documents as of the
Closing Date or the Option Closing Date referred to below, will contain all
statements which are required to be stated therein in accordance with the Act
and the Regulations and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, on such
dates, 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, except that
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this representation and warranty does not apply to statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company in connection with the Registration Statement or Prospectus or any
amendment or supplement thereto by the Underwriter expressly for use therein.
(g) The Company had at the date or dates indicated in
the Prospectus a duly authorized and outstanding capitalization as set forth in
the Registration Statement and the Prospectus. Based on the assumptions stated
in the Registration Statement and the Prospectus, the Company will have on the
Closing Date referred to below the adjusted stock capitalization set forth
therein. Except as set forth in the Registration Statement or the Prospectus, on
the Effective Date and on the Closing Date referred to below, there will be no
options to purchase, warrants or other rights to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell shares of the Company's capital stock or any such warrants,
convertible securities or obligations. Except as set forth in the Prospectus, no
holders of any of the Company's securities has any rights, "demand," "piggyback"
or otherwise, to have such securities registered under the Act.
(h) The descriptions in the Registration Statement
and the Prospectus of contracts and other documents are accurate in all material
respects and present fairly the information required to be disclosed, and there
are no contracts or other documents required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement under the Act or the Regulations which have not been so described or
filed as required.
(i) Each of BDO Xxxxxxx LLP and Maltese, Potter & La
Marca, LLP, the accountants who have certified certain of the consolidated
financial statements filed and to be filed with the Commission as part of the
Registration Statement and the Prospectus, are independent public accountants
within the meaning of the Act and Regulations. The consolidated financial
statements and schedules and the notes thereto filed as part of the Registration
Statement and included in the Prospectus are complete, correct and present
fairly the financial position of the Company as of the dates thereof, and the
results of operations and changes in financial position of the Company for the
periods indicated therein, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved except
as otherwise stated in the Registration Statement and the Prospectus. The
selected financial data set forth in the Registration Statement and the
Prospectus present fairly the information shown therein and have been compiled
on a basis consistent with that of the audited and unaudited financial
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statements included in the Registration Statement and the Prospectus.
(j) Each of the Company and each Subsidiary has filed
with the appropriate federal, state and local governmental agencies, and all
foreign countries and political subdivisions thereof, all tax returns, including
franchise tax returns, which are required to be filed or has duly obtained
extensions of time for the filing thereof; and, to the best of the Company's
knowledge, the provisions for income taxes payable, if any, shown on the
consolidated financial statements filed with or as part of the Registration
Statement are sufficient for all accrued and unpaid foreign and domestic taxes,
whether or not disputed, and for all periods to and including the dates of such
consolidated financial statements, other than such returns and taxes for which
the failure to file and pay can be remedied without adversely affecting the
Company. Except as disclosed in writing to the Underwriter, neither the Company
nor any Subsidiary has executed or filed with any taxing authority, foreign or
domestic, any agreement extending the period for assessment or collection of any
income taxes and is not a party to any pending action or proceeding by any
foreign or domestic governmental agency for assessment or collection of taxes;
and no claims for assessment or collection of taxes have been asserted against
the Company or any Subsidiary.
(k) The outstanding Common Shares and outstanding
options and warrants to purchase Common Shares have been duly authorized and
validly issued. The outstanding Common Shares are fully paid and nonassessable.
The outstanding options and warrants to purchase Common Shares constitute the
valid and binding obligations of the Company, enforceable in accordance with
their terms. None of the outstanding Common Shares, options or warrants to
purchase Common Shares has been issued in violation of the preemptive rights of
any shareholder of the Company. None of the holders of the outstanding Common
Shares is subject to personal liability solely by reason of being such a holder.
The offers and sales of the outstanding Common Shares and outstanding options
and warrants to purchase Common Shares were at all relevant times either
registered under the Act and the applicable state securities or Blue Sky laws or
exempt from such registration requirements. The authorized Common Shares and
outstanding options and warrants to purchase Common Shares conform to the
descriptions thereof contained in the Registration Statement and Prospectus.
Except as set forth in the Registration Statement and the Prospectus, on the
Effective Date and the Closing Date, there will be no outstanding options or
warrants for the purchase of, or other outstanding rights to purchase, Common
Shares or securities convertible into Common Shares.
(l) No securities of the Company have been sold by
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the Company or by or on behalf of, or for the benefit of, any person or persons
controlling, controlled by, or under common control with the Company within the
three years prior to the date hereof, except as disclosed in the Registration
Statement.
(m) The issuance and sale of the Shares and the
Warrant Shares have been duly authorized and, when the Shares and the Warrant
Shares have been issued and duly delivered against payment therefor as
contemplated by this Agreement or by the Warrant Agreement, as the case may be,
the Shares and the Warrant Shares will be validly issued, fully paid and
nonassessable. The holders of the Securities will not be subject to personal
liability solely by reason of being such holders and none of the securities will
be subject to preemptive rights of any shareholder of the Company.
(n) The issuance and sale of the Warrants, the
Underwriter's Warrants and the Underlying Warrants have been duly authorized
and, when issued, paid for and delivered pursuant to the terms of this Agreement
or the Underwriter's Warrants, as the case may be, the Warrants, the
Underwriter's Warrants and the Underlying Warrants will constitute valid and
binding obligations of the Company, enforceable as to the Company in accordance
with their terms. The Warrant Shares have been duly reserved for issuance upon
exercise of the Warrants, the Underwriter's Warrants and the Underlying Warrants
in accordance with the provisions of the Warrants, the Underwriter's Warrants
and the Underlying Warrants. The Warrants, Underwriter's Warrants and Underlying
Warrants will conform to the descriptions thereof contained in the Registration
Statement and Prospectus.
(o) Neither the Company nor any Subsidiary is in
violation of, or in default under, (i) any term or provision of its Certificate
of Incorporation or By-Laws, each as amended, except where such violation or
default would not have a material adverse effect on the Company and the
Subsidiaries taken as a whole; (ii) any material term or provision or any
financial covenants of any indenture, mortgage, contract, commitment or other
agreement or instrument to which it is a party or by which it or any of its
property or business is or may be bound or affected except where such violation
or default would not have a material adverse effect on the Company and the
Subsidiaries taken as a whole; or (iii) any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any Subsidiary or
any of the Company's or any Subsidiary's properties or business. Each of the
Company and each Subsidiary owns, possesses or has obtained all governmental and
other (including those obtainable from third parties) Permits necessary to own
or lease, as the case may be, and to operate its properties, whether tangible or
intangible, and to
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conduct any of the business or operations of the Company and the Subsidiaries as
presently conducted, except where such failure to do so does not, individually
or in the aggregate, have a material adverse effect on the Company and the
Subsidiaries taken as a whole, and all such Permits are outstanding and in good
standing, and there are no proceedings pending or, to the best of the Company's
knowledge, threatened, or any basis therefor, seeking to cancel, terminate or
limit such Permits.
(p) Except as set forth in the Prospectus, there are
no claims, actions, suits, proceedings, arbitrations, investigations or
inquiries before any governmental agency, court or tribunal, domestic or
foreign, or before any private arbitration tribunal, pending, or, to the best of
the Company's knowledge, threatened against the Company or any Subsidiary or, to
the best of the Company's knowledge involving the Company's or any Subsidiary's
properties or business which, if determined adversely to the Company or any
Subsidiary, would, individually or in the aggregate, result in any material
adverse change in the financial position, shareholders' equity, results of
operations, properties, business, management or affairs or business prospects of
the Company or any Subsidiary or which question the validity of the capital
stock of the Company or this Agreement or of any action taken or to be taken by
the Company pursuant to, or in connection with, this Agreement; nor, to the best
of the Company's knowledge, is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. There are no outstanding
orders, judgments or decrees of any court, governmental agency or other tribunal
naming the Company or any Subsidiary and enjoining the Company or any Subsidiary
from taking, or requiring the Company or any Subsidiary to take, any action, or
to which the Company or any Subsidiary, or the Company's or any Subsidiary's
properties or businesses is bound or subject.
(q) Except as otherwise consented to by the
Underwriter in its sole discretion, (i) no other person or entity has any rights
to participate in any offer, sale or distribution of securities of the company:
(ii) no person is entitled, directly or indirectly, to compensation from the
Company for services as a finder or investment adviser in connection with the
transactions contemplated by this Agreement; (iii) other than as described in
the letter from the Company to the Underwriter attached hereto as Exhibit A, no
officer, director or Principal Stockholder (as hereinafter defined) of the
Company is a member of the NASD or is associated with a member of the NASD; and
(iv) the Company has not promised or represented to any person that any part of
the Shares, Warrants or the other securities contemplated herein will be
directed or otherwise made available to such person in connection with the
offering.
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(r) Each of the Company and each Subsidiary owns or
possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, service marks, copyrights, rights, trade secrets,
confidential information, processes and formulations used or proposed to be used
in the conduct of their businesses as described in the Prospectus (collectively
the "Intangibles"), except where such failure to do so does not, individually or
in the aggregate, have a material adverse effect on the Company and the
Subsidiaries taken as a whole; to the best of the Company's knowledge, neither
the Company nor any Subsidiary has infringed and nor is infringing upon the
rights of others with respect to Intangibles; and neither the Company nor any
Subsidiary has received any notice of conflict with the asserted rights of
others with respect to Intangibles which could, singly or in the aggregate,
materially adversely affect its business as presently conducted or prospects,
financial condition or results of operations of the Company or any Subsidiary,
and the Company knows of no basis therefor; and, to the best of the Company's
knowledge, no others have infringed upon the Intangibles of the Company or any
Subsidiary.
(s) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus and the
Company's latest consolidated financial statements, neither the Company nor any
Subsidiary has incurred any material liability or obligation, direct or
contingent, or entered into any material transaction, whether or not in the
ordinary course of business, and has not sustained any material loss or
interference with its business from fire, storm, explosion, flood or other
casualty, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree; and since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
there have not been, and prior to the Closing Date referred to below there will
not be, any changes in the capital stock or any material increases in the
long-term debt of the Company or any material adverse change in or affecting the
general affairs, management, financial condition, shareholders' equity, results
of operations or prospects of the Company or any Subsidiary, otherwise than as
set forth or contemplated in the Prospectus.
(t) Each of the Company and each Subsidiary has good
and marketable title in fee simple to all real property and good title to all
personal property (tangible and intangible) owned by it, free and clear of all
security interests, charges, mortgages, liens, encumbrances and defects, except
such as are described in the Registration Statement and Prospectus or such as do
not materially affect the value or transferability of the properties, as a
whole, of the Company and do not interfere with the use of such property made,
or proposed to be made, by the
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Company or any Subsidiary. The leases, licenses or other contracts or
instruments under which the Company and each Subsidiary leases, holds or is
entitled to use any property, real or personal, are valid, subsisting and
enforceable only with such exceptions as are not material and do not interfere
with the use of the properties, as a whole, of the Company made, or proposed to
be made, by the Company or any Subsidiary, and all rentals, royalties or other
payments accruing thereunder which became due prior to the date of this
Agreement have been duly paid, and neither the Company nor any Subsidiary, nor,
to the best of the Company's knowledge, any other party is in default thereunder
except for such defaults which does not, individually or in the aggregate, have
a material adverse effect on the Company and the Subsidiaries taken as a whole
and, to the best of the Company's knowledge, no event has occurred which, with
the passage of time or the giving of notice, or both, would constitute a default
thereunder. Neither the Company nor any Subsidiary has received notice of any
violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties. Each of the Company and each
Subsidiary has insured its properties against loss or damage by fire or other
casualty and maintains such other insurance as is usually insured or maintained
by companies engaged in the same or similar businesses located in its
geographical area.
(u) Each contract or other instrument (however
characterized or described) which is filed as an exhibit to the Registration
Statement and to which the Company or any Subsidiary is a party or by which its
property or business is or may be bound or affected has been duly and validly
executed by the Company and, to the best of the Company's knowledge, by the
other parties thereto, is in full force and effect in all material respects and
is enforceable against the parties thereto in accordance with its terms, and
none of such contracts or instruments has been assigned by the Company or any
Subsidiary, and neither the Company nor any Subsidiary, nor, to the best of the
Company's knowledge, any other party is in default thereunder and, to the best
of the Company's knowledge, no event has occurred which, with the lapse of time
or the giving of notice, or both, would constitute a default thereunder.
None of the material provisions of such contracts or
instruments violates any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court having jurisdiction over the
Company or any Subsidiary or any of their respective assets or businesses,
including, without limitation, those relating to the sale of food and alcoholic
beverages, except for violations which do not, individually or in the aggregate,
have a material adverse effect on the Company and the Subsidiaries taken as a
whole.
-13-
(v) The employment, consulting, confidentiality and
non-competition agreements, if any, between the Company and between each
Subsidiary and its officers and employees, described in the Registration
Statement, are binding and enforceable obligations against the Company and, to
the best of the Company's knowledge of the other parties thereto, in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(w) Except as set forth in the Prospectus, the
Company has no employee benefit plans (including, without limitation, profit
sharing and welfare benefit plans) or deferred compensation arrangements that
are subject to the provisions of the Employee Retirement Income Security Act of
1974.
(x) To the best of the Company's knowledge, no labor
problem exists with any of the Company's or any Subsidiary's employees or is
imminent which could adversely affect the Company or any Subsidiary.
(y) The Company has not, directly or indirectly, at
any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(z) The Shares, Warrants and Warrant Shares have been
approved for listing on the Automated Quotation System of the National
Association of Securities Dealers, Inc. ("NASDAQ").
(aa) The Company's response to the Corporate Review
Memorandum of Xxxxxx Xxxxxxxxxx LLP, counsel to the Underwriter ("Underwriter's
Counsel"), dated ________, 1997, is true, accurate and complete in all material
respects.
Any Certificate signed by an officer of the Company
or of the Subsidiary and delivered to the Underwriter or to Underwriter's
Counsel shall be deemed to be a representation and warranty by the Company to
the Underwriter as to the matters covered thereby.
-14-
5. Certain Covenants of the Company. The Company covenants
with the Underwriter as follows:
(a) The Company will not at any time, whether before
the Effective Date or thereafter during such period as the Prospectus is
required by law to be delivered in connection with the sales of the Shares and
Warrants by the Underwriter or a dealer, file or publish any amendment or
supplement to the Registration Statement or Prospectus of which the Underwriter
have not been previously advised and furnished a copy, or to which the
Underwriter shall reasonably object in writing.
(b) The Company will use its best efforts to cause
the Registration Statement to become effective and will advise the Underwriter
immediately, and, if requested by the Underwriter, confirm such advice in
writing, (i) when the Registration Statement, or any post-effective amendment to
the Registration Statement or any supplemented Prospectus is filed with the
Commission; (ii) of the receipt of any comments from the Commission; (iii) of
any request of the Commission for amendment or supplementation of the
Registration Statement or Prospectus or for additional information; and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any Preliminary Prospectus, or of the suspension of the qualification of the
Shares and/or the Warrants for offering or sale in any jurisdiction, or of the
initiation of any proceedings for any of such purposes. The Company will use its
best efforts to prevent the issuance of any such stop order or of any order
preventing or suspending such use and to obtain as soon as possible the lifting
thereof, if any such order is issued.
(c) The Company will deliver to the Underwriter,
without charge, from time to time until the Effective Date, as many copies of
each Preliminary Prospectus as the Underwriter may reasonably request, and the
Company hereby consents to the use of such copies for purposes permitted by the
Act. The Company will deliver to each Underwriter, without charge, as soon as
practicable after the Registration Statement becomes effective, and thereafter
from time to time as requested, such number of copies of the Prospectus (as
supplemented, if the Company makes any supplements to the Prospectus) as the
Underwriter may reasonably request. The Company has furnished or will furnish to
the Underwriter one signed copy of the Registration Statement as originally
filed and of all amendments thereto, whether filed before or after the
Registration Statement becomes effective, one copy of all exhibits filed
therewith and one signed copy of all consents and certificates of experts.
-15-
(d) The Company will comply with the Act, the
Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder so as to permit the continuance
of sales of and dealings in the Offered Shares and Offered Warrants, in any
Optional Shares and Optional Warrants which may be issued and sold, and in the
Warrant Shares underlying such Warrants. If, at any time when a prospectus
relating to such Securities is required to be delivered under the Act, any event
occurs as a result of which the Registration Statement and Prospectus as then
amended or supplemented would include an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, or if it shall
be necessary to amend or supplement the Registration Statement and Prospectus to
comply with the Act or the regulations thereunder, the Company will promptly
file with the Commission, subject to Section 5(a) hereof, an amendment or
supplement which will correct such statement or omission or which will effect
such compliance.
(e) The Company will furnish such proper informa-
tion as may be required and otherwise cooperate in qualifying the Securities for
offering and sale under the securities or Blue Sky laws relating to the offering
or for sale in such jurisdictions as the Underwriter may reasonably designate,
provided that no such qualification will be required in any jurisdiction where,
solely as a result thereof, the Company would be subject to service of general
process or to taxation or qualification as a foreign corporation doing business
in such jurisdiction.
(f) The Company will make generally available to its
security holders, in the manner specified in Rule 158(b) under the Act, and
deliver to the Underwriter as soon as practicable and in any event not later
than 45 days after the end of its fiscal quarter in which the first anniversary
date of the effective date of the Registration Statement occurs, an earning
statement meeting the requirements of Rule 158(a) under the Act covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement.
(g) For a period of three (3) years from the
Effective Date, the Company will deliver to the Underwriter and to Underwriter's
Counsel on a timely basis (i) a copy of each report or document, including,
without limitation, reports on Forms 8-K, 10-C, 10-K (or 10-KSB) and 10-Q (or
10-QSB) and exhibits thereto, filed or furnished to the Commission, any
securities exchange or NASD Regulation, Inc. (the " NASD") on the date each such
report or document is so filed or furnished; (ii) as soon as practicable, copies
of any reports or communications (financial or other) of the Company mailed to
its security holders; (iii) as soon as
-16-
practicable, a copy of any Schedule 13D, 13G, 14D-1 or 13E-3 received or
prepared by the Company from time to time; (iv) to the extent provided by the
Company to any other third party, monthly statements setting forth such
information regarding the Company's results of operations and financial position
(including balance sheet, profit and loss statements and data regarding
outstanding purchase orders) as is regularly prepared by management of the
Company; and (v) to the extent provided by the Company to any other third-party,
such additional information concerning the business and financial condition of
the Company as the Underwriter may from time to time reasonably request and
which can be prepared or obtained by the Company without unreasonable effort or
expense. The Company will furnish to its shareholders annual reports containing
audited financial statements and such other periodic reports as it may determine
to be appropriate or as may be required by law.
(h) Neither the Company nor any person that con-
trols, is controlled by or is under common control with the Company will take
any action designed to or which might be reasonably expected to cause or result
in the stabilization or manipulation of the price of the Shares or Warrants.
(i) If the transactions contemplated by this
Agreement are consummated, the Underwriter shall retain the $50,000 previously
paid to it, and the Company will pay or cause to be paid the following: all
costs and expenses incident to the performance of the obligations of the Company
under this Agreement, including, but not limited to, the fees and expenses of
accountants and counsel for the Company, the preparation, printing, mailing and
filing of the Registration Statement (including financial statements and
exhibits), Preliminary Prospectuses and the Prospectus, and any amendments or
supplements thereto, the printing and mailing of the Selected Dealer Agreement,
the issuance and delivery of the Shares and Warrants to the Underwriter; all
taxes, if any, on the issuance of the Shares and Warrants; the fees, expenses
and other costs (including fees, up to a maximum of $20,000 and disbursements of
counsel) of qualifying the Shares and Warrants for sale under the Blue Sky or
securities laws of those states in which the Shares and Warrants are to be
offered or sold, the cost of printing and mailing the "Blue Sky Survey" and fees
and disbursements of counsel in connection therewith, including those of such
local counsel as may have been retained for such purpose; the filing fees
incident to securing any required review by the NASD; the cost of furnishing to
Underwriter copies of the Registration Statement, Preliminary Prospectuses and
the Prospectus as herein provided; the costs and expenses incurred in connection
with "road shows", the costs, not to exceed $15,000, of placing "tombstone
advertisements" in any publications which may be selected by the Underwriter,
and all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section
5(i).
-17-
In addition, at the Closing Date or the Option Closing Date, as
the case may be, the Underwriter will deduct from the payment for the Offered
Shares and Offered Warrants or any Optional Shares and/or Optional Warrants
purchased three percent (3%) of the gross proceeds of the offering (less the sum
of $50,000 previously paid to the Underwriter), as payment for the Underwriter's
non accountable expense allowance relating to the transactions contemplated
hereby, which amount will include the fees and expenses of Underwriter's
Counsel.
(j) If the transactions contemplated by this
Agreement or related hereto are not consummated for any reason, then the
Underwriter may receive (inclusive of amounts previously paid) and retain only
an amount equal to its accountable out-of-pocket expenses up to the sum of
$50,000 previously paid to it. In no event, however, will the Underwriter, in
the event the offering is terminated, be entitled to retain or receive more than
an amount equal to their actual accountable out-of-pocket expenses.
(k) The Company intends to apply the net proceeds
from the sale of the Shares and Warrants for the purposes set forth in the
Prospectus.
(l) During the eighteen (18) months following the
Effective Date, without the prior written consent of the Underwriter, (i) the
Company will not file any registration statement relating to the offer or sale
of any of the Company's securities, including any registration statement on Form
S-8; (ii) neither the Company nor any of its securityholders beneficially owning
greater than one percent (1%) and less than four percent (4%) of the Company's
Common Stock will sell or otherwise dispose of any securities of the Company's
and (iii) no holders of registration rights relating to securities of the
Company will exercise any such registration rights. In addition, without the
Underwriter's prior written consent, during the twenty-four (24) months
following the Effective Date, none of the Company's officers, directors or
securityholders beneficially owning four percent (4%) or more of the Company's
Common Stock, and, during the fifteen (15) months following the Effective Date,
none of the Company's securityholders beneficially owning one percent (1%) or
less of the Company's Common Stock, will sell or otherwise dispose of any
securities of the Company. Notwithstanding anything else contained herein, the
Exchange Warrants and the Bridge Warrants and the shares underlying such
warrants may be sold without the Underwriter's prior written consent commencing
fifteen (15) months following the Effective Date. The Company will deliver to
the Underwriter the agreements of its officers, directors, securityholders and
registration rights holders to such effect (the "Lock-Up Agreements") prior to
the IPO's Closing.
(m) The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets; and (iii) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(n) The Company will use its best efforts to maintain
the listing of the Shares and Warrants on NASDAQ for so long as the Shares and
Warrants are qualified for such listing.
(o) The Company will, concurrently with the Effective
Date, register the class of equity securities of which the Shares are a part
under Section 12(g) of the Exchange Act and the Company will maintain the
registration for a minimum of five years after the Effective Date.
(p) Subject to the provisions of applicable law, the
Underwriter shall be entitled to receive a warrant solicitation fee of five
percent (5%) of the aggregate exercise price of the Warrants for each Warrant
exercised during the period commencing one year after the Effective Date;
provided, however, that the Underwriter will not be entitled to receive such
compensation in Warrant exercise transactions in which (i) the market price of
the Common Shares at the time of exercise is lower than the exercise price of
the Warrants; (ii) the Warrants are held in any discretionary account; (iii)
disclosure of compensation arrangements is not made in the Registration
Statement and in documents provided to holders of Warrants at the time of
exercise; (iv) the holder thereof has not confirmed in writing that the
Underwriter solicited the exercise of the Warrants; or (v) the solicitation or
exercise of the Warrants was in violation of Regulation M promulgated under the
Exchange Act.
(q) The Company agrees to employ the Underwriter or a
designee of the Underwriter as a financial consultant on a non-exclusive basis
for a period of two (2) years from the Closing Date, pursuant to a separate
written Consulting Agreement between the Company and the Underwriter and/or such
designee, at an annual rate of Thirty Thousand Dollars ($30,000) (exclusive of
any accountable out-of-pocket expenses), payable in full, in advance, on the
Closing Date. In addition, the Consulting Agreement shall provide that the
Company will pay the Underwriter a finder's fee in the event that the
Underwriter originates a merger, acquisition, joint venture or other transaction
to which the Company is a party. The Company further agrees to deliver a duly
and validly executed
-19-
copy of said Consulting Agreement, in form and substance acceptable to the
Underwriter, on the Closing Date.
(r) The Company shall retain a transfer agent for the
Common Shares and Warrants, reasonably acceptable to the Underwriter, for a
period of five years following the Effective Date. In addition, for a period of
five years from the Effective Date, the Company, at its own expense, shall cause
such transfer agent to provide to the Underwriter, if so reasonably requested in
writing, with copies of the Company's daily transfer sheets, and, when
reasonably requested by the Underwriter, a current list of the Company's
security holders, including, to the extent held by or reasonably available to
the Company, a list of the beneficial owners of securities held by a depository
trust company and other nominees.
(s) The Company hereby agrees, at its sole cost and
expense, to supply and deliver to the Underwriter, within a reasonable period
from the date hereof, four bound volumes, including the Registration Statement,
as amended or supplemented, all exhibits to the Registration Statement, the
Prospectus and all other underwriting documents.
(t) The Company shall, as of the date hereof, have
applied for listing in Standard & Poor's Corporation Records Service (including
annual report information) or Xxxxx'x Industrial Manual (Xxxxx'x OTC Industrial
Manual not being sufficient for these purposes) and shall us its reasonable best
efforts to have the Company listed in such manual and shall maintain such
listing for a period of five years from the Effective Date.
(u) For a period of three (3) years from the
Effective Date, the Company shall continue to retain BDO Xxxxxxx, LLP (or such
other nationally recognized accounting firm reasonably acceptable to the
Underwriter) as the Company's independent public accountants.
(v) For a period of three (3) years from the
Effective Date, the Company, at its expense, shall cause its then independent
certified public accountants, as described in Section 5(w) above, to review (but
not audit) the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10-Q (or 10Q-SB) quarterly report and the mailing of
quarterly financial information to shareholders.
(w) So long as any Warrants are outstanding, the
Company shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act as shall
be necessary to enable the sale of
-20-
the Common Shares underlying the Warrants and cause a copy of each Prospectus,
as then amended, to be delivered to each holder of record of a Warrant as they
request and as otherwise required by law and, to furnish to the Underwriter and
dealers as many copies of each such Prospectus as each Underwriter or dealer may
reasonably request.
(x) For a period of twenty-five (25) days from the
Effective date, the Company will not issue press releases or engage in any other
publicity without the Underwriter's prior written consent, other than normal and
customary releases issued in the ordinary course of the Company's business or
those releases required by law.
(y) For a period of three (3) years from the
Effective Date, the Company will not offer or sell any of its securities
pursuant to Regulation S promulgated under the Act, without prior written
consent of the Underwriter.
(z) The Company will retain a transfer agent
reasonably acceptable to the Underwriter for the Common Stock and the Warrants
and continue to retain such transfer agent for a period of three (3) years
following the Effective Date.
(aa) The Company will not increase or authorize an
increase in the compensation of Xxxxx or Xxxxxx Xxxxxxxx greater than those
increases provided for in their employment agreements with the Company in effect
as of the Effective Date and disclosed in the Registration Statement or those
approved by the Underwriter, in writing, prior to the Effective Date, and will
not increase or authorize an increase greater than five percent (5%) per year in
the compensation of any employee earning an annual salary of One Hundred
Thousand Dollars ($100,0000) or more, in each case, without the Underwriter's
prior written consent, for a period of three (3) years following the Effective
Date.
(ab) For a period of three (3) years following the
Effective Date, the Company will retain a public relations firm reasonably
acceptable to the Underwriter.
(ac) For a period of one (1) year following the
Effective Date, the Company will not use any portion of the proceeds derived
from the Proposed IPO to repay any indebtedness, other than up to an aggregate
of One Million Dollars ($1,000,000), without the prior written consent of the
Underwriter.
(ad) For a period of three (3) years following the
Effective Date, the Company will provide to the Underwriter five (5) days
written notice prior to any issuance by the Company of any equity securities or
securities exchangeable for or convertible
-21-
into equity securities of the Company, except for (i) shares of Common Stock
issuable upon exercise or conversion of options, warrants or convertible
securities outstanding as of the Effective Date and (ii) options (and shares
issuable upon exercise of such options), available for future grant pursuant to
any stock option plan in effect on the Effective Date.
6. Conditions of the Underwriter's Obligation to Purchase
Shares from the Company. The obligation of the Underwriter to purchase and pay
for the Offered Shares and Offered Warrants which it has agreed to purchase from
the Company is subject (as of the date hereof and the Closing Date) to the
accuracy of and compliance in all material respects with the representations and
warranties of the Company herein, to the accuracy of the statements of the
Company or its officers made pursuant hereto, to the performance in all material
respects by the Company of its obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement will have become
effective not later than _________.M., New York City time, on the day following
the date of this Agreement, or at such later time or on such later date as the
Underwriter may agree to in writing; prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement will have been issued
and no proceedings for that purpose will have been initiated or will be pending
or, to the best of the Underwriter's or the Company's knowledge, will be
contemplated by the Commission; and any request on the part of the Commission
for additional information will have been complied with to the satisfaction of
Underwriter's Counsel.
(b) At the Closing Date, there will have been
delivered to the Underwriter a signed opinion of Xxxxxx Xxxxxxxxxx LLP, counsel
for the Company ("Company Counsel"), dated as of the Closing Date (and any other
opinions of counsel referred to in such opinion of Company Counsel or relied
upon by Company Counsel in rendering their opinion), reasonably satisfactory to
Underwriter's Counsel, in substantially the form attached hereto as Exhibit A.
(c) At the Closing Date, there will have been
delivered to the Underwriter a signed opinion of Underwriter's Counsel, dated as
of the Closing Date, to the effect that the opinions delivered pursuant to
Section 6(b) hereof appear on their face to be appropriately responsive to the
requirements of this Agreement, except to the extent waived by the Underwriter,
specifying the same, and with respect to such related matters as the Underwriter
may reasonably require.
(d) At the Closing Date (i) the Registration State-
ment and the Prospectus and any amendments or supplements thereto
-22-
will contain all material statements which are required to be stated therein in
accordance with the Act and the Regulations and will conform in all material
respects to the requirements of the Act and the Regulations, and 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; (ii) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there will not have been any
material adverse change in the financial condition, results of operations or
general affairs of the Company from that set forth or contemplated in the
Registration Statement and the Prospectus, except changes which the Registration
Statement and the Prospectus indicates might occur after the Effective Date;
(iii) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no material
transaction, contract or agreement entered into by the Company, other than in
the ordinary course of business, which would be required to be set forth in the
Registration Statement and the Prospectus, other than as set forth therein; and
(iv) no action, suit or proceeding at law or in equity will be pending or, to
the best of the Company's knowledge, threatened against the Company which is
required to be set forth in the Registration Statement and the Prospectus, other
than as set forth therein, and no proceedings will be pending or, to the best of
the Company's knowledge, threatened against the Company before or by any
federal, state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would materially adversely affect the
business, property, financial condition or results of operations of the Company,
other than as set forth in the Registration Statement and the Prospectus. At the
Closing Date, there will be delivered to the Underwriter a certificate signed by
the Chairman of the Board or the President or a Vice President of the Company,
dated the Closing Date, evidencing compliance with the provisions of this
Section 6(d) and stating that the representations and warranties of the Company
set forth in Section 4 hereof were accurate and complete in all material
respects when made on the date hereof and are accurate and complete in all
material respects on the Closing Date as if then made; that the Company has
performed all covenants and complied with all conditions required by this
Agreement to be performed or complied with by the Company prior to or as of the
Closing Date; and that, as of the Closing Date, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or, to the best of his knowledge, are
contemplated or threatened. In addition, the Underwriter will have received such
other and further certificates of officers of the Company as the Underwriter or
Underwriter's Counsel may reasonably request.
-23-
(e) At the time that this Agreement is executed and
at the Closing Date, the Underwriter will have received a signed letter from BDO
Xxxxxxx, LLP, dated the date such letter is to be received by the Underwriter
and addressed to it, confirming that it is a firm of independent public
accountants within the meaning of the Act and Regulations and stating that: (i)
insofar as reported on by them, in their opinion, the financial statements of
the Company included in the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act and the
applicable Regulations; (ii) on the basis of procedures and inquiries (not
constituting an examination in accordance with generally accepted auditing
standards) consisting of a reading of the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus and the latest available unaudited interim financial statements of
the Company, if more recent than that appearing in the Registration Statement
and Prospectus, inquiries of officers of the Company responsible for financial
and accounting matters as to the transactions and events subsequent to the date
of the latest audited financial statements of the Company, and a reading of the
minutes of meetings of the shareholders, the Board of Directors of the Company
and any committees of the Board of Directors, as set forth in the minute books
of the Company, nothing has come to their attention which, in their judgment,
would indicate that (A) during the period from the date of the latest financial
statements of the Company appearing in the Registration Statement and Prospectus
to a specified date not more than three business days prior to the date of such
letter, there have been any decreases in net current assets or net assets as
compared with amounts shown in such financial statements or decreases in net
sales or decreases increases] in total or per share net income [loss] compared
with the corresponding period in the preceding year or any change in the
capitalization or long-term debt of the Company, except in all cases as set
forth in or contemplated by the Registration Statement and the Prospectus, and
(B) the unaudited interim financial statements of the Company, if any, appearing
in the Registration Statement and the Prospectus, do not comply as to form in
all material respects with the applicable accounting requirements of the Act and
the Regulations or are not fairly presented in conformity with generally
accepted accounting principles and practices on a basis substantially consistent
with the audited financial statements included in the Registration Statement or
the Prospectus; and (iii) they have compared specific dollar amounts, numbers of
shares, numerical data, percentages of revenues and earnings, and other
financial information pertaining to the Company set forth in the Prospectus
(with respect to all dollar amounts, numbers of shares, percentages and other
financial information contained in the Prospectus, to the extent that such
amounts, numbers, percentages and information may be derived from the general
accounting records of the Company, and excluding any
-24-
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.
(f) There shall have been duly tendered to the
Underwriter on the Closing Date, certificates representing the Offered Shares
and the Offered Warrants to be sold on the Closing Date.
(g) The NASD shall have indicated that it has no
objection to the underwriting arrangements pertaining to the sale of the Offered
Shares and Offered Warrants by the Underwriter or the Optional Shares and
Optional Warrants by the Underwriter.
(h) No action shall have been taken by the Commission
or the NASD the effect of which would make it improper, at any time prior to the
Closing Date or the Option Closing Date, as the case may be, for any member firm
of the NASD to execute transactions (as principal or as agent) in the Shares or
Warrants, and no proceedings for the purpose of taking such action shall have
been instituted or shall be pending, or, to the best of the Under- writer's or
the Company's knowledge, shall be contemplated by the Commission or the NASD.
The Company represents at the date hereof, and shall represent as of the Closing
Date or Option Closing Date, as the case may be, that it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD.
(i) All proceedings taken at or prior to the Closing
Date or the Option Closing Date, as the case may be, in connection with the
authorization, issuance and sale of the Shares or Warrants shall be reasonably
satisfactory in form and substance to the Underwriter and to Underwriter's
Counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may request for the purpose of enabling them
to pass upon the matters referred to in Section 6(c) hereof and in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements of the Company, the performance of any covenants of the Company,
or the compliance by the Company with any of the conditions herein contained.
If any of the conditions specified in this Section 6
have not been fulfilled, this Agreement may be terminated by the Underwriter on
notice to the Company.
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7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each of the Underwriter, each officer, director, partner, employee and agent of
the Underwriter, and each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several (and actions in respect thereof), to which they or any of them may
become subject under the Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the Underwriter
and each such person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions, whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in the Registration Statement, in any Preliminary Prospectus or in the
Prospectus (or the Registration Statement or Prospectus as from time to time
amended or supplemented) or (ii) in any application or other document executed
by the Company, or based upon written information furnished by or on behalf of
the Company, filed in any jurisdiction in order to qualify the Shares and
Warrants under the securities laws thereof (hereinafter "application"), or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, in light of the circumstances under which
they were made, unless such untrue statement or omission was made in such
Registration Statement, Preliminary Prospectus, Prospectus or application in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by the Underwriter or any such person through
the Underwriter expressly for use therein; provided, however, that the indemnity
agreement contained in this Section 7(a) with respect to any Preliminary
Prospectus will not inure to the benefit of the Underwriter (or to the benefit
of any other person that may be indemnified pursuant to this Section 7(a)) if
(A) the person asserting any such losses, claims, damages, expenses or
liabilities purchased the Shares and/or Warrants which are the subject thereof
from the Underwriter or other indemnified person; (B) the Underwriter or other
indemnified person failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares and/or
Warrants to such person; and (C) the Prospectus did not contain any untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such cause, claim, damage, expense or liability.
(b) The Underwriter agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers
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who have signed the Registration Statement and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof), to which they or
any of them may become subject under the Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse the
Company and each such director, officer or controlling person for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus (or the Registration Statement or
Prospectus as from time to time amended or supplemented) or (ii) in any
application (including any application for registration of the Shares and
Warrants under state securities or Blue Sky laws), or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by the Underwriter expressly for use therein.
(c) Promptly after receipt of notice ("Notice") of
the commencement of any action in respect of which indemnity may be sought
against any indemnifying party under this Section 7, the indemnified party will
notify the indemnifying party in writing of the commencement thereof, and the
indemnifying party will, subject to the provisions hereinafter stated, assume
the defense of such action (including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of expenses) insofar as
such action relates to an alleged liability in respect of which indemnity may be
sought against the indemnifying party. After notice from the indemnifying party
of its election to assume the defense of such claim or action, the indemnifying
party shall no longer be liable to the indemnified party under this Section 7
for any legal or other expenses subsequently incurred by the indemnified party
in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if the indemnified party or parties
reasonably determine that there may be a conflict between the positions of the
indemnifying party or parties and of the indemnified party or parties in
conducting the defense of such action, suit, investigation, inquiry or
proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, the indemnified party or
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parties shall have the right to employ a single counsel to represent the
indemnified parties who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the indemnified parties thereof
against the indemnifying party, in which event the fees and expenses of such
separate counsel shall be borne by the indemnifying party. Any party against
whom indemnification may be sought under this Section 7 shall not be liable to
indemnify any person that might otherwise be indemnified pursuant hereto for any
settlement of any action effected without such indemnifying party's consent,
which consent shall not be unreasonably withheld. No indemnification provided
for in this Section 7 shall be available to any party who shall fail so to give
the Notice if the party to whom such Notice was not given was unaware of the
action, suit, investigation, inquiry or proceeding to which Notice would have
related and was prejudiced by the failure to give Notice, but the omission so to
notify such indemnifying party or parties of any such service or notification
shall not relieve such indemnifying party or parties from any liability which it
or they may have to the indemnified party for contribution or otherwise than on
account of such indemnity agreement.
8. Contribution. To provide for just and equitable
contribution, if (i) an indemnified party makes a claim for indemnification
pursuant to Section 7 hereof (subject to the limitations thereof) and it is
finally determined, by a judgment, order or decree not subject to further
appeal, that such claim for indemnification may not be enforced, even though
this Agreement expressly provides for indemnification in such case; or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company (including, for this purpose, any
contribution made by or on behalf of any director of the Company, any officer of
the Company who signed the Registration Statement and any controlling person of
the Company) as one entity and the Underwriter (including, for this purpose, any
contribution by or on behalf of each person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and each officer, director, partner, employee and agent of the
Underwriter) as a second entity, shall contribute to the losses, liabilities,
claims, damages and expenses whatsoever to which any of them may be subject, so
that the Underwriter is responsible for the proportion thereof equal to the
percentage which the underwriting discount per Share and per Warrant set forth
on the cover page of the Prospectus represents of the initial public offering
price per Share and per Warrant set forth on the cover page of the Prospectus
and the Company is responsible for the remaining portion; provided, however,
that if applicable law does not permit such allocation, then, if applicable law
permits, other relevant equitable considerations such as the relative fault of
the Company and the Underwriter in connection
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with the facts which resulted in such losses, liabilities, claims, damages and
expenses shall also be considered. The relative fault, in the case of an untrue
statement, alleged untrue statement, omission or alleged omission, shall be
determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company or
by the Underwriter, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and the Underwriter agrees
that it would be unjust and inequitable if the respective obligations of the
Company and the Underwriter for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages and
expenses or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 8. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls the Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee
and agent of the Underwriter will have the same rights to contribution as the
Underwriter, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who has signed the Registration Statement and each
director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 8. Anything in
this Section 8 to the contrary notwithstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 8 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act or the Exchange
Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriter contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained herein shall remain
operative and in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of the
Underwriter, the Company or any of its directors and officers, or any
controlling person referred to in said Sections, and shall survive the delivery
of, and payment for, the Shares and the Warrants.
-29-
10. Termination of Agreement.
(a) The Company, by written or telegraphic notice to
the Underwriter, or the Underwriter, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Underwriter, after the Registration Statement becomes
effective, releases the Offered Shares and Offered Warrants for public offering.
The time when the Underwriter "releases the Offered Shares and Offered Warrants
for public offering" for the purposes of this Section 10 means the time when the
Underwriter releases for publication the first newspaper advertisement, which is
subsequently published, relating to the Offered Shares and Offered Warrants, or
the time when the Underwriter releases for delivery to members of a selling
group copies of the Prospectus and an offering letter or an offering telegram
relating to the Offered Shares and Offered Warrants, whichever will first occur.
(b) This Agreement, including without limitation, the
obligation to purchase the Offered Shares and the Offered Warrants and the
obligation to purchase the Optional Shares and/or Optional Warrants after
exercise of the option referred to in Section 3 hereof, are subject to
termination in the absolute discretion of the Underwriter, by notice given to
the Company prior to delivery of and payment for all the Offered Shares and
Offered Warrants or the Optional Shares and Optional Warrants, as the case may
be, if, prior to such time, any of the following shall have occurred: (i) the
Company withdraws the Registration Statement from the Commission or the Company
does not or cannot expeditiously proceed with the public offering; (ii) the
representations and warranties in Section 4 hereof are not materially correct or
cannot be complied with in all material respects; (iii) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange will
have been suspended; (iv) limited or minimum prices will have been established
on either such Exchange; (v) a banking moratorium will have been declared either
by federal or New York State authorities; (vi) any other restrictions on
transactions in securities materially affecting the free market for securities
or the payment for such securities, including the Offered Shares and Offered
Warrants or the Optional Shares and Optional Warrants, will be established by
either of such Exchanges, by the Commission, by any other federal or state
agency, by action of the Congress or by Executive Order; (vii) trading in any
securities of the Company shall have been suspended or halted by any national
securities exchange, the NASD or the Commission; (viii) there has been a
materially adverse change in the condition (financial or otherwise), prospects
or obligations of the Company; (ix) the Company will have sustained a material
loss, whether or not insured, by reason of fire, flood, accident or other
calamity; (x) any action has been taken by the government of the United States
or any department or agency thereof which, in the reasonable judgment of the
Underwriter, has had a material adverse effect upon the
-30-
market or potential market for securities in general; or (xi) the market for
securities in general or political, financial or economic conditions will have
so materially adversely changed that, in the reasonable judgment of the
Underwriter, it will be impracticable to offer for sale, or to enforce contracts
made by the Underwriter for the resale of, the Offered Shares and Offered
Warrants or the Optional Shares and Offered Warrants, as the case may be.
(c) If this Agreement is terminated pursuant to
Section 6 hereof or this Section 10 or if the purchases provided for herein are
not consummated because any condition of the Underwriter's obligations hereunder
is not satisfied or because of any refusal, inability or failure on the part of
the Company to comply with any of the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company shall be unable to or does
not perform all of its obligations under this Agreement, the Company will not be
liable to the Underwriter for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 5(j), 7, 8 and 9 of this
Agreement.
11. Information Furnished by the Underwriter to the Company.
It is hereby acknowledged and agreed by the parties hereto that for the purposes
of this Agreement, including, without limitation, Sections 4(f), 7(a), 7(b) and
8 hereof, the only information given by the Underwriter to the Company for use
in the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, the statement appearing in the last paragraph on
page __ with respect to stabilizing the market price of Shares and Warrants, the
information in the __ paragraph on page __ with respect to concessions and
reallowances, and the information in the ___ paragraph on page ___ with respect
to the determination of the public offering price, as such information appears
in any Preliminary Prospectus and in the Prospectus.
12. Notices and Governing Law. All communications hereunder
will be in writing and, except as otherwise provided, will be delivered at, or
mailed by certified mail, return receipt requested, or telegraphed to, the
following addresses: if to the Underwriter, to it at 0 Xxxxxxx Xxxxxx - 0xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, with a copy to Xxxxxxx, Senterfitt & Xxxxxx,
P.A., Attention: Xxxx X. Xxxxxxx, Esq., Xxx Xxxxxxxxx 0xx Xxxxxx, Xxxxx, Xxxxxxx
00000; if to the Company, addressed to it at 0000 Xxxxxx Xxxxxx, Xxxxxx Xxxxxx,
Xxx Xxxx 00000, with a copy to Xxxxxx Xxxxxxxxxx LLP, Attention: Xxxxxx X.
Xxxxxxx, Esq., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
This Agreement shall be deemed to have been made and
delivered in New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company (1) agrees
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that any legal suit, action or proceeding arising out of or relating to this
Agreement shall be instituted exclusively in New York State Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York, (2) waives any objection which the Company may have now or
hereafter to the venue of any such suit, action or proceeding, and (3)
irrevocably consents to the jurisdiction of the New York State Supreme Court,
County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. The Company further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agrees that service of process upon the
Company mailed by certified mail to the Company's address shall be deemed in
every respect effective service of process upon the Company, in any such suit,
action or proceeding.
13. Parties in Interest. This Agreement is made solely for the
benefit of the Underwriter, the Company and, to the extent expressed, any person
controlling the Company or the Underwriter, each officer, director, partner,
employee and agent of the Underwriter, the directors of the Company, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns, and, no other person will
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" will not include any purchaser of the Shares or
Warrants from the Underwriter, as such purchaser.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
TAM RESTAURANTS, INC.
By_______________________________
Name:
Title:
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
PARAGON CAPITAL CORPORATION
By:__________________________________
Name:
Title:
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