EXHIBIT 1.1
2,500,000 COMMON SHARES
TARPON INDUSTRIES, INC.
FORM OF UNDERWRITING AGREEMENT
January ___, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Tarpon Industries, Inc., a Michigan corporation (together with its
subsidiaries, and the ▇▇▇▇▇▇ Road business to be acquired, the "Company" except
where indicated to the contrary), hereby confirms its agreement with ▇▇▇▇▇▇
▇▇▇▇▇▇ & Co., LLC (the "Representative") and with the other members of the
underwriting group named on Schedule A hereto (the "Members" and, together with
the Representative, the "Underwriters") with respect to the sale by the Company,
and the purchase by the Underwriters (the "Offering"), of 2,500,000 shares of
the Company's common shares, no par value per share ("Common Stock"), as more
specifically set forth on Schedule A hereto. Such shares are hereinafter
referred to as the "Firm Securities." Upon your request, as provided in Section
2(b) of this Agreement, the Company shall also issue and sell to the
Underwriters up to an additional 375,000 shares of Common Stock solely for the
purpose of covering over-allotments, if any. Such additional shares of Common
Stock are hereinafter referred to as the "Option Securities." The Firm
Securities and the Option Securities, if purchased, are hereinafter referred to
as the "Underwritten Securities."
1. Representations and Warranties of the Company. The Company represents
and warrants to the Underwriters as of the date hereof, as follows (the term "to
the Company's knowledge" means the knowledge of senior management after due and
diligent inquiry):
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form S-1 (File No. 333-120117, including the related preliminary
prospectus dated November 1, 2004 and any subsequent preliminary prospectus
subject to completion (a "Preliminary Prospectus"), for the registration of the
Underwritten Securities, under the Securities Act of 1933, as amended (the
"Securities Act"), which registration statement and amendments have been
prepared by the Company in conformity with the requirements of the Securities
Act, and the rules and regulations (the "Regulations") of the Commission
thereunder. The Company has complied with the conditions for the use of Form
S-1. The Company will promptly file a further amendment to said registration
statement in the form heretofore delivered to the Representative and will not
file any other amendment thereto to which
the Representative shall reasonably have objected in writing after having been
furnished with a draft copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time that the registration statement becomes effective (including the
prospectus, financial statements, schedules, exhibits and all other documents
filed as a part thereof and all information deemed to be a part thereof as of
such time pursuant to paragraph (b) of Rule 430(A) of the Regulations), is
hereinafter called the "Registration Statement," and the form of prospectus, in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." The Company may also file a
related registration statement with the Commission pursuant to Rule 462(b) of
the Regulations for the purpose of registering certain additional securities,
which registration shall be effective upon filing with the Commission. For
purposes hereof, the "Rule 462 Registration Statement" means any registration
statement filed with the Commission pursuant to Rule 462(b) of the Regulations,
including the Registration Statement and any prospectus incorporated therein at
the time such Registration Statement becomes effective. For purposes hereof,
"Rules and Regulations" mean the rules and regulations adopted by the Commission
under the Securities Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as applicable.
(b) Neither the Commission nor, to the Company's knowledge, any
state regulatory authority, has issued any order preventing or suspending the
use of any Preliminary Prospectus, the Registration Statement or the Prospectus
or any part of any thereof and no proceedings for a stop order suspending the
effectiveness of the Registration Statement have been instituted or are pending
or, to the Company's knowledge, threatened.
(c) Each of the Registration Statement and the Prospectus, as
amended, contain all statements required to be stated therein and comply with
the requirements of the Securities Act and the Rules and Regulations, and none
of the Registration Statement or the Prospectus, as amended, contains an untrue
statement of a material fact or omits to state a material fact required to be
stated therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in strict conformity with information
furnished to the Company in writing by or on behalf of the Underwriters
expressly for use in any Preliminary Prospectus, Registration Statement or the
Prospectus or any amendment thereof or supplement thereto (the "Underwriters'
Information"). The Company acknowledges that the Underwriters' Information shall
include only the written information contained under the caption "Underwriting"
in the Prospectus and on the front cover page of the Prospectus, and in no other
location.
(d) When the Registration Statement becomes effective and through
the last to occur of (A) the Closing Date (as defined in Section 2(c)), (B) the
Option Closing Date (as defined in Section 2(b)), if any, or (C) the last date
the Prospectus is required to be delivered in connection with sales by the
Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all statements required to be stated therein, and will comply in all
respects with the requirements of the Securities Act and the Rules and
Regulations. Neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were
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made, not misleading; provided, however, that this representation and warranty
does not apply to statements made or statements omitted in reliance upon and in
strict conformity with the Underwriters' Information.
(e) If the Company has elected to rely on Rule 462(b) and the Rule
462(b) Registration Statement has not been declared effective (i) the Company
will file the Rule 462(b) Registration Statement in compliance with, and that is
effective upon filing pursuant to, Rule 462(b) and (ii) the Company has given
irrevocable instructions for transmission of the applicable filing fee in
connection with the filing of the Rule 462(b) Registration Statement, in
compliance with Rule 111 promulgated under the Securities Act or the Commission
has received payment of such filing fee.
(f) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Michigan. The
Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the conduct of its business requires such qualification or
licensing, except where the failure to be so qualified or licensed would not
have a material adverse effect on the condition (financial or otherwise),
operations, business, prospects or results of operation of the Company (a
"Material Adverse Effect").
(g) The Company has all requisite corporate power and authority, and
has obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits (collectively, the "Approvals") of and from
all governmental and regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental matters), to own or
lease its properties and conduct its business as described in the Prospectus,
except as otherwise described in the Prospectus and except where failure to have
such Approvals would not have a Material Adverse Effect, the Company is and has
been doing business in compliance, in all materials respects, with all such
Approvals and all federal, state and local laws, rules and regulations, and the
Company has not received any written notice of proceedings relating to the
revocation or modification of any Approval. The disclosures in the Registration
Statement concerning the effects of federal, state and local laws, rules and
regulations on the Company's business as currently conducted are correct in all
material respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances under
which they were made.
(h) The Company has the duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus and
will have the adjusted pro forma capitalization set forth therein on the Closing
Date based upon the assumptions set forth therein. The Company is not a party to
or otherwise bound by any instrument, agreement or other arrangement, including,
but not limited to, any voting trust agreement, stockholders' agreement or other
agreement or instrument, affecting the securities or rights or obligations of
securityholders of the Company or providing for any of them to issue, sell,
transfer or acquire any capital stock, rights, warrants, options or other
securities of the Company, except as set forth or expressly contemplated in the
Registration Statement and the Prospectus. The Underwritten Securities and all
other securities issued or issuable pursuant to existing plans, agreements or
arrangements relating to the issuance of securities or outstanding options,
warrants, rights or other securities of the Company by the Company conform or,
when issued and paid for, will conform, in all material respects, to all
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statements with respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have been
offered and sold by the Company in compliance with or pursuant to exemptions
from registration under the Securities Act and applicable state securities law,
have been duly authorized and validly issued and are fully paid and
non-assessable and the holders thereof are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any securityholders of the Company or
similar contractual rights granted by the Company. The Underwritten Securities
have been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof, will be validly issued, fully paid and non-assessable.
The Underwriters' warrants (the "Warrants") have been duly authorized and, when
issued, paid for and delivered in the manner contemplated by the warrant
agreement (the "Warrant Agreement"), representing the same will be validly
issued and outstanding obligations of the Company entitled to the benefits of
the Warrant Agreement. The Warrant Shares issuable upon exercise of the Warrants
will, assuming payment therefor or exchange therefor, as set forth in the
Warrant Agreement, upon such issuances be duly authorized, validly issued, fully
paid and non-assessable, and the Company has duly authorized and reserved for
issuance the Warrant Shares. The Underwritten Securities and Warrant Shares are
not and will not be subject to any preemptive or other similar rights of any
stockholder of the Company under law or granted by the Company, under the law or
granted by the Company; all corporate action required to be taken for the
authorization, issue and sale of the Underwritten Securities and, in the case of
Warrant Shares, reservation, has been duly and validly taken; and the
certificates representing the Underwritten Securities will be in due and legally
proper form. Upon the issuance and delivery pursuant to the terms of this
Agreement of the Underwritten Securities to be sold by the Company hereunder,
the Underwriters will acquire validly issued and non-assessable Underwritten
Securities free and clear of any liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever (collectively, the "Liens").
(i) The financial statements (the "Financial Statements"), including
the related notes and schedules of the Company included in the Registration
Statement and the Prospectus, as amended, fairly present in all material
respects, the financial position, income, changes in cash flow, changes in
shareholder's equity and the results of operations of the Company at the
respective dates and for the respective periods to which they apply, and the as
adjusted and pro-forma financial information included in the Registration
Statement and the Prospectus, as amended, presents fairly and in all material
respects, on a basis consistent with that of the Financial Statements, what the
Company's as adjusted capitalization would have been for the periods and as of
the date to which they apply after giving effect to the adjustments described
therein, any quarterly adjustments and pro-forma assumptions. Except as
disclosed in the Registration Statement and Prospectus, the Financial Statements
have been prepared in conformity with United States generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved. Except as disclosed in the Registration
Statement and Prospectus, there has been no material adverse change or
development involving a material adverse change, in the condition, financial or
otherwise, or in the financial position, prospects, operation, business or
results of operations of the Company taken as a whole, whether or not arising in
the ordinary course of business, since the latest date of, or period covered by,
the Financial Statements; the outstanding debt, the property, both tangible and
intangible, and the business of the Company conform in all material respects to
the descriptions thereof contained in the Registration Statement, the
Prospectus, as amended, and
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the Prospectus. Historical financial information set forth in the Prospectus
under the headings "Summary Financial Information," "Selected Historical and Pro
Forma Financial Data," "Capitalization," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," fairly presents, in
all material respects, on the bases stated in the Prospectus, the information
set forth therein, which has been derived from or compiled on a basis consistent
with that of the Financial Statements.
(j) The Company (i) has timely filed all Federal, state, local and
foreign tax returns that it was required to file through the date hereof or has
timely requested extensions thereof, other than those filings being contested in
good faith, and has timely paid all Federal, state, local and foreign taxes
shown to be due on such returns for which it is liable and has timely furnished
all information returns it was required to furnish; (ii) has established
adequate reserves for such taxes that are not due and payable or that are being
contested in good faith; and (iii) does not have any tax deficiency or claims
outstanding, proposed or assessed against it.
(k) To its knowledge, the Company maintains with insurers of
recognized financial responsibility insurance policies and surety bonds,
including, but not limited to, general liability and property insurance, which
insures the Company and its employees, against, to the knowledge of the Company,
such losses and risks generally insured against by comparable businesses in
amounts that are prudent and customary for its business. The Company has not (i)
failed to give notice or present any insurance claim with respect to any matter,
including, but not limited to, the Company's business, property or employees,
under the insurance policy or surety bond in a due and timely manner; (ii) had
any disputes or claims against any underwriter of such insurance policies or
surety bonds or has failed to pay any premiums due and payable thereunder; or
(iii) failed to comply with all conditions contained in such insurance policies
and surety bonds wherein such failures or disputes would have a Material Adverse
Effect. There are no facts or circumstances under any such insurance policy or
surety bond that would relieve any insurer of its obligation to satisfy in full
any valid claim of the Company.
(l) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental matters), domestic or
foreign, pending or, to the Company's knowledge, threatened against (or
circumstances that may reasonably be expected to give rise to the same) or
involving the Company, its properties or its business which (i) questions the
validity of the capital stock of the Company, this Agreement, the Warrant
Agreement or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement or the Warrant Agreement; (ii) is required under
the Securities Act to be disclosed in the Registration Statement that is not so
disclosed (and such proceedings as are summarized in the Registration Statement
are accurately summarized; or (iii) except as disclosed in the Prospectus, is
not in the ordinary course of the Company's business.
(m) The Company has the corporate power and authority to authorize,
issue, deliver and sell the Underwritten Securities, enter into this Agreement
and the Warrant Agreement and to consummate the transactions provided for in
such agreements. This Agreement has been duly authorized, executed and delivered
by the Company. This Agreement constitutes, and when the Company has duly
executed and delivered the Warrant Agreement (assuming the due execution
5
and delivery thereof by the Representative), the Warrant Agreement will
constitute, a legal, valid and binding agreement and obligation of the Company
enforceable against the Company in accordance with its respective terms, except
(i) as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally; (ii) as enforceability of any indemnification or
contribution provisions may be limited under applicable laws or the public
policies underlying such laws; and (iii) that the remedies of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought, (clauses (i), (ii) and (iii), being
referred to collectively as the "Equitable Exceptions.") None of the Company's
issue and sale of the Underwritten Securities, execution or delivery of this
Agreement or the Warrant Agreement, its performance hereunder and thereunder, or
its consummation of the transactions contemplated herein and therein conflicts
with or will conflict with or results or will result in any breach or violation
of any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any Lien upon any
property or assets (tangible or intangible) of the Company pursuant to the terms
of, (i) the certificate of incorporation or by-laws of the Company; (ii) any
license, contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other material
agreement or instrument to which the Company is a party or is bound or to which
its properties or assets (tangible or intangible) are subject, or any
indebtedness; or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(n) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for performance by the Company of this Agreement and the
Warrant Agreement and the transactions contemplated hereby and thereby, and a
listing on the American Stock Exchange, except such as (i) have been obtained or
(ii) may be required under state securities or blue sky laws (iii) may be
required under the Rules of the National Association of Securities Dealers, Inc.
(the "NASD") in connection with the Underwriter's purchase and distribution of
the Underwritten Securities and the Underwriters' purchase of the Warrants.
(o) All agreements or contracts or other documents or copies of
executed agreements or contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which the Company
is currently bound or to which the Company's assets, properties or businesses
are subject are in full force and effect, have been executed and delivered by
the Company and constitute legal, valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
subject only to the Equitable Exceptions. The descriptions in the Registration
Statement of such agreements, contracts and other documents are accurate in all
material respects and fairly present the information required to be shown with
respect thereto by Form S-1, and there are no contracts or other documents that
are required by the Securities Act to be described in the Registration Statement
or filed as exhibits to the Registration Statement that are not described or
filed as required, and the exhibits that have been filed are complete and
correct copies of the documents of which they purport to be copies, except for
the
6
omission of some exhibits and schedules, copies of which have been provided
to the Representative.
(p) Subsequent to the dates as of which information is set forth in
the Registration Statement and Prospectus, and except as may otherwise be set
forth or contemplated herein or therein, the Company has not (i) issued any
securities (ii) incurred any liability or obligation, direct or contingent, for
borrowed money; (iii) entered into any transaction other than in the ordinary
course of business; or (iii) declared or paid any dividend or made any other
distribution on or with respect to its capital stock of any class, (vi) disposed
of any assets, other than in the ordinary course, or (vi) created any liens on
its assets, other than in the ordinary course and not for borrowed monies, and
there has not been any material adverse change in or affecting the management,
financial operations, prospects, or results of operations of the Company.
(q) The Company is not in violation of its articles of incorporation
or its by-laws and, except as disclosed in the Registration Statement and
Prospectus, to the knowledge of the Company, no default exists, and no event has
occurred that with notice or lapse of time, or both, would constitute a default
in the due performance and observance of any term, covenant or condition of any
license, contract, indenture, mortgage, installment sales agreement, lease, deed
of trust, voting trust agreement, stockholders agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other material agreement
or instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the Company
or any of its properties is otherwise bound or that otherwise affects the
property (tangible or intangible) of the Company, other than immaterial
defaults, a failure to make timely payment of the February, March and April 2004
bridge notes and matters between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as they relate
to the Standard Federal loan agreement.
(r) The Company is in compliance in all material respects with all
federal, state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours.
There are no investigations pending or to the Company's knowledge threatened
involving the Company by the U.S. Department of Labor or any other governmental
agency responsible for the enforcement of federal, state, local or foreign laws
and regulations. There is no unfair labor practice charge or complaint against
either the Company pending before the National Labor Relations Board or any
strike, picketing, boycott, slowdown or stoppage pending or, to the Company's
knowledge, threatened against or involving the Company. Except as disclosed in
the Prospectus, to the Company's knowledge, no union representation question
exists respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending or to the Company's knowledge
threatened under any expired or existing collective bargaining agreement of the
Company. No material labor dispute with the employees of the Company exists, or,
to the Company's knowledge, is imminent.
(s) Except as described in the Registration Statement and
Prospectus, the Company does not maintain, sponsor or contribute to any program
or arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan" or a "multiemployer plan" ("ERISA Plans"), as such terms are
defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Company does
not maintain or
7
contribute, now nor did at any previous time, to a defined benefit plan, as
defined in Section 3(35) of ERISA. No "accumulated funding deficiency" (as
defined in Section 302 of ERISA) or any of the events set forth in Section
4043(b) of ERISA (other than events with respect to which the 30-day notice
under Section 4043 of ERISA has been waived) has occurred with respect to any
employee benefit plan. No ERISA Plan (or any trust created thereunder) has
engaged in a "prohibited transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Internal Revenue Code, which could subject the Company to
any tax penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all reporting, disclosure and
other requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), and ERISA, as they relate to any such ERISA Plan. Determination letters
(if applicable) have been received from the Internal Revenue Service with
respect to each ERISA Plan that is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multiemployer
plan."
(t) Neither the Company nor, to the Company's knowledge, any of its
employees, directors, stockholders, affiliates (within the meaning of the Rules
and Regulations) of any of the foregoing, has taken, directly or indirectly, any
action designed to or which has constituted or which might be expected to cause
or result in, under the Exchange Act, or otherwise, stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities or otherwise.
(u) The Company owns or has the sufficient right to use, free and
clear of all Liens, all patents, trademarks, service marks, trade secrets, trade
names and copyrights, technology and licenses and rights used in the conduct of
its business as now conducted or proposed to be conducted without infringement
upon or otherwise acting adversely to the right or claimed right of any person,
corporation or other entity under or with respect to any of the foregoing, other
than immaterial infringements or immaterial adverse actions and, except as set
forth in the Registration Statement and Prospectus, is not obligated or under
any liability to make any material payment by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service ▇▇▇▇, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(v) The Company has taken all reasonable measures to protect the
secrecy, confidentiality and value of its intellectual property.
(w) The Company has good title to, or a valid and enforceable
leasehold estate in, all items of real and personal property stated in the
Registration Statement and Prospectus, as amended, as owned or leased by it free
and clear of all Liens, other than those referred to in the Registration
Statement and Prospectus and Liens for taxes not yet due and payable.
(x) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose reports are filed with the Commission
as a part of the Registration Statement, are independent certified public
accountants of the Company as required by the Securities Act and the Rules and
Regulations.
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(y) The Company has caused to be duly executed and delivered
agreements, in such form as the Company and Representative have heretofore
mutually agreed (collectively, the "Lock-up Agreements"), pursuant to which all
of the shareholders and option holders, other than selling shareholders
identified in the Registration Statement ("Lock-Up Parties") have agreed not to,
directly or indirectly, to offer, sell, grant any option to purchase, pledge,
hypothecate or otherwise dispose of any Common Stock or securities convertible
into, exercisable or exchangeable for any shares of Common Stock for a period of
one (1) year following the Closing Date without the prior written consent of the
Representative, except for Permitted Transfers, as defined in the Lock-up
Agreements.
(z) Except as set forth in the Registration Statement and
Prospectus, there are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee payable by the Company with respect to the sale of
the Underwritten Securities hereunder or any other arrangements, agreements,
understandings, payments or issuance with respect to the Company, or to the
Company's knowledge, its officers, directors, stockholders, employees or
affiliates that will affect the Underwriter's compensation. Except as
contemplated hereby, since the inception of the Company, no compensation has
been paid by the Company to or on behalf of any member of the NASD, or any
affiliate or employee thereof, in connection with any public offering by the
Company of the Company's securities.
(aa) The Underwritten Securities and Warrant Shares have been
approved for trading, subject to official notice of issuance, on the Nasdaq
SmallCap Market, and the Company has received no notice of any de-listing
procedures.
(bb) Neither the Company, nor, to the Company's knowledge, any of
its officers, employees, agents or any other person acting on behalf of the
Company has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who, to its knowledge, was, is, or may be in a position to help or hinder the
business of the Company (or assist the Company in connection with any actual or
proposed transaction) that (i) subjects the Company or any other such person to
any damage or penalty in any criminal or governmental litigation or proceeding
(domestic or foreign). The Company's internal accounting controls are sufficient
to enable the Company to comply with the Foreign Corrupt Practices Act of 1977,
as amended.
(cc) Except as set forth in the Registration Statement and
Prospectus, to the Company's knowledge, no officer, director or shareholder of
the Company, or any affiliate or associate of any of the foregoing persons or
entities has or has had, either directly or indirectly, (i) a disclosable
interest in any person or entity that (A) furnishes or sells services or
products that are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services; or (ii) a disclosable beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound or
affected. Except as set forth in the Registration Statement and Prospectus,
under "Related Party Transactions," or "Compensation Committee Interlocks and
Insider Participation," there are no
9
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director or stockholder of the Company, or any
partner, affiliate or associate of any of the foregoing persons or entities
required to be disclosed therein that have not been thus disclosed.
(dd) The minute books of the Company have been made available to the
Representative and its counsel (the "Representative's Counsel"), and contain a
summary of meetings and actions of the directors and shareholders of the Company
since the time of its incorporation.
(ee) Except and to the extent described in the Registration
Statement and Prospectus, or unless waived, no holders of any securities of the
Company or of any options, warrants or other convertible or exchangeable
securities of the Company, have the right to include any securities issued by
the Company in the Registration Statement or any registration statement to be
filed by the Company or to require the Company to file a registration statement
under the Securities Act and no person or entity holds any anti-dilution rights
with respect to any securities of the Company, except for anti-dilution rights
under the Company's Stock Option Plan, and except for anti-dilution and
registration rights in the warrants presently outstanding and described in the
Prospectus, and the warrants being issued to the Underwriters.
(ff) Except as described in the Registration Statement and
Prospectus, to the Company's knowledge there is no bankruptcy, labor disturbance
or other event affecting any of supplier or customer representing 10% or more of
purchases or sales of either EWCO or ▇▇▇▇▇▇ Road.
(gg) The Company is not liable, under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
any similar law ("Environmental Laws"). Except as set forth in the Registration
Statement and Prospectus, the Company is in compliance in all materials respects
with all applicable existing Environmental Laws. The term "Hazardous Material"
means (i) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; (ii)
any "hazardous waste" as defined by the Resource Conservation and Recovery Act,
as amended; (iii) any petroleum or petroleum product; (iv) any polychlorinated
biphenyl; and (v) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material, waste or substance regulated under or within the meaning of
any other Environmental Laws. Except as described in the Registration Statement
and Prospectus: (i) there has been no storage, disposal, generation,
transportation, handling or treatment of Hazardous Material by the Company (or
to the knowledge of the Company, any of its predecessors in interest) at, upon
or from any of the property now or previously owned or leased by the Company in
violation of any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or that require remedial action that has not been taken, under
any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit; and (ii) there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into the
environment surrounding such property by the Company of any Hazardous Materials.
(hh) The Company is not an "investment company," a company
controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an
10
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
(ii) None of the proceeds of the sale of the Underwritten Securities
or Warrants will be used, directly or indirectly, for the purpose of purchasing
or carrying any margin security, for the purpose of reducing or retiring any
indebtedness that was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the Underwritten
Securities or Warrants to be considered a "purpose credit" within the meanings
of Regulation T, U or X of the Board of Governors of the Federal Reserve Board.
2. Purchase by the Underwriters; Delivery and Payment.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to the Underwriters, and the
Underwriters severally agree to purchase from the Company, 2,500,000 shares of
Common Stock, in the aggregate, at the initial public offering price set forth
in the Prospectus less discounts and commissions of seven (7%) percent of the
public offering price.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase all or any part of an additional 375,000 shares of
Common Stock at the initial public offering price, less the underwriting
discounts and commissions as set forth on the cover page of the Prospectus. The
option granted hereby will expire 30 days after (i) the date that the
Registration Statement becomes effective, if the Company has elected not to rely
on Rule 430A under the Regulations, or (ii) the date of this Agreement if the
Company has elected to rely upon Rule 430A under the Rules and Regulations (if
such 30th day shall be a Saturday, Sunday or holiday, on the next day thereafter
when the New York Stock Exchange is open for trading), and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments that may be made in connection with the offering and
distribution of the Firm Securities, upon notice in writing or by telephone
(confirmed in writing) by the Representative to the Company setting forth the
number of Option Securities as to which the Representative is then exercising
the option and the time and date of payment and delivery for any such Option
Securities. Upon exercise of the option as provided herein, the Company shall
become obligated to sell to the Underwriters and subject to the terms and
conditions herein set forth, the Underwriters severally shall become obligated
to purchase from the Company that number of Option Securities then being
purchased. Any such time and date of delivery (an "Option Closing Date") shall
be determined by the Representative, but shall not be earlier than two nor later
than five full business days after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed upon
by the Representative and the Company. The Underwriters shall not be under any
obligation to purchase any of the Option Securities prior to the exercise of
such option. No Option Securities shall be delivered unless the Firm Securities
shall be simultaneously delivered or shall theretofore have been delivered as
herein provided.
(c) Payment of the purchase price for, and delivery of the
certificates for, the Firm Securities shall be made at the offices of the
Representative, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, or at such
other place as shall be agreed upon by the Representative and the
11
Company. Such delivery and payment shall be made at 10:00 a.m. (New York City
time) on January ___, 2005 or at such other time and date as shall be agreed
upon by the Representative and the Company (such time and date of payment and
delivery being herein called the "Closing Date"). In addition, in the event that
any or all of the Option Securities are purchased by the Underwriters, payment
of the purchase price for, and delivery of certificates for, such Option
Securities shall be made at the above mentioned offices of the Representative or
at such other place as shall be agreed upon by the Representative and the
Company on each Option Closing Date as specified in the notice from the
Representative to the Company. Delivery of the certificates for the Firm
Securities and Option Securities, if any, shall be made to the Representative
against payment by or on behalf of the Underwriters of the purchase price for
the Firm Securities and the Option Securities, if any, by wire transfer,
certified or official bank check or checks drawn upon or by a New York Clearing
House Bank and payable in same-day funds to the order of the Company, such
payment to be net of all amounts owed to the Underwriters under the terms of
this Agreement up to and including such date of payment, including the
underwriting discount, net non-accountable expenses and any additional amounts
owed under Section 5 of this Agreement and such other amounts as the Company and
Representative may agree. Certificates for the Underwritten Securities shall be
in definitive, registered form, shall bear no restrictive legends and shall be
in such denominations and registered in such names as the Representative may
request in writing at least two business days prior to the Closing Date or the
Option Closing Date, as the case may be. The certificates for the Underwritten
Securities shall be made available to the Representative at such office or such
other place as the Representative may designate for inspection, checking and
packaging at least one business day prior to the Closing Date or the relevant
Option Closing Date, as the case may be. Notwithstanding the foregoing, the
Underwritten Securities may be delivered via electronic transfer by the
Depository Trust Company or an affiliate thereof.
(d) On the Closing Date, the Company shall issue and sell to
Representative or its designees and/or to officers of the Representative or its
designees, Warrants to purchase an aggregate of 250,000 shares of Common Stock
at a purchase price of $.001 per warrant. The Warrants shall be exercisable for
a period of four years from the date of the Prospectus and shall not become
exercisable until twelve (12) months from the date of the Prospectus at a price
equal to 125% of the initial public offering price of the Underwritten
Securities. The Warrant Agreement shall be substantially in the form filed as
Exhibit 1.2 to the Registration Statement. Payment for the Warrants shall be
made by the Representative to or upon the order of the Company on the Closing
Date.
3. Public Offering of the Underwritten Securities. As soon after the
effective time of the Registration Statement as the Representative deems
advisable, the Underwriters shall make a public offering of the Underwritten
Securities (other than to residents of any jurisdiction in which the
qualification of the Underwritten Securities is required and has not become
effective) at the price and upon the other terms set forth in the Prospectus.
The Representative may from time to time increase or decrease the public
offering price after the distribution of the Underwritten Securities has been
completed to such extent as the Representative in its sole discretion deems
advisable. The Representative may enter into one or more agreements as the
Representative, in its sole discretion, deem advisable with one or more
broker-dealers who shall act as selected dealers in connection with such public
offering.
12
4. Covenants and Agreements of the Company. The Company covenants and
agrees with the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto, if not effective at the time of execution
of this Agreement, to become effective as promptly as practicable thereafter and
will not at any time, whether before or after the effective date of the
Registration Statement, file any amendment to the Registration Statement or
supplement to the Prospectus or file any document under the Securities Act or
Exchange Act during any time that a prospectus relating to the Underwritten
Securities is required to be delivered under the Securities Act of which the
Representative and Representative's counsel shall not previously have been
advised and furnished with a copy a reasonable period of time prior to its
proposed filing, or to which the Representative shall have reasonably objected
or which is not in compliance with the Securities Act, the Exchange Act or the
Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representative and confirm the notice in writing or
electronically, (i) when the Registration Statement, as amended, becomes
effective and, if the provisions of Rule 430A promulgated under the Securities
Act will be relied upon, when the Prospectus has been filed in accordance with
said Rule 430A and when any post-effective amendment to the Registration
Statement relating to the offering of the Underwritten Securities becomes
effective; (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding, suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose; (iii) of the
commencement by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Underwritten
Securities for offering or sale in any jurisdiction or of the threat of any
proceeding for that purpose; (iv) of the receipt of any comments from the
Commission; and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. The Company will use its best efforts to prevent the
issuance of any stop or suspension order and if the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly as possible, the lifting or withdrawal of such order or
suspension.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable, pursuant to Rule 424(b)(4)) on or before the date
that it is required to be filed under the Securities Act and the Regulations.
(d) The Company shall, in cooperation with the Representative, at or
prior to the time the Registration Statement becomes effective, arrange for the
qualification of the Securities for offering and sale under the securities or
Blue Sky laws of such jurisdictions as the Representative may designate to
permit the sales and dealings therein for as long as may be reasonably necessary
to complete the distribution contemplated hereby and shall make such
applications, file such documents and furnish such information as may reasonably
be required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation, subject itself to
13
taxation or file a general consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, file and make such statements or reports at
such times as are or may reasonably be required by the laws of such jurisdiction
to continue such qualification.
(e) During the time when a Prospectus is required to be delivered
under the Securities Act with respect to the Underwritten Securities, the
Company shall comply with all requirements imposed upon it by the Securities Act
and the Exchange Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Underwritten Securities in accordance
with the provisions hereof and the Prospectus, or any amendments or supplements
thereto. If at any time when a Prospectus relating to the Underwritten
Securities is required to be delivered under the Securities Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Representative's counsel, the Prospectus, as then amended or supplemented, would
include an 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 the light of the circumstances under which they were made, not misleading, or
if it is necessary at any time to amend the Prospectus to comply with the
Securities Act or the Rules and Regulations with respect to the offering of the
Underwritten Securities, the Company will notify the Representative promptly and
prepare and file with the Commission an appropriate amendment or supplement that
corrects such statement or omission or effects such compliance, each such
amendment or supplement to be satisfactory to Representative's Counsel, and the
Company will furnish to, or at the direction of, the Representative copies of
such amendment or supplement as soon as available and in such quantities as the
Representative may request.
(f) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period beginning on the first day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is also the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Securities Act and Rule 158(a) of the
Regulations.
(g) During the three-year period commencing on the date hereof, the
Company will furnish to its shareholders (i) as soon as practicable, but in any
event not later than the earlier of (A) 120 days after the last day of each
annual fiscal period, or (B) the date required for filing of the same with the
Securities and Exchange Commission under the Regulations its audited statements
of operations, stockholders' equity and cash flows for such period and its
audited balance sheet as of the end of such period as to which the Company's
independent accountants have rendered an opinion; and (ii) make available to its
shareholders, as soon as practicable, but in any event not later than 45 days
after each of the first three quarterly fiscal periods, its unaudited statements
of operations, and cash flows, for such period and its unaudited balance sheet
as of the end of such period (or such earlier dates required by the Rules and
Regulations.
14
In addition, during the three-year period commencing on the date hereof,
the Company will deliver to the Representative:
(1) concurrently with making such quarterly reports available
to its shareholders, summary financial information of the Company;
(2) concurrently with furnishing such annual reports to its
shareholders, a balance sheet of the Company at the end of the preceding fiscal
year, together with statements of operations, shareholders' equity and cash
flows of the Company for such fiscal year, accompanied by a copy of the report
thereon of the Company's independent certified public accountants;
(3) as soon as they are available, copies of all reports
(financial or other) made available by the Company to any person who is not an
employee of, or consultant to, the Company;
(4) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD and/or
any securities exchange;
(5) within a reasonable amount of time prior to its release,
every press release and every material news item or article of interest to the
financial community with respect to the Company or its affairs which is being
prepared by or on behalf of the Company; provided, however, that the
Representative will keep such information confidential and will not use or
disclose any such information prior to its release and will comply with all
applicable securities law requirements in respect thereto, including Regulation
F-D; and
(6) any additional information of a public nature concerning
the Company (and any future subsidiaries) or its businesses which the
Representative may reasonably request.
The foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries are required
to be consolidated under GAAP, and will be accompanied by similar financial
statements for any subsidiary that is not so consolidated.
(h) The Company will maintain a transfer agent for the Common Stock
reasonably satisfactory to the Representative.
(i) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (one of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may reasonably
request.
(j) On or before the effective date of the Registration Statement,
the Company shall provide the Representative with true copies of the Lock-up
Agreements duly executed and delivered by the Lock-Up Parties.
15
(k) Neither the Company, nor any of its officers, directors, nor any
of their respective affiliates (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to, or which might
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale of the
Shares substantially in the manner, and subject to the conditions, set forth
under "Use of Proceeds" in the Prospectus. No portion of the net proceeds will
be used, directly or indirectly, to acquire any securities issued by the
Company.
(m) The Company shall, until at least December 31, 2007, timely file
all such reports, forms or other documents as may be required from time to time,
under the Securities Act, the Exchange Act and the Rules and Regulations, and
all such reports, forms and documents filed will materially comply as to form
and substance with the applicable requirements under the Securities Act, the
Exchange Act and the Rules and Regulations.
(n) The Company shall furnish to the Representative as early as
practicable prior to each of (1) the date hereof, (2) the Closing Date and (3)
each Option Closing Date, if any, but no later than two full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than 30 days prior
to the date of the Registration Statement) that have been read by the Company's
independent public accountants, as stated in their letters to be furnished
pursuant to Section 6(j) hereof. The foregoing information shall be kept
confidential by the Representative.
(o) The Company shall use its reasonable best efforts to maintain
the Nasdaq SmallCap listing of the Common Stock.
(p) For a period of two years from the Closing Date, the Company
shall cause to be furnished to the Representative directly from the Company's
transfer agent, at the Company's sole expense, consolidated transfer sheets
relating to the Common Stock. Such consolidated transfer sheets shall be
furnished to the Representative daily on a daily basis for 60 days following the
Closing Date, and on a weekly basis beginning on the 61st day following the
Closing Date.
(q) Within 30 days after the effective date of the Registration
Statement the Company shall, take all necessary and appropriate actions to be
included in Standard and Poor's Corporation descriptions and endeavor to
continue such inclusion for a period of not less than five years from the
effective date of the Registration Statement.
(r) Except as contemplated by the Warrant Agreement, without the
consent of the Representative, the Company hereby agrees that it will not for a
period of one (1) year from the effective date of the Registration Statement,
adopt or propose to adopt any employee, officer, director, consultant or similar
compensation plan or arrangement permitting (i) the grant, issue, sale or entry
into any agreement to grant, issue or sell any option, warrant or other contract
right at an exercise price that is less than the fair market value on the date
of grant or sale; (ii) the maximum number of shares of Common Stock or other
securities of the Company purchasable at any time pursuant to options or
warrants issued by the Company to exceed 1,000,000 shares; (iii) the
16
payment for such securities with any form of consideration other than cash; or
(iv) the existence of stock appreciation rights, phantom options or similar
arrangements.
(s) Until the completion of the distribution of the Underwritten
Securities, the Company shall not without the prior written consent of the
Representative and Representative's Counsel, issue, directly or indirectly, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the Offering, other than releases that have
been approved by Representative's counsel in advance thereof.
(t) For a period equal to the lesser of (i) seven years from the
date hereof and (ii) the resale to the public of the Warrant Shares, the Company
will not take any action or actions that would prevent or disqualify the use by
the Company of Form S-1 or Form S-3 (or other appropriate forms) for the
registration of the Warrant Shares under the Securities Act.
(u) For a period of two years following the Closing Date, the
Company will permit a designee of the Representative to observe meetings of the
Company's board of directors and shall provide to such designee, at the same
time provided to the members of the Company's Board of Directors, all notices,
minutes, documents, information and other materials generally provided to the
members of the Company's Board of Directors; provided, however, that such
designee of the Representative will agree in writing to be bound by such duties
of confidentiality, care and loyalty as if he were a member of the Company's
Board of Directors. The Company will reimburse the designee directly for
reasonable out-of-pocket expenses incurred in attending board meetings,
including, but not limited to, expenses for food, transportation and lodging,
and shall pay that designee the same cash attendance fee (if any) that the
Company pays to its outside directors. During such two-year period, the Company
will hold no less than one formal, in person meetings of its board of directors
each calendar quarter.
(v) Prior to the 90th day after the Closing Date, the Company will
provide the Representative and its designees with five sets of bound volumes of
the transaction documents relating to the Offering, in form and substance
reasonably satisfactory to the Representative and its counsel.
(w) Prior to the Closing Date, the Company will deliver to the
Representative a reasonably detailed budget covering the period from the Closing
Date to December 31, 2005. In addition, during each of the next two succeeding
fiscal years, the Company will provide to the Representative, not less than 45
days prior to the beginning of such fiscal year, a reasonably detailed budget
covering such fiscal year approved by the Board of Directors. Within 45 days
after each quarter of each budget period, the Company will provide the
Representative with actual results compared to budget, with variances.
(x) The Company will not change auditors for two (2) years from the
date hereof, other than to a "big four" without the consent of the
Representative.
5. Payment of Expenses and Other Fees.
17
(a) The Company hereby agrees to pay on each of the Closing Date and
the Option Closing Date if any (to the extent not payable prior to the Closing
Date) all expenses and fees (other than fees of Representative's counsel, except
as provided in clause (v) below) incident to the performance of the obligations
of the Company under this Agreement and the Warrant Agreement, including, but
not limited to, (i) the fees and expenses of accountants and counsel for the
Company; (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement, each Preliminary Prospectus, the
Prospectus and any amendments and supplements thereto, and the printing, mailing
(including the payment of postage with respect thereto) and delivery of this
Agreement, the Selected Dealer Agreements, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Representative and
such dealers as the Representative may reasonably request in connection with the
offering of the Underwritten Securities; (iii) the printing, engraving, issuance
and delivery of the Underwritten Securities, including, but not limited to, (A)
the purchase from the Company of the Underwritten Securities by the
Underwriters, (B) the purchase from the Company of the Warrants by the
Underwriters, (C) the consummation by the Company of any of its obligations
under this Agreement and the Warrant Agreement and (D) the resale of the
Underwritten Securities by the Underwriters in connection with the distribution
contemplated hereby; (iv) any qualification of the Underwritten Securities under
state or foreign securities or "Blue Sky" laws and determination of the status
of such securities under legal investment laws, including the costs of printing
and mailing the "Preliminary Blue Sky Memorandum" and the "Supplemental Blue Sky
Memorandum," and the reasonable fees and disbursements of counsel incurred in
connection therewith; (v) the fees and expenses of Representative's counsel in
accordance with a separate retainer agreement, up to $75,000 plus out-of-pocket
expenses; (vi) reasonable advertising costs and expenses, including, but not
limited to, costs and expenses in connection with the "road show," information
the reasonable meetings and presentations (including reasonable travel and hotel
expenses of the Representative), up to five copies of bound volumes, prospectus
memorabilia and expenses relating to "tomb-stone" advertisements; (vii)
reasonable costs and expenses in connection with due diligence investigations by
the Company, including, but not limited to, the reasonable fees of any
independent counsel or consultant retained by the Company; (viii) reasonable
fees and expenses of the transfer agent and registrar; (ix) the fees payable to
the Commission, the NASD and state securities regulators; and (x) the fees and
expenses incurred in connection with the inclusion of the Underwritten
Securities and Warrant Shares on the Nasdaq SmallCap Market.
(b) The Company agrees that, in addition to the expenses payable
pursuant to Section 5(a), it will pay to the Representative on the Closing Date,
by certified or bank cashier's check or, at the Representative's election, by
deduction from the proceeds of the Offering, a non-accountable expense allowance
equal to 3% of the gross proceeds from the sale of the Firm Securities, net of
$25,000 that has already been paid by the Company. In the event the
Representative elects to exercise the over-allotment option, the Company further
agrees to pay to the Representative, on each Option Closing Date, by certified
or bank cashier's check or, at the Representative's election, by deduction from
the proceeds of the Offering, a non-accountable expense allowance equal to 3% of
the gross proceeds from the sale of the Option Securities on such Option Closing
Date.
18
(c) The Company agrees that all payments and reimbursements due
pursuant to this Section 5 will be promptly and fully made. If the Company shall
fail to promptly and fully pay all amounts due pursuant to this Section 5, the
Company shall be liable to the Representative for all attorneys' fees and costs
incurred in connection with the collection of such amounts.
(d) The Company agrees to sell to the Representative or its
designees, for nominal consideration, warrants (the "Warrants") pursuant to a
warrant agreement (the "Warrant Agreement") for the purchase, during the period
commencing one year after the date of the Prospectus (as defined below) and
expiring on the fourth anniversary of the date of the Prospectus, of 250,000
shares of Common Stock, subject to adjustment as provided in the Warrant
Agreement (the "Warrant Shares"), at an initial exercise price of $6.25 per
share, subject to adjustment as provided in the Warrant Agreement.
6. Conditions to the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and, with respect to the purchase and sale of the Option
Securities only, as of each Option Closing Date, if any, as if they had been
made on and as of such Closing Date and such Option Closing Date, as the case
may be; the accuracy on and as of the Closing Date or Option Closing Date, if
any, of the statements of the officers of the Company made on certificates
delivered pursuant to the provisions hereof; and the performance by the Company
on and as of the Closing Date and, with respect to the purchase and sale of the
Option Securities only, each Option Closing Date, if any, of its covenants and
obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., New York time, on the date hereof or such later date and time as
shall be approved in writing by the Representative, in its sole discretion and,
at the Closing Date and, with respect to the purchase and sale of the Option
Securities only, each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission, and any request on the part of the Commission
for additional information shall have been complied with to the reasonable
satisfaction of Representative's Counsel. If the Company has elected to rely
upon Rule 430A of the Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Regulations within the
prescribed time period, and prior to the Closing Date the Company shall have
provided evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Regulations.
(b) No order suspending the sale of the Underwritten Securities in
any jurisdiction shall have been issued on either the Closing Date or, with
respect to the purchase and sale of the Option Securities only, the relevant
Option Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be threatened.
19
(c) On the Closing Date, the Representative shall have received the
opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ LLP, counsel to the Company (the
"Company's Counsel"), dated the Closing Date, addressed to the Representative
and in form and substance reasonably satisfactory to Representative's Counsel,
substantially to the effect that:
(1) Tarpon Industries, Inc. ("Tarpon") (A) has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of Michigan; and (B) has the corporate power and authority to
own or lease its properties and conduct its business as described in the
Prospectus. Based solely on a certificate of officers of Tarpon, ▇▇▇▇▇▇ Welding
Co. ("EWCO"), and BST Acquisition, Ltd. ("BST") (the "Certificate") and the
results of an inquiry circulated to the partners of such firm, such firm
confirms to the Representative that, to such firm's Actual Knowledge, at the
date of this opinion letter, there is no action or proceeding pending before any
court, governmental agency or arbitrator, or overtly threatened in writing
against Tarpon, EWCO, Steelbank or ▇▇▇▇▇▇ Road that seeks to enjoin the
performance or affect the enforceability of this Agreement or the issuance and
sale of shares of Common Stock hereunder; [The opinions in 1(A) and (B) above
shall be given as well for each subsidiary of Tarpon Industries, Inc., and
insofar at the subsidiaries are formed under the laws of Canada or its
provinces, an opinion of Canadian counsel acceptable to the Representative may
be substituted therefor.]
(2) the authorized capital stock of Tarpon is as set forth in
the Prospectus under the caption "Capitalization". The description of Tarpon's
common shares, and the other statements in the Prospectus, under the caption
"Description of Securities" in the Prospectus, to the extent that they
constitute statements of law, descriptions of statutes, rules or regulations or
legal conclusions, conform in all material respects to the terms of the Tarpon's
common shares contained in Tarpon's Restated Articles of Incorporation (the
"Articles") and fairly present in all material respects the matters referred to
in such statements. All issued and outstanding common shares of Tarpon have been
duly authorized and validly issued and are fully paid and non-assessable. To
such counsel's Actual Knowledge, none of such common shares was issued in
violation of preemptive rights arising under the Michigan Business Corporation
Act, as amended, the Articles, Tarpon's bylaws or any agreement listed as an
Exhibit to the Registration Statement (the "Exhibits"). The Underwritten
Securities to be sold by the Company hereunder and the Warrant Shares, to such
Counsel's Actual Knowledge, are not and will not be subject to any preemptive
rights of any shareholder arising under the Michigan Business Corporation Act,
as amended, the Articles, Tarpon's bylaws or any of the Exhibits, have been duly
authorized and, when issued, paid for and delivered in accordance with the terms
hereof and thereof, will be validly issued, fully paid and non-assessable; all
corporate action required to be taken by Tarpon for the authorization of the
issuance and sale of the Underwritten Securities and Warrant Shares has been
taken; the form of certificate used by Tarpon to represent its common shares
complies in all material respects with any applicable requirement of Michigan
law, the Articles and Tarpon's bylaws;
(3) the Registration Statement has become effective under the
Securities Act, and, if applicable, filing of the Prospectus to include pricing
information omitted from the Prospectus included in the Registration Statement
as of the effective date has been made, and, to such counsel's Actual Knowledge,
(1) no stop order suspending the effectiveness of the Registration Statement has
been issued under the Securities Act, and (2) no proceedings for that purpose
have been instituted, are pending or, are threatened by the Commission under the
Securities Act;
20
(4) the Registration Statement, and the Prospectus and any
amendments or supplements thereto (other than the financial statements,
schedules and other financial and statistical data included therein, as to which
no opinion need be rendered) complies as to form in all material respects with
the requirements of the Securities Act and the Regulations;
(5) to such counsel's Actual Knowledge, there are no
agreements, contracts or other documents required by the Securities Act to be
described in the Registration Statement and the Prospectus and filed as exhibits
to the Registration Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits thereto;
(6) Tarpon has the corporate power and authority to enter into
each of this Agreement and the Warrant Agreement and to perform its obligations
thereunder, and the execution, delivery and performance by Tarpon of each of
this Agreement and the Warrant Agreement have been duly authorized by all
requisite corporate action by or on behalf of Tarpon, and such counsel shall
confirm that this Agreement and the Warrant have been duly executed and
delivered by Tarpon. Each of this Agreement and the Warrant Agreement,
constitutes a legal, valid and binding agreement of Tarpon enforceable against
Tarpon in accordance with its terms, except as enforceability may be limited by
general equitable principles, bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting creditors' rights
generally, except that the remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought and
except as to those provisions relating to indemnity or contribution for
liabilities arising under the Act, as to which no opinion need be expressed; and
none of Tarpon's execution or delivery of the Agreement and the Warrant
Agreement, or its performance hereunder or thereunder, except as disclosed in
the Prospectus, (A) violates the Articles or the bylaws (each, as amended) of
Tarpon; (B) to our Actual Knowledge, results in the creation or imposition of
any lien, pledge, or security interest upon any property or assets (tangible or
intangible) of Tarpon or any subsidiary of Tarpon pursuant to the terms or
provisions of, or constitutes or will constitute a breach of any of the express
terms of, or constitutes or will constitute a default under the express terms
of, any of the Exhibits; (C) violates a Michigan or federal statute, rule or
regulation that, to such counsel's Actual Knowledge, is applicable to Tarpon
where such violation would reasonably be expected to have a material adverse
effect on the validity, performance or enforceability of any of the terms of the
Agreement or the Warrant Agreement; or (D) based solely on the Certificate and
the Inquiry, violate any of Tarpon's existing obligations under any judgment,
decree or order of any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body (including, without limitation,
those having jurisdiction over environmental or similar matters) applicable to
Tarpon or any subsidiary, domestic or foreign, having jurisdiction over the
Company or any of its respective activities or properties;
(7) no consent, approval, authorization or order of, and no
filing with, any court, regulatory body, governmental agency or body (other than
such as may be required under Blue Sky laws, or required from the NASD in regard
to reasonable compensation of the Underwriters, as to which no opinion need be
rendered) is required to be made or obtained by Tarpon for the issuance of the
Underwritten Securities, the issuance of the Warrants and the Warrant Shares,
the execution
21
and delivery of the Registration Statement and the performance of this Agreement
and the Warrant Agreement (except consents, approvals, authorizations or orders
and filings that have been properly made or obtained);
(8) the Underwritten Securities and Warrant Shares have been
accepted for quotation, subject to official notice of issuance, on the Nasdaq
SmallCap Market;
(9) neither the execution and delivery by Tarpon of, nor the
performance of its obligations under this Agreement and the Warrant Agreement
nor the sale, issuance, execution or delivery by Tarpon of the Underwritten
Securities or Warrants will violate Regulation T, U or X of the Federal Reserve
Board; and
(10) nothing has come to the attention of Company's counsel
that causes such counsel to believe that the Registration Statement as of the
effective date and as of the Closing Date contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus as of the date thereof and as of the Closing
Date contained or contains any untrue statement of a material fact or omitted or
omits to state a 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 (it being understood that such counsel need make no
statement with respect to the financial statements, schedules and other
financial and statistical data included in the Registration Statement or the
Prospectus).
At each Option Closing Date, if any, the Representative shall have
received the favorable opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ LLP, counsel
to the Company, dated the Option Closing Date, addressed to the Representative
and in form and substance reasonably satisfactory to Representative's Counsel
confirming as of the Option Closing Date the opinions made by such counsel in
its opinion delivered on the Closing Date.
"Actual Knowledge" of Company's counsel means the actual conscious
awareness of all attorneys actively involved in assisting Tarpon in the
preparation of the Registration Statement, who shall be named in the opinion.
(d) On and as of the Closing Date and each Option Closing Date, if
any, (i) there shall have been no material adverse change in the condition,
financial or otherwise, prospects, or the business of the Company, whether or
not in the ordinary course of business, from the latest dates as of which such
condition was set forth in the Registration Statement and Prospectus; (ii) there
shall not have been any transaction, not in the ordinary course of business,
entered into by the Company, from the latest date as of which the financial
condition of the Company is set forth in the Registration Statement and
Prospectus that is materially adverse to the Company; (iii) the Company shall
not be in default under any provision of any instrument relating to any
outstanding indebtedness of the Company, except as disclosed in the Registration
Statement and Prospectus; (iv) since the latest date set forth in the
Registration Statement, the Company shall not have issued any securities (other
than the Underwritten Securities and Warrants) or declared or paid any dividend
or made any distribution with respect to its capital stock of any class and
there has not been any change in the capital stock or any change in the debt
(long or short term), or liabilities or
22
obligations of the Company (contingent or otherwise), except in the ordinary
course of business; or except as disclosed in the Registration Statement and
Prospectus and except as the same are settled with an application of proceeds
which is in accordance with the Use of Proceeds in the Registration Statement;
(v) no assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or overtly threatened
against the Company, or affecting any of its properties or business before or by
any court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding could reasonably be
expected to materially adversely affect the condition, financial or otherwise,
results of operations, business or prospects of the Company, except as set forth
in the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Securities Act and no proceedings therefor shall have been
initiated or overtly threatened by the Commission or any state regulatory
authority.
(e) At each of the Closing Date and each Option Closing Date, if
any, the Representative shall have received a certificate of Tarpon signed by
the chief executive officer and by the chief financial or chief accounting
officer of Tarpon, dated the Closing Date or Option Closing Date, as the case
may be, to the effect that such person has reviewed the Registration Statement,
the Prospectus and this Agreement, and that:
(1) The representations and warranties of the Company
contained in this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the Company has
complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at or prior
to such Closing Date or Option Closing Date, as the case may be;
(2) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no proceedings
for that purpose have been instituted or are pending or, to each such person's
knowledge, are contemplated or threatened under the Securities Act;
(3) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement or 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;
(4) Subsequent to the latest dates as of which information is
given in the Registration Statement and the Prospectus through the Closing Date
or the Option Closing Date, as the case may be: (A) the Company has not
incurred, other than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent, except as disclosed in the
Prospectus; (B) the Company has not paid or declared any dividends or other
distributions on its capital stock, except as disclosed in the Prospectus; (C)
the Company has not entered into any transactions not in the ordinary course of
business, except as disclosed in the Prospectus; (D) there has not been any
change in the capital stock or long-term debt or any increase in the short-term
borrowings (other than any increase in the short-term borrowings in the ordinary
course of business or in connection
23
with carrying out the Offering) of the Company, except as disclosed in the
Prospectus; (E) the Company has not sustained any material loss or damage to its
property or assets, whether or not insured; (F) there is no litigation that is
pending or, to the Company's knowledge, threatened (or circumstances giving rise
to same) against the Company or any affiliated party of any of the foregoing
that is required to be set forth in an amended or supplemented Prospectus that
has not been set forth; and (G) there has occurred no other event required to be
set forth in an amended or supplemented Registration Statement or Prospectus.
(f) On or prior to the date hereof, the Underwriters shall have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriters, as described in the Registration Statement
(g) At the time this Agreement is executed, the Representative shall
have received a letter, dated such date, addressed to the Representative in form
and substance satisfactory (including the nature of the changes or decreases, if
any, referred to in clauses (3) (B) and (C) below, in all respects to the
Representative and Representative's counsel, from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP:
(1) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Securities Act
and the applicable Regulations;
(2) stating that it is their opinion that the financial
statements of the Company audited by them and included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Rules and Regulations
thereunder;
(3) stating that, on the basis of procedures, but not an audit
in accordance with G.A.A.S., which included a reading of the latest available
unaudited interim financial statements of the Company (with an indication of the
date of the latest available unaudited interim financial statements), a reading
of the latest available minutes of meetings and actions of the shareholders, the
Board of Directors and the Audit Committee of the Board of Directors of the
Company, inquiries of officers and other employees of the Company responsible
for financial and accounting matters, nothing has come to their attention which
would lead them to believe that: (A) the unaudited financial statements
contained in the Registration Statement and Prospectus do not comply as to form
in all material respects with the applicable accounting requirements of the
Securities Act and the Rules and Regulations or that any material modifications
should be made to the unaudited interim financial statements for them to be in
conformity with generally accepted accounting principles; or (B) at a specified
date not more than five days prior to the date of delivery of such letter, there
has been any change in the capital stock or long-term debt of the Company, or
any decrease in the shareholders' equity or net current assets or net assets of
the Company as compared with amounts shown in the September 30, 2004 balance
sheet included in the Registration Statement, other than as set forth in the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease; and (C) the sales by EWCO, Steelbank and
▇▇▇▇▇▇ Road for the period October 1, 2004 to December 31, 2004 provided by the
Company are inaccurate to any material extent other than as set forth in the
Registration Statement; and
24
(4) stating that they have compared specific dollar amounts,
percentages of revenues and losses, and other financial information pertaining
to the Company set forth in the sections of the Prospectus set forth below, (in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, of the Company
and excluding any questions requiring an interpretation by legal counsel), with
the results obtained from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards) set forth in the
letter and found them to be in agreement: (A) Prospectus Summary;
Capitalization; Selected Financial Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations; Business - Steel, and Financial
Information About Geographic Areas; and (B) Management and Related Party
Transactions insofar as the numerical information contained therein is also
contained in the financial statements in the Registration Statement.
(h) At the Closing Date and each Option Closing Date, if any, the
Representative shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP a letter dated as of
the Closing Date or the Option Closing Date, as the case may be, to the effect
that it reaffirms that statements made in the letters furnished pursuant to
Section 6(g) hereof, except that the specified date referred to therein shall be
a date not more than five days prior to the Closing Date or the Option Closing
Date, as the case may be, and, if the Company has elected to rely on Rule 430A
of the Regulations, to the further effect that they have carried out procedures
as specified in clause (4) of Section 6(g) with respect to certain amounts,
percentages and financial information as specified by the Representative and
deemed to be a part of the Registration Statement pursuant to Rule 430A(b) and
have found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (4).
(i) On each of the Closing Date and the Option Closing Date, if any,
there shall have been duly tendered to, or at the direction of, the
Representative the appropriate number of Underwritten Securities.
(j) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters shall have been issued on the
Closing Date or the Option Closing Date, if any, and no proceedings for that
purpose shall have been instituted.
(k) On or before the Closing Date, the Company shall have executed
and delivered to the Representative, (i) the Warrant Agreement substantially in
the form filed as Exhibit 1.2 to the Registration Statement and (ii) the
Warrants in such denominations and to such designee as shall have been provided
by the Representative to the Company.
(l) On or before the Closing Date, the Underwritten Securities and
Warrant Shares shall have been duly approved for inclusion on the Nasdaq
SmallCap Market, subject to official notice of issuance.
(m) On or before the Closing Date, there shall have been delivered
to the Representative, Lock-up Agreements from the Lock-Up Parties.
25
(n) Trading in the Common Stock shall not have been suspended by the
Nasdaq SmallCap Market at any time after the date hereof.
(o) Prior to the Closing Date, the Representative shall have
received from the Company a reasonably detailed budget covering the period from
the Closing Date to December 31, 2005 together with financial statements of the
Company prepared in sufficient detail so as to allow comparison to the budget.
(p) On the Closing Date, the following matters shall have occurred
with respect to transactions related to the February, March and April 2004 note
financings, EWCO, Steelbank and ▇▇▇▇▇▇ Road, as such terms are used in the
Registration Statement and Prospectus:
(1) (A) The closing of the acquisition of ▇▇▇▇▇▇ Road in
accordance with the agreements filed as Exhibits to this Registration Statement
(the "▇▇▇▇▇▇ Road Agreements") shall have taken place in escrow subject to an
escrow agreement acceptable to the Representative and its counsel, providing
that the only action required to release escrow is that the payments at closing
described in the ▇▇▇▇▇▇ Road Agreements to be made at its closing shall be made
not later than one (1) business day after the Closing Date, and (B) a closing of
the working capital loan for the ▇▇▇▇▇▇ Road business shall have taken place in
escrow subject to an escrow agreement acceptable to the Representative and its
counsel providing that the only action to release the loan documents and to
provide funding thereunder is the release of the ▇▇▇▇▇▇ Road escrow described in
(A) above.
(2) The Company shall have received formal written commitments
for the financing required for the purchase of the ▇▇▇▇▇▇ Road inventory and
real property.
(3) The Company shall pay in full principal, interest and
other charges, if any, of the notes issued in the February, March and April 2004
note financings out of the proceeds of the Offering.
(4) The Company shall pay all sums due at the Closing Date
under notes issued in connection with the acquisition of Steelbank out of the
proceeds of the Offering.
(5) The Company shall pay all sums due at the Closing Date
under notes issued in connection with the acquisition of EWCO out of the
proceeds of the Offering.
(6) No former owner of Steelbank or EWCO has commenced any
action, or has threatened to commence any action, related to notes received by
them or related to rescission of any such transactions.
(7) With respect to Option Closing Dates only, nothing has
occurred on any Option Closing Date which indicates that a condition above,
which was satisfied as of the Closing Date, may in fact, not be satisfied.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to the
26
Representative and its counsel. If any condition to the Representative's
obligations hereunder to be fulfilled prior to or at the Closing Date or the
relevant Option Closing Date, as the case may be, is not so fulfilled, the
Representative may terminate this Agreement or, if the Representative so elects,
it may waive any such condition(s) that have not been fulfilled or extend the
time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Representative, the Underwriters (for purposes of this Section 7, "Underwriters"
shall include the officers, directors, members, stockholders and employees of
the Underwriters), and each person, if any, who controls the Underwriters
("controlling person") within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, and their counsel from and against any and
all losses, claims, damages, expenses or liabilities, joint or several (and
actions, proceedings, suits and litigation with respect thereto), whatsoever
(including, but not limited to, any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any action, suit,
proceeding or litigation, commenced or threatened, or any claim whatsoever), as
such are incurred, to which any Underwriter or any such controlling person may
become subject under the Securities Act, the Exchange Act or any other statute
or at common law or otherwise, insofar as such losses, claims, damages, expenses
or liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained (i) in any Preliminary Prospectus,
the Registration Statement or the Prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included securities of the
Company issued or issuable upon exercise of the Underwritten Securities; or
(iii) in any application or other document or written communication (in this
Section 7 collectively called an "application") executed by the Company or based
upon written information furnished by the Company in any jurisdiction in order
to qualify the Underwritten Securities under the securities laws thereof or
filed with the Commission, any state securities commission or agency, The Nasdaq
Stock Market or any other securities exchange; or arise out of or are based upon
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Preliminary Prospectus and Prospectus, in the light of the
circumstances under which they were made), unless such statement or omission was
made in reliance upon and in conformity solely with the Underwriters'
Information and; provided, further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any Preliminary
Prospectus or the Prospectus, the indemnification provided for herein shall not
apply to any loss, liability, claim, damage or expense to the extent the same
results from the sale of Underwritten Securities to a person to whom there was
not sent or given, at or prior to the written confirmation of such sale, a copy
of the Prospectus, or in the case of an untrue statement or omission or alleged
untrue statement or omission in the Prospectus, a copy of the amended Prospectus
or supplement thereto, if the Company has previously furnished sufficient copies
thereof, based upon the number of copies requested by the Representative, to the
Representative a reasonable time in advance and the claim, damage or expense of
such person results from an untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in a Preliminary
Prospectus or Prospectus that was corrected in the Prospectus or amendment or
supplement thereto.
27
(b) The Underwriters agree to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement and each other person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act, and their
officers, employees and counsel, to the same extent as the foregoing indemnity
from the Company to the Underwriters but only with respect to statements or
omissions, if any, made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment thereof or supplement thereto or in any
application made in reliance upon, and in strict conformity with, the
Underwriters' Information.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim with respect thereto is to be made against
one or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from: any
liability that it may have under Section 7(a) or (b) hereof unless and to the
extent that it has been prejudiced in any material respect by such failure or
from the forfeiture of substantial rights and defenses. In case any such action,
suit or proceeding is brought against any indemnified party, and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them that are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel selected by the indemnified parties shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
(d) The indemnity agreements in Section 7(a) and Section 7(b) shall
be in addition to any liability that the Company, the Representative or the
Underwriters may have at common law or otherwise. Anything in this Section 7 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent unless a
complete release is obtained; provided, however, that such consent shall not be
unreasonably withheld or delayed.
28
(e) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification pursuant
to this Section 7, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case; or (ii) contribution under the Securities Act may be required on the part
of any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or liabilities
(or actions, suits, proceedings or litigation with respect thereto) (A) in such
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified on
the other hand, from the offering of the Underwritten Securities; or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (A) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by of the Company on
the one hand, and the Underwriters, on the other, shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Underwritten
Securities (before deducting expenses other than the Representative's expenses)
bear to the total underwriting discounts received by the Underwriters hereunder,
in each case as set forth in the table on the cover page of the Prospectus.
Relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, or by the Underwriters, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, expenses or liabilities (or actions,
suits, proceedings or litigation with respect thereto) referred to above in this
Section 7(e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action, claim, suit, proceeding or litigation. Notwithstanding the
provisions of this Section 7(e), an Underwriter shall not be required to
contribute any amount in excess of the underwriting discounts applicable to the
Underwritten Securities purchased by the Underwriter hereunder. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7,
each person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who has signed the Registration
Statement, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to this Section 7(e). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party with respect
to which a claim for contribution may be made against another party or parties
under this Section 7(e), notify such party or parties from whom contribution may
be sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this Section 7(e) to the
extent that such party or parties were not adversely affected by such omission.
The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
29
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company delivered pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Dates, as the case may be, and such representations,
warranties and agreements of the Company, as the case may be, and the respective
indemnity agreements contained in Section 7 hereof, shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
the Representative, the Underwriters, the Company, any controlling person of the
Representative, the Underwriters or the Company, and shall survive termination
of this Agreement or the issuance and delivery of the Underwritten Securities
and Warrants to the Underwriters; provided, however, that the representations
and warranties contained in this Agreement or in any certificates of the
Company's officers shall survive only until the third (3rd) anniversary of the
Closing Date, and claims thereunder must be made, if at all, by such date.
9. Effective Date. This Agreement shall become effective at 10:00 a.m.,
New York City time, on the next full business day following the date hereof, or
at such earlier time after the Registration Statement becomes effective as the
Representative, in its sole discretion, shall release the Underwritten
Securities for the sale to the public; provided, however, that the provisions of
this Section 9 and Sections 5, 7 and 10 of this Agreement shall, at all times be
effective subject to their respective terms. For purposes of this Section 9, the
Underwritten Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Representative of electronic
communications (facsimile or e-mail) to securities dealers releasing such shares
for offering or the release by the Representative for publication of the first
newspaper advertisement that is subsequently published relating to the
Underwritten Securities.
10. Termination.
(a) This agreement may be terminated with respect to the Firm
Securities or Option Securities, if any, by the Representative by notice to the
Company given prior to the Closing Date or the relevant Option Closing Date,
respectively, in the event that all conditions set forth in Section 6 have not
been satisfied or the Company shall have failed, refused or been unable to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder (after a reasonable opportunity to cure) at or prior
thereto; and, in addition, if after the execution and delivery of this Agreement
and at or prior to the Closing Date or such Option Closing Date, respectively:
(1) the Company sustains a loss by reason of explosion, fire,
flood, accident or other calamity, which, in the opinion of the Representative,
substantially affects the value of the properties of the Company or which
materially interferes with the operation of the business of the Company
regardless of whether such loss shall have been insured; there shall have been a
material adverse change (including, without limitation, a change in management
(other than the appointment of a chief executive officer, a chief operating
officer, or both, of Tarpon who are reasonably acceptable to the Representative)
or control of the Company), in the business, operations, condition, financial or
otherwise, prospects, shareholders' equity, properties, business or results of
operations of the Company, except in each case as described in or contemplated
by the Prospectus
30
(exclusive of any amendment or supplement thereto); or ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall
have suffered any injury or disability of a nature that could materially
adversely affect his ability to function as the President and Chief Executive
Officer of the Company, or has ceased to act as such, unless his positions have
been filled in the manner as set forth above;
(2) any action, suit or proceeding shall be overtly
threatened, instituted or pending, at law or in equity, against the Company or
any of its directors or executive officers, by any person or by any federal,
state or other governmental or regulatory commission, board or agency that could
reasonably be expected to have a Material Adverse Effect on the Company;
(3) trading in the Common Stock shall have been suspended by
the Commission or The Nasdaq Stock Market or trading in securities generally on
the New York Stock Exchange, American Stock Exchange or the over-the-counter
market shall have been suspended or minimum or maximum prices shall have been
established on either such exchange or quotation system;
(4) a moratorium on banking activities shall have been
declared by New York State or United States authorities; or
(5) there shall have been (A) an outbreak of hostilities
between the United States and any foreign power (or, in the case of any ongoing
hostilities, a material escalation thereof); (B) an outbreak of any other
insurrection or armed conflict involving the United States, or a terrorist
attack in the United States; or (C) any other calamity or crisis or material
change in financial, political or economic conditions, having an effect on the
financial markets that, in the judgment of the Representative, makes it
impracticable or inadvisable to proceed with the Offering or the delivery of the
Underwritten Securities as contemplated by the Registration Statement, as
amended.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) or Section 11 hereof, or if this
Agreement shall not be carried out by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied after a reasonable cure period (including,
without limitation, pursuant to Section 6, Section 10(a) or Section 11 hereof),
the Company shall promptly reimburse and indemnify the Representative for all of
its reasonable actual out-of-pocket expenses, including the fees and
disbursements of Representative's counsel (less amounts previously paid pursuant
to Section 5(c) above). Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 10(a) and 11 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Default by the Company. If the Company shall fail at the Closing Date
or any Option Closing Date, as applicable, to sell and deliver the number of
Underwritten Securities which it is obligated to sell hereunder on such date,
then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Securities to be purchased on an Option Closing Date, the
Representative may at its option, by notice from the Representative to the
Company, terminate the Representative's obligation to purchase Option Securities
from the Company on such date) without
31
any liability on the part of the non-defaulting party other than pursuant to
Section 5, Section 7 and Section 10 hereof. No action taken pursuant to this
Section 11 shall relieve the Company from liability, if any, with respect to
such default.
12. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given when delivered in person, by facsimile or recognized courier to
a party and its counsel indicated below. Notices to the Representative shall be
directed to it at ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq., Ruskin Moscou Faltischek, P.C., ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Notices to the Company shall be directed to the
Company at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief
Executive Officer, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇, First ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇.
13. Parties. This Agreement shall inure solely to the benefit of and shall
be binding upon, the Representative, the Underwriters, the Company and the
controlling persons, directors, officers, and other persons referred to in
Section 7 hereof, and their respective successors, legal representatives and
permitted assigns, and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or with respect to or by virtue
of this Agreement or any provisions herein contained. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase. Neither this Agreement nor any rights or obligations hereunder may be
assigned or delegated by a party without the prior written consent of the other
party.
14. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without regard to
conflicts of law principles. Any action hereunder shall be brought exclusively
in the courts sitting in the City, County and State of New York. The party
prevailing in any proceeding shall be entitled to recover its reasonable legal
fees and expenses from the parties not prevailing.
15. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and all of which taken together shall
be deemed to be one and the same instrument.
16. Entire Agreement; Amendments. This Agreement and the Warrant Agreement
constitute the entire agreement of the parties hereto and supersede all prior
and/or contemporaneous written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may not
be amended except in a writing, signed on behalf of the Representative and the
Company.
If the foregoing correctly sets forth the understanding between the
Representative and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us in accordance with its terms..
Very truly yours,
32
TARPON INDUSTRIES, INC.
By: ________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and CEO
Confirmed and accepted as of
the date first above written:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., LLC
By: ________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: A Member
33
SCHEDULE A
Number of Firm
Securities to be
Name of Underwriter Purchased
------------------- ----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC [ ]
__________________________ [ ]
__________________________ [ ]
34