Underwriting Agreement
June 29, 1999
Xxxxxxx Xxxxxxx & Associates
0000 Xxxxxxxxx 0xx Xxx
Xxxx Xxxxxxxxxx, XX 00000
Ladies and Gentlemen:
Bio-Aqua Systems, Inc. (the "Company'), a Florida company, of 0000
Xxxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx, hereby confirms its agreement with
the representative of the Underwriters, Xxxxxxx Xxxxxxx & Associates, ("Xxxxxxx
Xxxxxxx" or the "Representative") and other members of the Underwriting Group
(hereinafter the "Underwriting Group" or "Underwriters") as follows:
SECTION I
Description of Securities
The Company's authorized and outstanding capitalization when the
offering of the securities contemplated hereby is permitted to commence and at
the Closing Date (hereinafter defined), will be as set forth in the Registration
Statement and Prospectus included therein (hereinafter defined). The Company
proposes to issue and sell to the Underwriting Group an aggregate of 1,400,000
Class A Voting Stock par value $.0001 at $4.25 per share ("Stock") and 1,400,000
Redeemable Common Stock Purchase Warrants at $.15 per Warrant ("Warrants") and
Representative's Warrants entitling Representative to 140,000 shares of Stock at
$6.375 and 140,000 warrants at $.225 ("Representative's Warrants"). The
Underwriting Group shall also have an over-allotment option to purchase
1
up to an additional 210,000 shares of Class A Common Stock and 210,000 Warrants
at initial public offering minus the underwriter's discount as provided in
Section 3.01 hereof.
SECTION 2
Representations and Warranties of the Company
In order to induce the Underwriting Group to enter into this Agreement
the Company hereby represents and warrants to and agrees with the Underwriting
Group as follows:
2.01. Registration Statement and Prospectus. A registration statement
on Form SB-2 (File No. ____) (the "Registration Statement") with respect to the
Stock and Warrants, including the related Prospectus, copies of which have
heretofore been delivered by the Company to the Underwriter, has been prepared
by the Company in conformity with the requirements of the Securities Act of
1933, as amended (the "Act"), and the rules and regulations ("Rules and
Regulations") of the Securities and Exchange Commission (the "'Commission")
thereunder, and said Registration Statement has been filed with the Commission
under the Act; one or more amendments to said Registration Statement, copies of
which have heretofore been delivered to the Representative, has or have
heretofore been filed; and the Company may file on or prior to the effective
date additional amendments to said Registration Statement, including the final
Prospectus. Included in such Registration Statement of the Company's Common
Stock, are which shares are reserved against exercise of the Underwriter's
Warrants to be granted by the Company, as more particularly described
hereinafter.
2
As used in this Agreement: the term "Registration Statement" refers to
and means said Registration Statement on Form SB-2 and all amendments thereto,
including the Prospectus, all exhibits and financial statements, as it becomes
effective; the term "Prospectus" refers to and means the Prospectus included in
the Registration Statement when it becomes effective; and the term "Preliminary
Prospectus" refers to and means any prospectus included in said Registration
Statement before it becomes effective. The terms "Effective Date" and
"Effective" refer to the date the Commission declares the Registration Statement
filed with the Electronic Data Gathering, Analysis and Retrieval system
("XXXXX") effective pursuant to Section 8 of the Act.
2.02. Accuracy of Registration Statement and Prospectus. The Commission
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Stock and Warrants, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and the applicable Rules and Regulations of the Commission thereunder, and
to the best of the Company's knowledge, has not included at the time of filing
any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading. When the Registration
Statement becomes Effective and on the Closing Date (as hereinafter defined),
the Registration Statement and Prospectus, and any further amendments or
supplements thereto, will contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations for the
purposes of the proposed public offering of the Stock and Warrants, and all
statements of material fact contained in the Registration Statement and
Prospectus will be true and correct, and neither the Registration Statement nor
the Prospectus will include any untrue statement of a material
3
fact or omit to state any material fact required to be stated therein necessary
to make the statements therein not misleading; provided, however, the Company
does not make any representations or warranties as to information contained in
or omitted from the Registration Statement or the Prospectus in reliance upon
written information furnished by the Representative on behalf of the
Underwriters specifically for use therein.
2.03. Financial Statements. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus will present fairly the financial position of the
Company and the results of its operations and the changes in its financial
position at the respective dates and for the respective periods for which they
apply; such financial statements have been prepared in accordance with generally
accepted principles of accounting consistently applied throughout the periods
concerned except as otherwise stated therein.
2.04. Independent Public Accountant. Spear, Safer, Xxxxxx & Co., P.A. ,
which has certified, or shall certify, certain of the financial statements
filed, or to be filed, with the Commission as part of the Registration Statement
and Prospectus, are independent certified public accountants within the meaning
of the Act and the Rules and Regulations.
2.05. No Material Adverse Change. Except as may be reflected in or
contemplated by the Registration Statement or the Prospectus, subsequent to the
dates as of which information is given in the Registration Statement and
Prospectus, and prior to the Closing Date, (i) there shall not be any material
adverse change in the condition, financial or otherwise, of the Company or in
its business taken as a whole; (ii) there shall not have been any material
transaction entered into by the Company or its subsidiaries other than
4
transactions in the ordinary course of business; (iii) neither the Company nor
any of its subsidiaries shall have incurred any material obligations, contingent
or otherwise, which are not disclosed in the Prospectus; (iv) there shall not
have been, nor will there be, any change in the capital stock or long-term debt
(except current payments) of the Company; (v) the Company has not, and will not,
have paid or declared any dividends or other distributions on its common stock;
and (vi) there are no currency exchange control laws or withholding taxes of any
applicable country which govern the payment of dividends on the stock of the
Company or the stock of any of the subsidiaries of the Company except as set
forth in the Prospectus and Registration Statement.
2.06. No Defaults. Neither the Company nor any of its subsidiaries is
in any default which has not been waived in the performance of any obligation,
agreement or condition contained in any debenture, note or other evidence of
indebtedness or any indenture or loan agreement of the Company. The execution
and delivery of this Agreement and the consummation of the transactions herein
contemplated, and compliance with the terms of this Agreement will not conflict
with or result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, the articles of incorporation, as amended, or bylaws
of the Company, any note, indenture, mortgage, deed of trust or other agreement
or instrument to which the Company is a party or by which it or any of its
property is bound, or any existing law, order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality, agency or
body, arbitration tribunal or court, domestic or foreign, having jurisdiction
over the Company or its property. The consent, approval, authorization, or order
of any court or governmental instrumentality, agency or body is not required for
the consummation of the transactions herein
5
contemplated except such as may be required under the Act or under the blue sky
or securities laws of any state or jurisdiction.
2.07. Incorporation and Standing. The Company is, and at the Closing
Date will be, duly incorporated and validly existing in good standing as a
corporation under the laws of the State of Florida and the Company and/or its
subsidiaries is duly is authorized to do business in all other states and
applicable foreign jurisdictions, including Chile and Peru, with authorized and
outstanding capital stock as set forth in the Registration Statement and the
Prospectus, and with full power and authority (corporate and other) to own its
property and conduct its business, present and proposed, as described in the
Registration Statement and Prospectus; the Company has full power and authority
to enter into this Agreement; and the Company is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which it owns or
leases real property or transacts business requiring such qualification. The
Company has no subsidiaries other than as shown in Exhibit 21 to the
Registration Statement.
2.08. Legality of Outstanding Stock. The outstanding common stock of
the Company has been duly and validly authorized, issued and is fully paid and
non-assessable and will conform to all statements with regard thereto contained
in the Registration Statement and Prospectus. No sales of securities have been
made by the Company in violation of the registration provisions of the
Securities Act of 1933.
2.09. Legality of Stock, Warrants and Representative's Warrants. The
Stock, Warrants, and Representative's Warrants have been duly and validly
authorized and, when issued and delivered against payment therefor as provided
in this Agreement, will be validly
6
issued, fully paid and nonassessable. The Stock, Warrants, and Representative's
Warrants upon issuance will not be subject to the preemptive rights of any
shareholders of the Company. The Warrants and Representative's Warrants when
sold and delivered, will constitute valid and binding obligations of the Company
enforceable in accordance with the terms thereof. A sufficient number of shares
of Common Stock and Warrants have been reserved for issuance upon exercise of
the Warrants and Representative's Warrants. The Stock, Warrants, and
Representative's Warrants will conform to all statements with regard thereto in
the Registration Statement and Prospectus.
2.10. Prior Sales. No securities of the Company, of an affiliate or of
a predecessor of the Company have been sold within one year prior to the date
hereof, except as set out in the Registration Statement.
2.11. Litigation. Except as set forth in the Registration Statement and
Prospectus, there is, and at the Closing Date there will be, no action, suit or
proceeding before any court or governmental agency, authority or body pending or
to the knowledge of the Company threatened which might result in judgments
against the Company not adequately covered by insurance or which collectively
might result in any material adverse change in the condition (financial or
otherwise), the business or the prospects of the Company, or would materially
affect the properties or assets of the Company.
2.12. Warrants and Representative's Warrants. Upon delivery of and
payment for the Warrants and Representative's Warrants to be sold by and to the
Company as set forth in Section 3.03 of this Agreement, the Underwriter and the
Underwriter's designees will receive good and marketable title thereto, free and
clear of all liens, encumbrances,
7
charges and claims whatsoever; and the Company will have on the Effective Date
of the Registration Statement and at the time of delivery of such Warrants or
Representative's Warrants full legal right and power and all authorization and
approval required by law to sell, transfer and deliver such Warrants or
Representative's Warrants in the manner provided hereunder subject to certain
"lock up" provisions set forth in the Registration Statement and Prospectus.
2.13. Finder. The Company knows of no outstanding claims for services
in the nature of a finder's fee or origination fee with respect to the sale of
the Stock and Warrants hereunder resulting from its acts for which the
Representative may be responsible.
2.14. Exhibits. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or by
the Rules and Regulations which have not been so filed and each contract to
which the Company or any of its subsidiaries is a party and to which reference
is made in the Prospectus has been duly and validly executed, is in full force
and effect in all material respects in accordance with their respective terms,
including but not limited to the Employment Agreement between the Company and
Xxx Xxxxxx, exhibit No. 10.10, the Employment Agreement between Xxxxxxxxx Xxxxxx
and the Company, exhibit No. 10.11, and the various distribution and licensing
agreements in Exhibits 10.2-10.8, and none of such contracts have been assigned
by the Company; and the Company knows of no present situation or condition or
fact which would prevent compliance with the terms of such contracts, as amended
to date. Except for amendments or modifications of such contracts in the
ordinary course of business, the Company has no intention of exercising any
right which it may have to cancel
8
any of its obligations under any of such contracts, and has no knowledge that
any other party to any of such contracts has any intention not to render full
performance under such contracts.
2.15. Tax Returns. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes have
become due. The Company has filed all tax returns required by it in any foreign
jurisdictions. All taxes with respect to which the Company is obligated have
been paid or adequate accruals have been set up to cover any such unpaid taxes.
2.16. Property. Except as otherwise set forth in or contemplated by the
Registration Statement and Prospectus, the Company has good title, free and
clear of all liens, encumbrances and defects, except liens for current taxes not
due and payable, to all property and assets which are described in the
Registration Statement and the Prospectus as being owned by the Company, subject
only to such exceptions as are not material and do not adversely affect the
present or prospective business of the Company.
2.17. Authority. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company.
2.18 Environmental Laws. Neither the Company nor any of its
subsidiaries has violated any foreign, federal, state or local law relating to
the protection of human health and safety, the environmental or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
or incurred costs or liabilities associated with these
9
Environmental Laws, except for such violations which singly or in the aggregate
would not have a material adverse effect on the business, prospects, financial
condition or results of the Company and its subsidiaries taken as a whole.
2.19 ERISA. Neither the Company nor any of its subsidiaries has
violated any provisions or the Employee Retirement Income Security Act of 1974,
as amended, or the rules and regulations promulgated thereunder, in each case
that is applicable to the Company or such subsidiary, except for such violations
which singly or in the aggregate would not have a material adverse effect on the
business, prospects, financial condition or results of the Company and its
subsidiaries taken as a whole.
SECTION 3
Purchase and Sale of the Stock
3.01. Purchase of Stock and Over-Allotment Option. The Company hereby
agrees to sell to members of the Underwriting Group named in Schedule I hereto
(for all of whom the Representative is acting), severally and not jointly, and
each member of the Underwriting Group, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees to purchase from the Company, severally and not jointly, the number of
shares of Stock set forth opposite their respective names in Schedule I hereto
at a purchase price of $4.25 per share, less the underwriting discounts, and the
number of Warrants set forth opposite their respective names in Schedule I
hereto at a purchase price of $.15 per Warrant, less the underwriting discounts.
The Representative is also granted Representative's Warrants entitling them to
purchase 140,000 shares of Stock and 140,000 Warrants exercisable at a purchase
10
price of $6.375 per share of Stock and $.225 per Warrant for four years
following the Effective Date subject to a twelve month lock-up.
The Company hereby grants to the Representative an over allotment
option (the "Over- allotment Option") for a period of forty-five days after the
Effective Date to purchase at the initial public offering price of $4.25 per
share up to 210,000 additional shares of Stock and 210,000 Warrants at $.15 per
Warrant, less the underwriting discounts, in order to cover over-allotments.
3.01.01. Default by an Underwriter. If any of the Underwriters shall
fail to purchase the entire number of shares of Stock and Warrants set opposite
its name in Schedule I hereto, and such failure to purchase shall constitute a
default by such Underwriter in the performance of its obligations under this
Agreement, the remaining Underwriters shall have the right and shall be
obligated to take up and pay for (in the respective proportions which the number
of shares of Stock and Warrants set opposite the names of the several remaining
Underwriters bears to the aggregate number of shares of Stock and Warrants set
opposite the names of all the remaining Underwriters) the entire amount of
shares of Stock and Warrants which the defaulting Underwriter agreed but failed
to purchase, provided, however, that the aggregate amount of all such increases
for all non-defaulting Underwriters shall not exceed 160,000 shares of Stock or
160,000 Warrants and provided, further, that in the event that such additional
shares of Stock or Warrants shall exceed the foregoing maximum, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the entire amount
(but not less than all) of remaining shares of Stock or Warrants which all
defaulting Underwriters agreed but failed to purchase.
11
3.01.02. Liability of Defaulting Underwriter. Nothing contained in this
Section 3.01 shall relieve any defaulting Underwriter of its liability, if any,
to the Company or to the remaining Underwriters for damages occasioned by its
default hereunder.
3.01.03. Right of Remaining Underwriters. If any of the Underwriters
shall fail to purchase the entire number of shares of Stock and Warrants set
opposite its name and such failure to purchase shall not constitute a default by
such Underwriter in the performance of its obligations under this Agreement, the
remaining Underwriters shall have the right, but shall not be obligated, to take
up and pay for (in such proportions as in be agreed upon among them) the entire
amount (but not less than all) of the shares of Stock and Warrants which all
withdrawing Underwriters agreed but failed to purchase.
3.02. Public Offering Price. After the Commission notifies the Company
that the Registration Statement has become Effective, the Underwriters propose
to offer the Stock to the public at a public offering price of $4.25 per share,
and the Warrants at $.15 per Warrant, as set forth in the Prospectus. The
Underwriters may allow a discount of $.425 upon sales of Stock and $.015 upon
sales of Warrants to selected dealers as may be determined from time to time by
the Representative.
3.02.01. Payment For Stock. Payment for the Stock and Warrants
(including the Over-allotment Option Stock and Warrants) which the Underwriters
agree to purchase shall be made to the Company or its order by certified or
official bank check or checks, in the amount of the purchase price by or on
behalf of the Representative at the offices of the Representative in Fort
Lauderdale, Florida, upon delivery to the Representative of certificates for
shares and Warrants in definitive form in such numbers and registered in
12
such names as the Representative requests in writing at least one full business
day prior to such delivery.
3.02.02. Closing. The time and date of delivery and payment hereunder
is herein called the "Closing Date" and shall take place at the office of the
Representative at 0000 Xxxxxxxxx 0xx Xxx, Xxxx Xxxxxxxxxx, XX 00000, or at such
other place that shall be agreed upon by the Company and the Underwriters, on
the third business day following the effective date of this Agreement(unless
postponed in accordance with Section 9) or such other time not later than ten
business days after such date as shall be agreed upon by the Representative and
the Company. Should the Representative elect to exercise any part of the
Over-allotment Option pursuant to Section 3.01 hereinabove, the time and date of
delivery and payment for said over-allotment Stock and Warrants shall be as
mutually agreed, but not later than the 45th calendar day after the Effective
Date. Said date is hereinafter referred to, as the "Over-Allotment Closing
Date."
3.02.03. Inspection of Certificates. For the purpose of expediting the
checking and packaging of the certificates for Stocks and Warrants, the Company
agrees to make the certificates available for inspection by the Representative
at the office of the Representative, set forth above in Fort Lauderdale, Florida
at least one full business day prior to the proposed delivery date.
3.03. Sale of Warrants. The Company will sell and deliver to the
Representative, at a purchase price of $0.15 per Warrant less the underwriting
discounts, 1,400,000 Warrants, dated on the Closing Date, substantially in the
form of Exhibit A, attached hereto and by this reference incorporated herein,
evidencing the right of the Representative to
13
purchase 1,4000,000 shares of Stock at the price of $6.25 per share and upon the
terms and conditions provided in the Warrants. The Company shall not be
obligated to sell and deliver the Warrants, and the Underwriter will not be
obligated to purchase and pay for the Warrants, except upon payment for the
shares pursuant to Subsection 3.02.01 hereof.
The Representative may purchase for nominal consideration, at the
closing of the sale of all the Stock and Warrants contemplated by this
Underwriting Agreement, Representative's Warrants entitling Representative to
140,000 shares of Stock and 140,000 Warrants, which shall not be exercisable or
transferable for a twelve month period following the Effective Date. The
Representative's Warrants shall be exercisable for a period of four years at
$6.375 per share of Stock and $.225 per Warrant, upon the terms and conditions
provided in the Representative's Warrants. The Company shall not be obligated to
sell and deliver the Representative's Warrants, and the Representative will not
be obligated to purchase and pay for the Representative's Warrants, except upon
payment for the shares pursuant to Subsection 3.02.01 hereof.
3.04. Representative's Expense Allowance. It is understood that the
Company shall reimburse Xxxxxxx Xxxxxxx for its expenses on a nonaccountable
basis in the amount of 3% of the gross proceeds from the offering, including
proceeds from the sale of the over-allotment shares, if exercised. At the
Closing and, if applicable, on the Over-Allotment Closing Date, the Company
shall pay to Xxxxxxx Xxxxxxx the unpaid balance of such allowance to defray the
expenses incurred by Xxxxxxx Xxxxxxx in connection with the offering. Xxxxxxx
Xxxxxxx shall be solely responsible for all expenses incurred by it in
connection with the offering including, but not limited to, the expenses of its
own counsel except as set forth in subsection 5.07 hereof.
14
3.05. Representations of the Parties. The parties hereto respectively
represent that as of the Closing Date the representations herein contained and
the statements contained in all the certificates theretofore or simultaneously
delivered by any party to another, pursuant to this Agreement, shall in all
material respects be true and correct.
3.06. Post-Closing Information. The Representative covenants that
reasonably promptly after the Closing Date, it will supply the Company with all
information required from the Underwriters for the completion of any applicable
forms and such additional information as the Company may reasonably request to
be supplied to the securities commissions of such states in which the Stock and
Warrants have been qualified for sale.
3.07. Re-Offers By Selected Dealers. On each sale by the Underwriters
of any of the Stock to selected dealers, the Representative shall require the
selected dealer purchasing any such Stock to agree to re-offer the same on the
terms and conditions of the offering set forth in the Registration Statement and
Prospectus.
SECTION 4
Registration Statement and Prospectus
4.01. Delivery of Registration Statements. The Company shall deliver to
the Representative without charge two signed copies of the Registration
Statement, including all financial statements and exhibits filed therewith and
any amendments or supplements thereto, and shall deliver without charge to the
Representative five conformed copies of the Registration Statement and any
amendment or supplement thereto, including such financial statements and
exhibits. The signed copies of the Registration Statement so furnished to the
Representative will include signed copies of any and all consents and
15
certificates of the independent public accountant certifying to the financial
statements included in the Registration Statement and Prospectus and signed
copies of any and all consents and certificates of any other persons whose
profession gives authority to statements made by them and who are named in the
Registration Statement or Prospectus as having prepared, certified, or reviewed
any part thereof.
4.02. Delivery of Preliminary Prospectus. The Company will deliver to
the Representative, without charge, as many copies of each Preliminary
Prospectus filed with the Commission bearing in red ink the statement required
by Regulation S-B Item 501(6) and (7) as may be required by the Underwriters.
The Company consents to the use of such documents by the Underwriters and by
dealers prior to the Effective Date of the Registration Statement. The Company
will deliver at its expense such copies of the Preliminary Prospectus as the
Representative may deem necessary in order to recirculate the Preliminary
Prospectus and/or to permit compliance with the provisions of Rule 15c2- 11. For
purposes of the paragraph, the term "Preliminary Prospectus" shall be deemed to
include after the Effective Date of the Registration Statement a Rule 430A
subject to completion prospectus and the Company will deliver to the
Representative, after the effective date at its expense such copies of the Rule
430A prospectus subject to completion as the Representative deems necessary in
connection with the offering.
4.03. Delivery of Prospectus. The Company will deliver, at its expense,
as many printed copies of the Prospectus as the Underwriter may require for the
purposes contemplated by this Agreement and shall deliver said printed copies of
the Prospectus to the Representative as soon as practicable on effectiveness of
this Agreement, but in no
16
event more than one business day after the effective date of this Agreement. The
Company will deliver such additional copies at its expense as may be necessary
to permit dealers to comply with the requirements of Rule 174. If the
Representative determines to use a Term Sheet together with a prospectus subject
to completion in accordance with Rule 434 to satisfy the delivery of prospectus
requirement, the Company shall furnish the Representative with such number of
copies of the Term Sheet meeting the requirements of Rule 434 and will file such
number of copies with the Commission as required by Rule 424(b) to permit the
Representative to deliver the final prospectus to purchasers in the offering in
this manner.
4.04. Further Amendments and Supplements. If, during such period of
time as in the opinion of the Representative or its counsel a Prospectus
relating to this financing is required to be delivered under the Act, any event
occurs or any event known to the Company relating to or affecting the Company
shall occur as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state any
material fact 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 after the Effective Date of the Registration Statement to amend or
supplement the Prospectus to comply with the Act, the Company will forthwith
notify the Representative thereof and prepare and file with the Commission such
further amendment to the Registration Statement or supplemental or amended
Prospectus as may be required and furnish and deliver to the Representative and
to others whose names and addresses are designated by the Representative, all at
the cost of the Company, the number of copies of the amended or supplemented
Prospectus designated by the Representative, which is
17
so amended or supplemented to not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
Prospectus not misleading in the light of the circumstances when it is delivered
to a purchaser or prospective purchaser, and which will comply in all respects
with the Act.
4.05. Use of Prospectus. The Company authorizes the Underwriters in
connection with the distribution of the Stock and Warrants and all dealers to
whom any of the Stock and Warrants may be sold by the Underwriters to use the
Prospectus as from time to time amended or supplemented, in connection with the
offering and sale of the Stock and Warrants, and in accordance with the
applicable provisions of the Act and the applicable Rules and Regulations and
applicable state blue sky or securities laws.
SECTION 5
Covenants of the Company
The Company covenants and agrees with the Underwriters that:
5.01. Objection of Representative to Amendments or Supplements. After
the date hereof, the Company will not at any time, whether before or after the
Effective Date of the Registration Statement, file any amendment or supplement
to the Registration Statement or Prospectus, unless and until a copy of such
amendment or supplement has been previously furnished to the Representative
within a reasonable time period prior to the proposed filing thereof, or of
which the Representative or counsel for the Representative has reasonably
objected to, in writing, on the ground that such amendment or supplement is not
in compliance with the Act or the Rules and Regulations.
18
5.02. Company's Best-Efforts to Cause Registration Statement to Become
Effective. The Company will use its best efforts to cause the Registration
Statement and any post-effective amendment subsequently filed, to become
effective as promptly as reasonably practicable and will promptly advise the
Representative, and will confirm such advice in writing (i) when the
Registration Statement shall have become effective and when any amendment
thereto shall have become Effective and when any amendment of or supplement to
the Prospectus shall be filed with the Commission; (ii) when the Commission
shall make a request or suggestion for any amendment to the Registration
Statement or the Prospectus or for additional information and the nature and
substance thereof; and (iii) of the issuance by the Commission of an order
suspending the effectiveness of the Registration Statement pursuant to Section 8
of the Act or of the initiation of any proceedings for that purpose; (iv) of the
happening of any event which in the judgment of the Company makes any material
statement in the Registration Statement or Prospectus untrue or which requires
the making of any changes in the Registration Statement or Prospectus in order
to make the statements therein not misleading; and (v) of the refusal to qualify
or the suspension of the qualification of the Stock and Warrants for offering or
sale in any jurisdiction, or of the institution of any proceedings for any of
such purposes. The Company will use every reasonable effort to prevent the
issuance of any such order or of any order preventing or suspending such use, to
prevent any such refusal to qualify or any such suspension, and to obtain as
soon as possible a lifting of any such order, the reversal of any such refusal
and the termination of any such suspension.
19
5.03. Preparation and Filing of Amendments and Supplements. The Company
will prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement or
Prospectus, in form satisfactory to counsel to the Company, as in the opinion of
counsel to the Representative and of counsel to the Company, may be necessary in
connection with the offering or distribution of the Stock and Warrants and will
use its best efforts to cause the same to become effective as promptly as
possible.
5.04. Blue-Sky Qualification. The Company will, when and as requested
by the Representative, use reasonable efforts to qualify the Stock and Warrants
or such part thereof as the Representative may determine for sale under the
so-called blue sky laws of the State of Florida, and of so many other states as
the Representative may reasonably request, and to continue such qualification in
effect so long as required for the purposes of the distribution of the Stock and
Warrants.
5.05. Financial Statements. The Company at its own expense will prepare
and give and will continue to give such financial statements and other
information to and as may be required by the Commission, or the proper public
bodies of the states in which the Stock and Warrants may be qualified.
5.06. Reports and Financial Statements to the Representative. During
the period of five years from the Closing Date, the Company will deliver to the
Representative, copies of each annual report of the Company, and will deliver to
the Representative: (i) within 90 days after the close of each fiscal year of
the Company, a financial report of the Company and its subsidiaries, if any, on
a consolidated basis, and a similar financial report
20
of all unconsolidated subsidiaries, if any, all such reports to include a
balance sheet as of the end of the preceding fiscal year, an income statement, a
statement of changes in financial condition and an analysis of shareholders'
equity covering such fiscal year, and all to be in reasonable detail and
certified by independent public accountants for the Company; (ii) within 45 days
after the end of each quarterly fiscal period of the Company other than the last
quarterly fiscal period in any fiscal year, copies of the consolidated income
statement and statement of changes in financial condition for that period, and
the balance sheet as of the end of that period of the Company and its
subsidiaries, if any, and the income statement, statement of changes in
financial condition and the balance sheet of each unconsolidated subsidiary, if
any, of the Company for that period, all subject to year-end adjustment,
certified by the principal financial or accounting officer of the Company; (iii)
copies of all other statements, documents, or other information which the
Company shall mail or otherwise make available to any class of its security
holders, or shall file with the Commission; and (iv) upon request in writing
from the Underwriter, furnish to the Underwriter such other information as may
reasonably be requested and which may be properly disclosed to the
Representative with reference to the property, business and affairs of the
Company and its subsidiaries, if any.
5.07. Expenses Paid by the Company. The Company will pay, whether or
not the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement including:
all expenses incident to the authorization of the Stock and Warrants and their
issue and delivery to the Representative; any original issue taxes in connection
therewith; all transfer taxes, if any,
21
incident to the initial sale of the Stock and Warrants to the public; the fees
and expenses of the Company's counsel and accountants; the costs and expenses
incident to the preparation, printing and filing under the Act and with the
National Association of Securities Dealers, Inc. of the Registration Statement,
any Preliminary Prospectus and the Prospectus and any amendments or supplements
thereto; the cost of printing, reproducing and filing all exhibits to the
Registration Statement, the underwriting documents and the Selected Dealers
Agreement, the cost of printing and furnishing to the Representative copies of
the Registration Statement and copies of the Prospectus as herein provided; and,
the cost of qualifying the Stock and Warrants under the state securities or Blue
Sky laws as provided in Section 5.04 herein, including expenses and
disbursements of the Representative incurred in connection with such
qualification.
5.08. Reports to Shareholders. During the period of five years from the
Closing Date, the Company will, as promptly as possible, not to exceed 120 days,
after each annual fiscal period render and distribute reports to its
shareholders which will include audited statements of its operations and changes
of financial position during such period and its balance sheet as of the end of
such period, as to which statements the Company's independent certified public
accountants shall have rendered an opinion.
5.09. Section 11(a) Financials. The Company will make generally
available to its security holders and will deliver to the Representative, as
soon as practicable, but in no event later than the first day of the sixteenth
full calendar month following the Effective Date of the Registration Statement,
an earnings statement (as to which no opinion need be rendered but which will
satisfy the provisions of Section 11(a) of the Act) covering a
22
period of at least 12 months beginning after the Effective Date of the
Registration Statement.
5.10. Post-Effective Availability of Prospectus. Within the time during
which the Prospectus is required to be delivered under the Act, the Company will
comply, at its own expense, with all requirements imposed upon it by the Act, as
now or hereafter amended, by the Rules and Regulations, as from time to time may
be in force, and by any order of the Commission, so far as necessary to permit
the continuance of sales or dealings in the Stock and Warrants.
5.11. Application of Proceeds. The Company will apply the net proceeds
from the sale of the Stock and Warrants substantially in the manner set forth in
the Registration Statement and Prospectus.
5.12. Undertakings of Certain Shareholders. The Company will deliver to
the Representative, prior to or simultaneously with the execution of this
Agreement, the undertaking of each officer, director, and each employee of the
Company who owns 5% or more of shares of the Company (based on the number of
shares to be outstanding prior to the completion of the offering) that such
person shall not directly or indirectly offer or sell to the public any portion
of the shares of common stock owned prior to the effective date of this
Agreement or hereafter acquired by exercise of an option for a period of
twenty-four months or privately for a period of twelve months from the Effective
Date of the Registration Statement without the Representative's prior written
consent.
5.13. Delivery of Documents. At the Closing, the Company will deliver
to the Representative true and correct copies of the articles of incorporation
and certificate of
23
incorporation of the Company and all amendments thereto, all such copies to be
certified by the Secretary of State of the State of Florida; true and correct
copies of the bylaws of the Company and of the minutes of all meetings of the
directors and shareholders of the Company held prior to the Closing Date which
in any way relate to the subject matter of this Agreement; and true and correct
copies of all material contracts to which the Company is a part, other than
contracts for the sale of products or services in the normal course of business.
5.14. Cooperation With Representative's Due Diligence. At all times
prior to the Closing Date, the Company will cooperate with the Representative in
such investigation as the Representative may make, or cause to be, made of all
the properties, business and operations of the Company in connection with the
purchase and public offering of the Stock and Warrants, and the Company will
make available to the Representative in connection therewith such information in
its possession as the Representative may reasonably request.
5.15. No Sale Period. No offering, sale or other disposition of any
common stock, equity or long-term debt will be made within one year after the
Effective Date of the Prospectus, directly or indirectly, by the Company,
otherwise than hereunder or with the Representative's consent.
5.16. Appointment of Transfer Agent. The Company has appointed Florida
Atlantic Stock Transfer, Inc. as Transfer Agent for the Stock and Warrants
subject to the Closing. The Company will not change or terminate such
appointment for a period of three
24
years from the Effective Date without first obtaining the written consent of the
Representative, which consent shall not be unreasonably withheld.
5.17. Compliance With Conditions Precedent. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Underwriters in Section 8 hereof.
5.18. Filings of Form SR. The Company agrees to file with the
Commission all required reports on Form SR in accordance with the provisions of
Rule 463 promulgated under the Act and to provide a copy of such reports to the
Representative and its counsel.
5.19. Registration Under the Exchange Act. The Company shall, within 90
days after the Effective Date, register the class of equity securities which
constitutes the Stock and Warrants by filing with the Securities and Exchange
Commission a Registration Statement (and such copies thereof as the Commission
may require) with respect to such securities, containing such information and
documents as the Commission may specify comparable to that which is required in
an application to register a security pursuant to subsection (g) of Section 12
of the Act, as amended.
5.20. Designation of Member of Company's Board of Directors. The
Representative shall have the right to designate or an individual selected by
the Representative, as a member of the Board of Directors or at the
Repesentative's option, an individual to attend the meetings of the Board of
Directors of the Company, for a period of three years after the Effective Date.
5.21 Key Man Insurance. The Company shall, of the Effective Date, have
obtained a one million dollar ($1,000,000) key
25
man life insurance policy from a qualitied insurance company, on Xxx Xxxxxx the
Chief Executive Officer and Chairman of the Board of the Company , for which the
Company will be the beneficiary.
5.22. Application to Xxxxx'x. The Company shall, within 120 days after
the Effective Date, apply for listing in Xxxxx'x Over-the-Counter Manual and
shall use its best efforts to have the Company listed in such manual.
5.23. NASDAQ Listing. For a period of five years from the Effective
Date of the Registration Statement, the Company will use its best efforts at its
cost and expense to effect and maintain the quotation of the Stock and Warrants
on the NASDAQ SmallCap Market and will file with the NASDAQ SmallCap Market all
documents and notices required by the NASDAQ SmallCap Market for companies that
have securities that are traded in the over the counter market and quotations
for which are reported by the NASDAQ SmallCap Market.
SECTION 6
Indemnification
6.01. Indemnification By Company. The Company agrees to indemnify and
hold harmless the Underwriters and each person who controls any underwriter
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act or any other statute
or at common law and to reimburse persons indemnified as above for any legal or
other expenses (including the cost of any investigation and preparation)
incurred by them in connection with any litigation, whether or not resulting in
any liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon any untrue statement or alleged untrue
26
statement of a material fact contained in the Registration Statement or any
amendment thereto or any application or other document filed in order to qualify
the Stock and Warrants under the blue sky or securities laws of the states where
filings were made, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, all as of the date when the Registration Statement or
such amendment, as the case may be, becomes effective, or any untrue statement
or alleged untrue statement of a material fact contained in the Prospectus (as
amended or supplemented if the Company shall have filed with the Commission any
amendments thereof or supplements thereto), or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the indemnity agreement contained in this
subsection 6.01 shall not apply to amounts paid in settlement of any such
litigation if such settlements are effected without the consent of the Company,
nor shall it apply to the Underwriter or any person controlling the Underwriters
in respect of any such losses, claims, damages, liabilities or actions arising
out of or based upon any such untrue statements or alleged untrue statement, or
any such omission or alleged omission, if such statement or omission was made in
reliance upon information peculiarly within the knowledge of the Underwriter and
furnished in writing to the Company by the Underwriter specifically for use in
connection with the preparation of the Registration Statement and Prospectus or
any such amendment or supplement thereto. This indemnity agreement is in
addition to any other liability which the Company may otherwise have to the
Underwriters. The Underwriters agree within ten days after the receipt by them
of written notice of the commencement of any action against them or
27
against any person controlling them as aforesaid, in respect of which indemnity
may be sought from the Company on account of the indemnity agreement contained
in this subsection 6.01 to notify the Company in writing of the commencement
thereof. The failure of the Underwriters so to notify the Company of any such
action shall relieve the Company from any liability which it may have to the
Underwriters or any person controlling them as aforesaid on account of the
indemnity agreement contained in this subsection 6.01, but shall not relieve the
Company from any other liability which it may have to the Underwriters or such
controlling person. In case any such action shall be brought against the
Underwriters or any such controlling person and the Underwriters shall notify
the Company of the commencement thereof, the Company shall be entitled to
participate in (and, to the extent that it shall wish, to direct) the defense
thereof at its own expense, but such defense shall be conducted by counsel of
recognized standing and reasonably satisfactory to the Representative or such
controlling person or persons, defendant or defendants in such litigation. The
Company agrees to notify the Representative promptly of commencement of any
litigation or proceedings against it or any of its officers or directors, of
which it may be advised, in connection with the issue and sale of any of its
securities and to furnish to the Representative, at its request, copies of all
pleadings therein and permit the Representative to be an observer therein and
apprise the Representative of all developments therein, all at the Company's
expense. Provided, however, that in no event shall the indemnification agreement
contained in this Section 6.01 inure to the benefit of the Representative (or
any person controlling the Representative) on account of any losses, claims,
damages, liabilities or actions arising from the sale of the Stock and Warrants
upon the public offering to any person by such Representative if such losses,
28
claims, damages, liabilities or actions arise out of, or are based upon, an
untrue statement or omission or alleged untrue statement or omission in a
Preliminary Prospectus and if the Prospectus shall correct the untrue statement
or omission or the alleged untrue statement or omission which is the basis of
the loss, claim, damage, liability or action for which indemnification is sought
and a copy of the Prospectus had not been sent or given to such person at or
prior to the confirmation of such sale to him in any case where such delivery is
required by the Securities Act, unless such failure to deliver the Prospectus
was a result of non-compliance by the Company with Section 4.03 hereof.
6.02. Indemnification By Underwriters. The Underwriters severally
agree, to the extent of and only to the extent of their commitment pursuant to
Schedule I, in the same manner as set forth in subsection 6.01 above, to
indemnify and hold harmless the Company, the directors of the Company and each
person, if any, who controls the Company with respect to any statement in or
omission from the Registration Statement or any amendment thereto, or the
Prospectus (as amended or as supplemented, if amended or supplemented as
aforesaid) or any application or other document filed in any state or
jurisdiction in order to qualify the Stock and Warrants under the blue sky or
securities laws thereof, or any information furnished pursuant to Section 3.05
hereof, if such statement or omission was made in reliance upon information
peculiarly within its knowledge and furnished in writing to the Company by the
Representative on its behalf specifically for use in connection with the
preparation thereof or supplement thereto. The Underwriters shall not be liable
for amounts paid in settlement of any such litigation if such settlement was
effected without the consent of the Representative. In case of commencement of
any action in respect of which indemnity may be sought from the Underwriters on
account of
29
the indemnity agreement contained in this subsection 6.02, each person agreed to
be indemnified by the Underwriters shall have the same obligation to notify the
Underwriters as the Underwriters have toward the Company in subsection 6.01
above, subject to the same loss of indemnity in the event such notice is not
given, and the Underwriters shall have the same right to participate in (and, to
the extent that they shall wish, to direct) the defense of such action at their
own expense, but such defense shall be conducted by counsel of recognized
standing and satisfactory to the Company. The Underwriters agree to notify the
Company promptly of the commencement of any litigation or proceeding against the
Underwriters or against any such controlling person, of which it may be advised,
in connection with the issue and sale of any of the securities of the Company,
and furnish to the Company at its request copies of all pleadings therein and
apprise it of all the developments therein, all at the Company's expense, and
permit the Company to be an observer therein.
SECTION 7
Effectiveness of Agreement
This Agreement shall become effective upon release by the
Representative of the Stock and Warrants for offering after the Effective Date.
The time of the release by the Representative of the Stock and Warrants for
offering, for the purposes of this Section 7, shall mean the time of the release
by the Representative of the Stock and Warrants for public sale pursuant to the
Registration Statement. The Representative agrees to notify the Company
immediately after the Representative shall have released the Stock and Warrants,
that this Agreement has become effective. This Agreement shall nevertheless,
30
become effective at such time earlier than the time specified above, after the
Effective Date, as the Representative may determine by notice to the Company.
SECTION 8
Conditions of the Underwriters' Obligations
The Underwriters' obligations hereunder to purchase the Stock and
Warrants and to make payment to the Company hereunder on the Closing Date shall
be subject to the accuracy, as of the Closing Date, of the representations and
warranties on the part of the Company herein contained, to the performance by
the Company of all its agreements herein contained, to the fulfillment of or
compliance by the Company with all covenants and conditions hereof, and to the
following additional conditions:
8.01. Effectiveness of Registration Statement. The Registration
Statement shall have become effective on or prior to 12:00 Noon EST time, on the
Effective Date hereof, or such later date as the Underwriter may agree to. On or
prior to the Closing Date, no order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission or be pending; any
request for additional information on the part of the Commission (to be included
in the Registration Statement or Prospectus or otherwise) shall have been
complied with to the satisfaction of the Commission; and neither the
Registration Statement or the Prospectus nor any amendment thereto shall have
been filed to which counsel to the Representative shall have reasonably objected
in writing or have not given their consent.
31
8.02. Accuracy of Registration Statement. The Representative shall not
have disclosed in writing to the Company that the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel to the Representative, is
material, or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein, or is necessary to make the
statements therein not misleading.
8.03. Casualty and Other Calamity. Between the date hereof and the
Closing Date, the Company shall not have sustained any loss on account of fire,
explosion, flood, accident, calamity or any other cause, of such character as
materially adversely affects its business or property considered as an entire
entity, whether or not such loss is covered by insurance and neither the
President of the Company nor the Chief Financial Officer of the Company shall
have suffered any injury or disability of a nature which would materially
adversely affect his ability to properly function as an officer and director of
the Company.
8.04. Litigation and Other Proceedings. Between the date hereof and the
Closing Date, there shall be no litigation instituted or threatened against the
Company and there shall be no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or foreign, wherein
an unfavorable ruling, decision or finding would materially adversely affect the
business, franchises, licenses, patents, operations or financial condition or
income of the Company considered as an entity.
8.05. Lack of Material Change. Except as contemplated herein or as set
forth in the Registration Statement and Prospectus, during the period subsequent
to the date of
32
the last audited balance sheet included in the Registration Statement and prior
to the Closing Date, the Company (A) shall have conducted its business in the
usual and ordinary manner as the same was being conducted on the date of the
last audited balance sheet included in the Registration Statement, (B) except in
the ordinary course of its business, the Company shall not have incurred any
liabilities or obligations (direct or contingent) or disposed of any of its
assets, or entered into any material transaction or suffered or experienced any
substantially adverse change in its condition, financial or otherwise,
8.06. NASDAQ Listin Approval and NASD No-Objection Letter. NASDAQ shall
have approved the Company's listing application for NASDAQ Small Cap under the
symbols "FISH" for the Stock and " FISHW" for the Warrants,
8.07. Accountant's Comfort Letter and Update. at the Closing the
Representative shall have received from Spear, Safer, Xxxxxx & Co. a letter
dated such date, in form and substance satisfactory to the representative
containing statements and information of the type ordinarily included in
accountants' "comfort letter" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and Prospectus; and, at the Closing, the Representative shall also
have received from Spear, Safer Xxxxxx & Co. a letter, dated at the Closing
Date, to the effect that they reaffirm the statements made in the letter
furnished pursuant to the previous clause, except that the specified date
referred to shall be a date not more than three days prior to the Closing Date.
At the Closing Date, the capital stock and surplus accounts of the Company shall
be substantially the same as at the date of the last audited balance sheet
included in the Registration Statement, without considering the proceeds from
the sale of the Stock, other than as may be set forth in the Prospectus.
33
8.08. Review By and Opinion of Underwriter's Counsel. The authorization
of the Stock, the Warrants, the Warrant Stock, the Representative's Warrants,
the Registration Statement, the Prospectus and all corporate proceedings and
other legal matters incident thereto and to this Agreement shall be reasonably
satisfactory in all respects to counsel to the Representative. The
Representative shall have received an opinion dated as of the Closing Date from
its counsel, substantially in the form of the opinion called for by Section
8.07(viii), qualified in such manner as the Representative may deem acceptable.
8.09. Opinion of Counsel. The Company (which term shall include any
subsidiaries of the Company) shall have furnished to the Representative the
opinion, dated the Closing Date, addressed to the Representative, from Atlas,
Xxxxxxxx, Trop & Borkson, counsel to the Company, to the effect that based upon
a review by them of the Registration Statement, Prospectus, the Company's
certificate of incorporation, bylaws, and relevant corporate proceedings, an
examination of such statutes they deem necessary and such other investigation by
such counsel as they deem necessary to express such opinion:
(i) The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of Florida, with full corporate
power and authority to own and operate its properties and to carry on its
business as set forth in the Registration Statement and Prospectus.
(ii) The Company is duly qualified or registered as a foreign
corporation in any applicable state or foreign jurisdiction cognizant that the
Company's ownership of property
34
and its conduct of business requires such qualification or registration and that
the failure to so qualify would have a material adverse effect on its
operations.
(iii) The Company has authorized an outstanding capital stock as set
forth in the Registration Statement and Prospectus; the outstanding common stock
of the Company, the Stock, and the Warrants conform to the statements concerning
them in the Registration Statement and Prospectus; the outstanding common stock
of the Company has been duly and validly issued and is fully-paid and
nonassessable and contains no preemptive rights; the Stock has been, and the
shares of Warrant Stock issuable upon exercise of the Warrants will be, duly and
validly authorized and, upon issuance thereof and payment therefor in accordance
with this Agreement and the Warrants, will be duly and validly issued, fully
paid and nonassessable, and will not be subject to the preemptive rights of any
shareholder of the Company.
(iv) The Warrants and Representative's Warrants have been duly and
validly authorized and issued and are valid and binding instruments enforceable
in accordance with their terms.
(v) A sufficient number of shares of Stock and Warrants have been duly
reserved for issuance upon exercise of the Warrants and the Representative's
Warrants.
(vi) No consents, approvals, authorizations or orders of agencies,
officers or other regulatory authorities are known to such counsel which are
necessary for the valid authorization, issue or sale of the Stock and Warrants
hereunder, except as required under the Act or blue sky or state securities
laws.
(vii) The issuance and sale of the Stock, the Warrants,
Representative's Warrants and the consummation of the transactions herein
contemplated and compliance with the
35
terms of this Agreement will not conflict with or result in a breach of any of
the terms, conditions, or provisions of or constitute a default under the
certificate of incorporation, or bylaws of the Company, or any note, indenture,
mortgage, deed of trust, or other agreement or instrument known to such counsel
to which the Company is a party or by which the Company or any of its property
is bound or any existing law (provided this paragraph shall not relate to
federal or state securities laws), order, rule, regulation, writ, injunction, or
decree known to such counsel of any government, governmental instrumentality,
agency, body, arbitration tribunal, or court domestic or foreign, having
jurisdiction over the Company or its property.
(viii) The Registration Statement has become effective under the Act
and, to the best of the knowledge of such counsel after such counsel has
conducted a reasonable investigation, no order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated by the Commission under the
Act; and the Registration Statement and Prospectus, and each amendment and
supplement thereto, comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations thereunder, and after a
reasonable investigation such counsel has no reason to believe that either the
Registration Statement or the Prospectus or any such amendment or supplement
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which made (except that no
opinion need be expressed as to financial statements contained in the
Registration Statement or Prospectus); and such counsel is familiar with all
contracts referred to in the Registration
36
Statement or Prospectus and such contracts are sufficiently summarized or
disclosed therein or filed as exhibits thereto as required, and such counsel,
after a reasonable investigation, does not know of any contracts required to be
summarized or disclosed or filed, and such counsel, after a reasonable
investigation, does not know of any legal or governmental proceedings pending or
threatened to which the Company is the subject of such a character required to
be disclosed in the Registration Statement or the Prospectus which are not
disclosed and properly described therein.
(ix) This Agreement has been duly authorized and executed by the
Company and is a valid and binding agreement of the Company.
As to routine factual matters such as the issuance of stock
certificates and receipt of payment therefor, the states in which the Company
transacts business, the adoption of resolutions reflected by the Company's
minute book and the like, such counsel may rely on the certificate of an
appropriate officer of the Company. Such opinion shall also cover such other
matters incident to the transactions contemplated by this Agreement as the
Underwriter or their Counsel shall reasonably request.
8.08.10.01. Accountant's Letter. The Underwriter shall have received a
letter addressed to it and dated the date of this Agreement and the Closing
Date, respectively, from Spear, Safer, Xxxxxx & Co. independent public
accountants for the Company, stating that (i) with respect to the Company they
are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and the response to Item
509 of Regulation S-K as reflected by the Registration Statement is correct
insofar as it relates to them; (ii) in their opinion, the financial statements
examined by them of the Company at all dates and for all periods referred to in
their opinion and
37
included in the Registration Statement and Prospectus, comply in all material
respects with the applicable accounting requirements of the Act and the
published Rules and Regulations thereunder with respect to registration
statements on Form S-B2; (iii) on the basis of certain indicated procedures (but
not an examination in accordance with generally accepted accounting principles),
including examinations of the instruments of the Company set forth under
"Capitalization" in the Prospectus, a reading of the latest available interim
unaudited financial statements of the Company, whether or not appearing in the
Prospectus, inquiries of the officers of the Company or other persons
responsible for its financial and accounting matters regarding the specific
items for which representations are requested below and a reading of the minute
books of the Company, nothing has come to their attention which would cause them
to believe that during the period from the last audited balance sheet included
in the Registration Statement to a specified date not more than five days prior
to the date of such letter (a) there has been any change in the capital stock or
other securities of the Company or any payment or declaration of any dividend or
other distribution in respect thereof or exchange therefor from that shown on
its audited balance sheets or in the debt of the Company from that shown or
contemplated under "Capitalization" in the Registration Statement or Prospectus
other than as set forth in or contemplated by the Registration Statement or
Prospectus; (b) there have been any material decreases in net current assets or
net assets as compared with amounts shown in the last audited balance sheet
included in the Prospectus so as to make said financial statements misleading;
and (c) on the basis of the indicated procedures and discussions referred to in
clause (iii) above, nothing has come to their attention which, in their
judgment, would cause them to believe or indicate that (1) the unaudited
financial
38
statements and schedules set forth in the Registration Statement and Prospectus
do not present fairly the financial position and results of the Company, for the
periods indicated, in conformity with the generally accepted accounting
principles applied on a consistent basis with the audited financial statements,
and (2) the dollar amounts, percentages and other financial information set
forth in the Registration Statement and Prospectus under the captions
"Prospectus Summary," "Risk Factors," "Dilution," "Capitalization,"
"Remuneration," "Stock Option Plan," "Principal Shareholders," and "Interest of
Management and Others in Certain Transactions," are not in agreement with the
Company's general ledger, financial records or computations made by the Company
therefrom.
8.08.10.02. Conformed Copies of Accountant's Letter. The Representative
shall be furnished without charge, in addition to the original signed copies,
such number of signed or photostatic or conformed copies of such letters as the
Representative shall reasonably request.
8.11. Officer's Certificate. The Company shall have furnished to the
Representative its certificate by the Chief Executive Officer and the Chief
Financial Officer, dated as of the Closing Date, to the effect that:
(i) The representations and warranties of the Company in this Agreement
are true and correct at and as of the Closing Date, and the Company has complied
with all the agreements and has satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date.
39
(ii) The Registration Statement has become effective and no order
suspending the effectiveness of the Registration Statement has been issued and
to the best of the knowledge of the respective signers, no proceeding for that
purpose has been initiated or is threatened by the Commission.
(iii) The respective signers have each carefully examined the
Registration Statement and Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and the
Prospectus and any amendments and supplements thereto contain all statements
required to be stated therein, and all statements contained therein are true and
correct, and neither the Registration Statement nor Prospectus nor any amendment
or supplement thereto includes any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and, since the effective date of the
Registration Statement, there has occurred no event required to be set forth in
an amended or a supplemented Prospectus which has not been so set forth.
(iv) Except as set forth in the Registration Statement and Prospectus
since the respective dates as of which the periods for which information is
given in the Registration Statement and Prospectus and prior to the date of such
certificate, (A) there has not been any substantially adverse change, financial
or otherwise, in the affairs or condition of the Company, and (B) the Company
has not incurred any liabilities, direct or contingent, or entered into any
transactions, otherwise than in the ordinary course of business.
(v) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, no dividends or distribution
whatever have been declared and/or paid on or with respect to the common stock
of the Company.
40
8.12. Tender of Delivery of Stock. All of the Stock being offered by
the Company and the Warrants being purchased from the Company by the
Representative shall be tendered for delivery in accordance with the terms and
provisions of this Agreement.
8.13. Blue-Sky Qualification. The Stock shall be qualified in such
states as the Underwriters through their Representative may reasonably request
pursuant to Section 5.04, and each such qualification shall be in effect and not
subject to any stop order or other proceeding on the Closing Date.
8.14. Approval of Representative's Counsel. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose approval
shall not be unreasonably withheld. The suggested form of such documents shall
be provided to the counsel for the Representative at least one business day
before the Closing Date. The Representative's counsel will provide a written
memorandum stating such closing documents which they deem necessary for their
review. Such memorandum shall be delivered at least three business days before
the Closing Date to counsel for the Company.
8.15. Officers' Certificate As a Company Representative. Any
certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Representative will be deemed a
representation and warranty by the Company to the Representative as to the
statements made therein.
41
SECTION 9
Termination
9.01. Termination Because of Non-Compliance. This Agreement may be
terminated by the Representative by notice to the Company in the event that
there has been, since the time of execution of this Agreement or since the
respective dates as of which the information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings or business affairs of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of business, or
if, the Company shall have failed or been unable to comply with any of the
terms, conditions or provisions of this Agreement on the part of the Company to
be performed, complied with or fulfilled (including but not limited to those
specified in Sections 2, 3, 4, 5, and 8 hereof) within the respective times
herein provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the Representative in writing.
9.02. Market Out Termination. This Agreement may be terminated by the
Representative by notice to the Company at any time if, in the judgment of the
Representative, payment for and delivery of the Stock and Warrants is rendered
impracticable or inadvisable because (i) trading in securities generally on the
New York Stock Exchange, American Stock Exchange, or NASDAQ (including NASDAQ
SmallCap) shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York or Florida shall have
been declared by either federal or state authorities, or (iii) there has
occurred a material adverse change in the financial markets
42
in the United States or elsewhere including, but not limited to: a war, outbreak
of hostilities or escalation thereof, or any other national calamity shall have
occurred, or any development involving a crisis or change in political,
financial, or economic conditions, the effect of which on the financial markets
of the United States or overseas is such as it would be undesirable,
impracticable or inadvisable in the judgment of the Representative to proceed or
continue with this Agreement or with the public offering. Notice of such
termination may be given to the Company by telegram, telecopy or telephone and
shall subsequently be confirmed by letter.
9.03. Company's Right to Terminate. In the event any action or
proceeding of the type referred to in subparagraph 10.02 above shall be
instituted or threatened against the Underwriters at any time prior to the
effective date hereunder, or in the event there shall be filed by or against it
in any court pursuant to any federal, state, local or municipal statute, a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of its assets or if it makes an assignment
for the benefit of creditors, the Company shall have the right on three days'
written notice to the Representative to terminate this Agreement without any
liability to the Underwriters of any kind except for the payment of all expenses
as provided herein.
9.04. Effect of Termination Hereunder. Any termination of this
Agreement pursuant to this Section 9 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of any party thereto; except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it specified in
Section 5.07; and the Company and the Representative shall be obligated to pay,
respectively, all losses, claims, damages or liabilities, joint or several,
under Section 6.01 in the case of the Company and Section 6.02 in the case of
the Representative.
SECTION 10
Underwriter's Representations and Warranties
The Underwriters represent and warrant to and agree with the Company
that:
10.01. Registration as Broker-Dealer and Member of NASD. Each
underwriter is registered as a broker-dealer with the Securities and Exchange
Commission and is
43
registered as a broker-dealer in all states in which it conducts business and is
a member in good standing of the National Association of Securities Dealers,
Inc.
10.02. No Pending Proceedings. There is not now pending or threatened
against the Underwriters any action or proceeding of which it has been advised,
either in any court of competent jurisdiction, before the Securities and
Exchange Commission or any state securities commission concerning its activities
as a broker or dealer, nor have any of the Underwriters been named as a "cause"
in any such action or proceeding.
SECTION 11
Right of First Refusal
11.01. Consultation With Representative. For a period of two years from
the date of the definitive prospectus, the Company and its officers and
directors agree to consult with Xxxxxxx Xxxxxxx in respect of any prospective or
actual public or private offering of
44
securities of the Company (as such term is defined in this subsection 11.01) for
cash , securities or other consideration, other than to employees.
For the purposes of this Section 11, the term, "securities of the
Company" shall be deemed to include any debt or equity securities of the Company
other than debt securities secured by chattel mortgages or equipment or property
of the Company, the maturity date of which is less than two years, and which are
offered by the Company for sale or sold by the Company only to commercial banks,
insurance companies, recognized finance companies or pension trusts. Also
specifically excluded are public offerings and/or private offerings of the
Company's shares in exchange for properties, assets or stock of other
individuals or corporations. The Company shall not be required to consult with
the Underwriter concerning any borrowings from banks and institutional lenders
or concerning financing under any equipment leasing or similar arrangements.
11.02. Underwriter's Right of First Refusal. For a period of three
years from the date of the definitive prospectus, the Company will not enter
into an agreement for any public or private offering for cash (other than to
employees) of any securities of the Company as defined in Section 11.01 to or
through any person, firm or corporation other than Xxxxxxx Xxxxxxx unless and
until the Company shall have first negotiated for the sale of the Company's
securities with or offered to sell its securities to Xxxxxxx Xxxxxxx. The
Company shall notify Xxxxxxx Xxxxxxx in writing of the Company's intention to
offer its securities in a covered offering and the terms (including the price to
the Representative or other method of determining the underwriting discount or
fee) and conditions of the proposed offering.
45
11.03 Exercise of Warrants. The Company hereby grants a right of first
refusal to Xxxxxxx Xxxxxxx for three (3) years from the date of the definitive
Prospectus, with respect to the exercise of Warrants issued in the instant
offering and any Rule 144 sales by Company officials.
SECTION 12
Notice
Except as otherwise expressly provided in this Agreement:
12.01. Notice to the Company. Whenever notice is required by the
provisions of this Underwriting Agreement to be given to the Company, such
notice shall be in writing addressed to the Company as follows:
BIO-AQUA SYSTEMS, INC.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Attention: Xxxxx Xxxxx
With a copy to:
Xxxxxxx X. Xxxxxxxx, Esq.
Atlas, Xxxxxxxx, Trop & Borkson, P.A.
000 Xxxx Xxx Xxxx Xxxx., Xxxxx 0000
Xxxx Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
12.02. Notice to the Underwriters. Whenever notice is required by the
provisions of this Agreement to be given to the Underwriters, such notice shall
be given in writing addressed to the Representative at the address set out at
the beginning of this Agreement, with a copy to:
00
Xxxxxxx Xxxxxxx
0000 Xxxxxxxxx 0xx Xxx
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
With a copy to:
Xxxxxx X. Xxxxxxx III, Esq. and Xxxxx Xxx Xxxx, Esq.
Sacher, Zelman, Stanton, Paul, Beiley & Van Sant P.A.
0000 Xxxxxxxx, Xxxxx 000
Xxxxx, XX 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
SECTION 13
Miscellaneous
13.01. Benefit. This Agreement is made solely for the benefit of the
Underwriters, the Company, their respective officers and directors and any
controlling person, and their respective successors and assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successor" or the term "successors and assigns" as used in this Agreement
shall not include any purchasers, as such, of any of the Stock or Warrants.
13.02. Survival. The respective indemnities, agreements,
representations, warranties, covenants and other statements of the Company or
its officers as set forth in or made pursuant to this Agreement and the
indemnity agreements of the Company and the Underwriters contained in Section 6
hereof shall survive and remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or the Underwriters or any
such officer or director thereof or any controlling person of the Company or of
the Underwriters, (ii) delivery of or payment for the Stock, (iii) the Closing
47
Date, and (iv) any successor of the Company and the Underwriters or any
controlling person, officer or director thereof, as the case may be, shall be
entitled to the benefits hereof.
13.03. Governing Law. The validity, interpretation and construction of
this Agreement and of each part hereof will be governed by the laws of the State
of Florida.
13.04. Underwriters' Information. The statements with respect to the
public offering of the Stock on the cover page of the Prospectus and under the
caption "Underwriting"' in the Prospectus constitute the written information
furnished by or on behalf of the Underwriters referred to in subsection 2.02
hereof, in subsection 6.01 hereof and subsection 6.02 hereof.
13.05. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth our Agreement.
48
Very truly yours,
Bio-Aqua Systems, Inc.
By:_________________________________
ATTEST:
___________________________
Secretary
49
WE HEREBY CONFIRM AS OF THE DATE HEREOF
THAT THE ABOVE LETTER SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND US.
Xxxxxxx Xxxxxxx & Associates
________________________________________
(for itself and as Representative of the
members of the Underwriting Group)
BIO-AQUA SYSTEMS, INC.
By:_____________________________________
50
