ORGANIC FOOD PRODUCTS
1,200,000 Shares
UNDERWRITING AGREEMENT
_______________, 1997
Sentra Securities Corporation
Spelman & Co., Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(As Representatives of the Several
Underwriters Named in Schedule 1 hereto)
Dear Sirs:
Organic Food Products, a California corporation (the "Company"), hereby
confirms its agreement (this "Agreement") with the several underwriters named
in Schedule 1 hereto (the "Underwriters"), for whom Sentra Securities
Corporation and Spelman & Co., Inc. have been duly authorized to act as
representatives (in such capacity, the "Representatives"), as set forth below:
SECTION 1.
DESCRIPTION OF TRANSACTION
The Company proposes to issue and sell to the Underwriters on the
Closing Date (as defined below), pursuant to the terms and conditions of this
Agreement, an aggregate of 1,200,000 shares ("Firm Shares") of the Company's
Common Stock ("Common Stock") at a price of $5.00 per Share on the terms as
hereinafter set forth. The Company also proposes to issue and sell to the
several Underwriters on or after the Closing Date not more than 180,000
additional Shares if requested by the Representatives as provided in Section
3.02 of this Agreement (the "Option Shares"). The Firm Shares and any Option
Shares are collectively referred to herein as the "Shares."
SECTION 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Underwriters to enter into this Agreement, the
Company hereby represents and warrants to and agrees with the Underwriters
that:
2.1 REGISTRATION STATEMENT AND PROSPECTUS. A registration statement
on Form SB-2 (File No. _______) with respect to the Shares, including the
related prospectus, copies of which have heretofore been delivered by the
Company to the Underwriters, has been filed by the Company in conformity with
the requirements of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and one or more
amendments to such registration statement have been so filed. After the
execution of this Agreement, the Company will file with the Commission either
(a) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most recently included in an amendment to such registration statement
(or, if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule 430A
under the Act or permitted by Rule 424(b) under the Act and as have been
provided to and approved by the Representatives prior to the execution of
this Agreement, or (b) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the
Act, an amendment to such registration statement, including a form of
prospectus, a copy of which amendment has been furnished to and approved by
the Representatives prior to the execution of this Agreement. As used in
this Agreement, the term "Registration Statement" means such registration
statement on Form SB-2 and all amendments thereto, including the prospectus,
all exhibits and financial statements, as it becomes effective; the term
"Preliminary Prospectus" means each prospectus included in said Registration
Statement before it becomes effective; and the term "Prospectus" means the
prospectus first filed with the Commission pursuant to Rule 424(b) under the
Act or, if no prospectus is required to be filed pursuant to said Rule 424(b),
such term means the prospectus included in the Registration Statement when it
becomes effective.
2.2 ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. Neither the
Commission nor the "blue sky" or securities authority of any jurisdiction has
issued any order preventing or suspending the use of any Preliminary Prospectus.
When (a) any Preliminary Prospectus was filed with the Commission, (b) the
Registration Statement or any amendment thereto was or is declared effective,
and (c) the Prospectus or any amendment or supplement thereto is filed with
the Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment
or supplement is not required to be so filed, when the Registration Statement
or the amendment thereto containing such amendment or supplement to the
Prospectus was or is declared effective) and on the Closing Date the Prospectus,
as amended or supplemented at any such time, such filing (i) contained or
will contain all statements required to be stated therein in accordance with,
and complied or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission promulgated
thereunder (the "Rules and Regulations") and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. The foregoing representation does
not apply to statements or omissions made in any Preliminary Prospectus, the
Registration Statement or any amendment thereto or the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein.
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2.3 INCORPORATION AND STANDING. The Company has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the State of California and is duly qualified to transact
business as a foreign corporation and is in good standing under the laws of
all other jurisdictions where the ownership or leasing of its properties or
the conduct of its business requires such qualification, except where the
failure to be so qualified does not amount to a material liability or
disability to the Company.
2.4 DUE POWER AND AUTHORITY. The Company has full corporate power
to own or lease its properties and conduct its business as described in the
Registration Statement and the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus; and the Company has full
corporate power to enter into this Agreement and to carry out all the terms
and provisions hereof to be carried out by it. The execution and delivery of
this Agreement and consummation of the transactions contemplated herein have
been duly authorized by the Company and this Agreement has been duly executed
and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
the terms thereof, except as may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and by general equitable principles, and as rights to indemnity and
contribution hereunder may be limited by applicable law.
2.5 CONSENTS; NO DEFAULTS. The issuance, offering and sale of the
Shares to the Underwriters by the Company pursuant to this Agreement, the
compliance by the Company with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (a) require
the consent, approval, authorization, registration or qualification of or
with any governmental authority, except such as have been obtained, or as may
be required under the Act or under the securities or blue sky laws of any
jurisdiction, or (b) conflict with or result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, lease or other material agreement or instrument to
which the Company is a party or by which the Company or any of its properties
is bound, or the charter documents or bylaws of the Company, or any statute
or any judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to the Company.
2.6 NO BREACH OR DEFAULT. The Company is not in breach of any
term or provision of its Articles of Incorporation or Bylaws; no default
exists, and no event has occurred which with notice or lapse of time or both,
would constitute a default, in the Company's due performance and observance
of any term, covenant or condition of any indenture, mortgage, deed of trust,
lease, note, bank loan or credit agreement or any other material agreement or
instrument to which the Company or its properties may be bound or affected in
any respect which would have a material adverse effect on the condition
(financial or otherwise), business, properties, prospects, net worth or
results of operations of the Company.
2.7 LICENSES. Except as described in the Prospectus, the Company
possesses all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary for
the conduct of its business, including without limitation the Food and Drug
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Administration, the United States Department of Agriculture and the
Environmental Protection Agency, and the Company has not received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would result in a
material adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company, except as
described in or contemplated by the Registration Statement. Each approval,
registration, qualification, license, permit, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative
or other governmental body or agency necessary in connection with the
execution and delivery by the Company of this Agreement and the consummation
of the transactions contemplated (except such additional actions as may be
required by the National Association of Securities Dealers, Inc. or may be
necessary to qualify the Common Stock for public offering under state
securities or blue sky laws) has been obtained or made and each is in full
force and effect.
2.8 COMPLIANCE WITH LAWS. Except as disclosed in the Registration
Statement and in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), the Company is not in violation of
any laws, ordinances, governmental rules or regulations to which it is subject,
which would have a material adverse effect on the condition (financial or
otherwise), business, properties, prospects, net worth or results of operations
of the Company.
2.9 EXISTING CAPITAL STRUCTURE AND SHAREHOLDER RIGHTS. The Company
has an authorized, issued and outstanding capitalization as set forth in, and
capital stock conforms in all material respects to the description contained
in, the Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus. Except as described in the Registration Statement
and in the Prospectus there are no outstanding (a) securities or obligations
of the Company convertible into or exchangeable for any capital stock of the
Company, (b) warrants, rights or options to subscribe for or purchase from
the Company any such capital stock or any such convertible or exchangeable
securities or obligations, or (c) obligations of the Company to issue such
shares, any such convertible or exchangeable securities or obligations, or
any such warrants, rights or obligations. All of the issued shares of capital
stock of the Company have been duly authorized and validly issued and are
fully paid and nonassessable, and have been issued in compliance with all
federal and state securities laws. No preemptive rights of shareholders
exist with respect to any capital stock of the Company. No shareholder of
the Company has any right pursuant to any agreement which has not been waived
or honored to require the Company to register the sale of any securities
owned by such shareholder under the Act in the public offering contemplated
herein except as disclosed in the Registration Statement. The Company has
no subsidiaries, and does not own any shares of stock or any other equity
interest in any firm, partnership, association or other entity.
2.10 AUTHORITY FOR ISSUANCE OF SHARES. The issuance of the Common
Stock issuable in connection with the Shares has been duly authorized and at
any Firm or Option Closing Date as defined herein after payment therefor in
accordance herewith, such Common Stock will be validly issued, fully paid and
nonassessable. The Shares will conform in all material respects with all
statements with regard thereto in the Registration Statement and the Prospectus.
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2.11 TITLE TO TANGIBLE PROPERTY. Except as otherwise set forth in
or contemplated by the Registration Statement and Prospectus, the Company has
good and marketable title to all items of personal property owned by the
Company, free and clear of any security interest, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such property and do not materially interfere
with the use made or proposed to be made of such property by the Company, and
any real property and buildings held under lease by the Company are held
under valid, subsisting and enforceable leases, with such exceptions as are
not material and do not materially interfere with the use made or proposed to
be made of such property and buildings by the Company.
2.12 TITLE TO INTELLECTUAL PROPERTY. The Company owns the
trademarks and intellectual property described in the Registration Statement.
The Company does not own any patents. The Company owns or possesses, or can
acquire on reasonable terms, all material, trademarks, service marks, trade
names, licenses, copyrights and proprietary or other confidential information
currently employed by it in connection with its business, and the Company has
not received any notice of infringement of or conflict with asserted rights
of any third party with respect to any of the foregoing intellectual property
rights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding would result in a material adverse change in the
condition (financial or otherwise), business prospects, net worth or results
of operations of the Company, except as described in or contemplated by the
Prospectus.
2.13 CONTRACT RIGHTS. The agreements to which the Company is a
party described in the Registration Statement and Prospectus are valid
agreements, enforceable by the Company in accordance with their terms, except
as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditor's rights generally or by equitable principles, and, to the
Company's knowledge, the other contracting party or parties thereto are not
in material breach or material default under any of such agreements.
2.14 NO MARKET MANIPULATION. The Company has not taken nor will it
take, directly or indirectly, any action designed to cause or result, or
which might reasonably be expected to cause or result, in the stabilization
or manipulation of the price of any security of the Company to facilitate the
sale or resale of the Common Stock.
2.15 NO OTHER SALES OR COMMISSIONS. The Company has not since the
filing of the Registration Statement (i) sold, bid for, purchased, attempted
to induce any person to purchase, or paid anyone any compensation for
soliciting purchases of, its capital stock or (ii) paid or agreed to pay to
any person any compensation for soliciting another to purchase any securities
of the Company except for the sale of Shares by the Company under this
Agreement.
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2.16 ACCURACY OF FINANCIAL STATEMENTS. The financial statements and
schedules of the Company included in the Registration Statement and the
Prospectus, or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus, fairly present in all material respects the financial
position of the Company and the results of operations and changes in
financial condition as of the dates and periods therein specified. Such
financial statements and schedules have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as otherwise noted therein and include all financial
information required to be included by the Act. The selected financial data
set forth under the captions "PROSPECTUS SUMMARY--Summary Financial
Information," "SELECTED FINANCIAL DATA" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" in the Prospectus,
or, if the Prospectus is not in existence the most recent Preliminary
Prospectus, fairly present in all material respects, on the basis stated in
the Prospectus or such Preliminary Prospectus, the information included
therein.
2.17 INDEPENDENT PUBLIC ACCOUNTANT. ▇▇▇▇▇▇ & ▇▇▇▇▇▇, which have
certified or shall certify certain of the financial statements of the Company
filed or to be filed as part of the Registration Statement and the Prospectus,
are independent certified public accountants within the meaning of the Act
and the Rules and Regulations.
2.18 INTERNAL ACCOUNTING. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(a) transactions are executed in accordance with management's general or
specific authorization; (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (c) access to
assets is permitted only in accordance with management's general or specific
authorization; and (d) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
2.19 LITIGATION. Except as set forth in the Registration Statement
and Prospectus, there is and at the Closing Date there will be no action,
suit or proceeding before any court or governmental agency, authority or body
pending or to the knowledge of the Company threatened which might result in
judgments against the Company not adequately covered by insurance or which
collectively might result in any material adverse change in the condition
(financial or otherwise), the business or the prospects of the Company, or
would have a material adverse effect on the properties or assets of the
Company. The Company is not subject to the provisions of any injunction,
judgement, decree or order of any court, regulatory body, administrative
agency or other governmental body or arbitral forum, which might result in a
material adverse change in the business, assets or condition of the Company.
2.20 NO MATERIAL ADVERSE CHANGE. Subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), (a) the Company has not incurred any material
adverse change in or affecting the condition, financial or otherwise, of the
Company or the earnings,
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business affairs, management, or business prospects of the Company, whether
or not occurring in the ordinary course of business, (b) there has not been
any material transaction entered into by the Company, other than transactions
in the ordinary course of business or transactions specifically described in
the Registration Statement as it may be amended or supplemented, (c) the
Company has not sustained any material loss or interference with its business
or properties from fire, flood, windstorm, accident or other calamity, (d)
the Company has not paid or declared any dividends or other distribution with
respect to its capital stock and the Company is not in default in the payment
of principal or interest on any outstanding debt obligations, and (e) there
has not been any change in the capital stock (other than the sale of the
Common Stock hereunder or the exercise of outstanding stock options or
warrants as described in the Registration Statement) or material increase in
indebtedness of the Company. The Company does not have any known material
contingent obligation which is not disclosed in the Registration Statement
(or contained in the financial statements or related notes thereto), as such
may be amended or supplemented.
2.21 TRANSACTIONS WITH AFFILIATES. Subsequent to the respective
dates as of which information is given in the Registration Statement and
Prospectus or if the Prospectus is not in existence the most recent
Preliminary Prospectus, and except as may otherwise be indicated or
contemplated herein or therein, (a) the Company has not entered into any
transaction with an "affiliate" of the Company, as defined in the Act and the
Rules and Regulations, or (b) declared, paid or made any dividend or
distribution of any kind on or in connection with any class of its capital
stock, and (c) the Company has no knowledge of any transaction between any
affiliate of the Company and any significant customer or supplier of the
Company, except in its ordinary course of business.
2.22 INSURANCE. Except as otherwise set forth in or contemplated
by the Registration Statement and Prospectus, the Company is insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the business in which it
is engaged, including without limitation products liability insurance; the
Company has not been refused any insurance coverage sought or applied for;
and the Company has no reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition (financial or otherwise), business prospects, net worth or results
of operations of the Company.
2.23 TAX RETURNS. The Company has filed all foreign, federal,
state and local tax returns that are required to be filed or has requested
extensions thereof and has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent that any
of the foregoing is due and payable or adequate accruals have been set up to
cover any such unpaid taxes, except for any such assessment, fine or penalty
that is currently being contested in good faith.
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2.24 POLITICAL CONTRIBUTIONS. The Company has not directly or
indirectly, (a) made any unlawful contribution to any candidate for public
office, or failed to disclose fully any contribution in violation of law, or
(b) made any payment to any federal, state, local, or foreign governmental
officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any other such jurisdiction.
2.25 RELATIONSHIPS WITH CUSTOMERS, SUPPLIERS AND MANUFACTURERS.
The Company does not currently have any written contracts with any of its
customers, suppliers and manufacturers. The Company is in compliance with
all oral agreements with its customers, suppliers and manufacturers. The
Company has not received notice from any of its customers, suppliers and
manufacturers alleging any breach of contract, representation or warranty
which, in the aggregate, would have a material adverse effect on the
financial condition or operations results of the Company.
2.26 INVESTMENT COMPANY ACT. The Company conducts its operations
in a manner that does not subject it to registration as an investment company
under the Investment Company Act of 1940, as amended, and the transactions
contemplated by this Agreement will not cause the Company to become an
investment company subject to registration under the Investment Company Act
of 1940, as amended.
SECTION 3.
PURCHASE, SALE AND DELIVERY OF THE SHARES
3.1 PURCHASE OF FIRM SHARES. On the basis of the representations,
warranties, agreements and covenants herein contained and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
to each of the Underwriters named in Schedule I hereto, and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company,
at a purchase price of $4.50 per Share, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule 1 hereto. The Company will
make one or more certificates for Common Stock constituting the Firm Shares,
in definitive form and in such denomination or denominations and registered
in such name or names as the Representatives shall request upon notice to the
Company at least 48 hours prior to the Firm Closing Date, available for
checking and packaging by the Representatives at the offices of the Company's
transfer agent or registrar (or the correspondent or the agent of the
Company's transfer agent or registrar) at least 24 hours prior to the Firm
Closing Date. Payment for the Firm Shares shall be made by bank wire payable
in same day funds to the order of the Company drawn to the order of the
Company for the Firm Shares, against delivery of certificates therefor to the
Representatives. Delivery of the documents, certificates and opinions
described in Section 6 of this Agreement, the Firm Shares and payment for the
Firm Shares and the Option Shares shall be made at the offices of Sentra
Securities Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 9:00 a.m., San Diego time, on the third full business
day following the date hereof (on the fourth full business day if this
Agreement is executed after 1:30 p.m., San Diego time), or at such other
places, time or date as the Representatives and the Company
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may agree upon or as the Representatives may determine pursuant to Section 9
hereof, such time and date of delivery against payment being herein referred
to as the "Firm Closing Date" or "Closing Date" as applicable.
3.2 OVER-ALLOTMENTS; OPTION SHARES. For the purpose of covering
any over-allotments in connection with the distribution and sale of the Firm
Shares as contemplated by the Prospectus, the Company hereby grants to you on
behalf of the several Underwriters an option to purchase, severally and not
jointly, the Option Shares. The purchase price to be paid for any Option
Shares shall be the same price per share as the price per Share for the Firm
Shares set forth above in Section 3.1, plus, if the purchase and sale of any
Option Share takes place after the Firm Closing Date and after the Common
Stock is trading "ex-dividend," an amount equal to the dividends payable on
the Common Stock contained in such Option Shares. The option granted hereby
may be exercised in the manner described below as to all or any part of the
Option Shares from time to time within forty-five days after the date of the
Prospectus. The Underwriters shall not be under any obligation to purchase
any of the Option Shares prior to the exercise of such option. The
Representatives may from time to time exercise the option granted hereby by
giving notice in writing or by telephone (confirmed in writing) to the
Company setting forth the aggregate number of Option Shares as to which the
several Underwriters are then exercising the option and the date and time for
delivery of and payment for such Option Shares. Any such date of delivery
shall be determined by the Representatives but shall not be earlier than two
business days or later than seven business days after such exercise of the
option and, in any event, shall not be earlier than the Firm Closing Date.
The time and date set forth in such notice, or such other time on such other
date as the Representatives and the Company may agree upon or as the
Representatives may determine pursuant to Section 9 hereof, is herein called
the "Option Closing Date" with respect to such Option Shares. Upon each
exercise of the option as provided herein, subject to the terms and
conditions herein set forth, the Company shall become obligated to sell to
each of the several Underwriters, and each of the Underwriters (severally and
not jointly) shall become obligated to purchase from the Company, the same
percentage of the total number of the Option Shares as to which the several
Underwriters are then exercising the option as such Underwriter is obligated
to purchase of the aggregate number of Firm Shares, as adjusted by the
Representatives in such manner as it deems advisable to avoid fractional
shares. If the option is exercised as to all or any portion of the Option
Shares, one or more certificates for the Common Stock contained in such
Option Shares, in definitive form, and payment therefore, shall be delivered
on the related Option Closing Date in the manner, and upon the terms and
conditions, set forth in Section 3.1, except that reference therein to the
Firm Shares and the Firm Closing Date shall be deemed, for purposes of this
Section 3.2, to refer to such Option Shares and Option Closing Date,
respectively. No Option Shares shall be required to be, or be, sold and
delivered unless the Firm Shares have been, or simultaneously are, sold and
delivered as provided in this Agreement.
3.3 DEFAULT BY AN UNDERWRITER. It is understood that you,
individually and not as the Representatives, may (but shall not be obligated
to) make payment on behalf of any Underwriter or Underwriters for any of the
Shares to be purchased by such Underwriter or Underwriters. No such
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payment shall relieve such Underwriter or Underwriters from any of its or
their obligations hereunder.
SECTION 4.
OFFERING BY THE UNDERWRITERS
Upon payment by the Underwriters of the purchase price of $4.50 per
Share and the Company's authorization of the release of the Firm Shares, the
several Underwriters shall offer the Firm Shares for sale to the public upon
the terms set forth in the Prospectus. The Representatives may from time to
time thereafter change the public offering prices and other selling terms.
If the option set forth in Section 3.2 of this Agreement is exercised, then
upon the Company's authorization of the release of the Option Shares the
several Underwriters shall offer such Shares for sale to the public upon the
foregoing terms.
SECTION 5.
COVENANTS OF THE COMPANY
Except as otherwise stated below, the Company covenants and agrees with
each of the Underwriters that:
5.1 COMPANY'S BEST EFFORTS TO CAUSE REGISTRATION STATEMENT TO
BECOME EFFECTIVE. The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto, to become effective as promptly as
possible. If required, the Company will file the Prospectus and any
amendment or supplement thereto with the Commission in the manner and within
the time period required by Rule 424(b) under the Act. During any time when
a prospectus relating to the Common Stock is required to be delivered under
the Act, the Company (a) will comply with all requirements imposed upon it by
the Act and the Rules and Regulations to the extent necessary to permit the
continuance of sales of or dealings in the Common Stock in accordance with
the provisions hereof and of the Prospectus, as then amended or supplemented,
and (b) will not file with the Commission the prospectus or the amendment
referred to in the second sentence of Section 2.1 hereof, any amendment or
supplement to such prospectus or any amendment to the Registration Statement
unless and until the Representatives have been advised of such proposed
filing, has been furnished with a copy for a reasonable period of time prior
to the proposed filing, and has given its consent to such filing, which shall
not be unreasonably withheld or delayed.
5.2 PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The
Company will prepare and file with the Commission, in accordance with the
Rules and Regulations of the Commission, promptly upon written request by the
Representatives or counsel for the Representatives, any amendments to the
Registration Statement or amendments or supplements to the Prospectus that
may be reasonably necessary or advisable in connection with the distribution
of the Shares by the several Underwriters, and the Company will use its best
efforts to cause any such
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amendment to the Registration Statement to be declared effective by the
Commission as promptly as possible. The Company will advise the
Representatives, promptly after receiving notice thereof, of the time when
the Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto
has been filed and will provide evidence satisfactory to the Representatives
of each such filing or effectiveness.
5.3 NOTICE OF STOP ORDERS. The Company will advise the
Representatives promptly after receiving notice or obtaining knowledge of:
(a) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any amendment thereto, or any
order preventing or suspending the use of any Preliminary Prospectus of the
Prospectus or any amendment or supplement thereto; (b) the suspension of the
qualification of the Shares for offering or sale in any jurisdiction; (c) the
institution, threatening or contemplation of any proceeding for any such
purpose; or (d) any request made by the Commission for amending the
Registration Statement, for amending or supplementing the Prospectus or for
additional information. The Company will use its best efforts to prevent the
issuance of any such stop order and, if any such stop order is issued to
obtain the withdrawal thereof as promptly as possible.
5.4 BLUE SKY QUALIFICATION. The Company will arrange and
cooperate with counsel to the Representatives for the qualification of the
Shares for offering and sale under the securities or blue sky laws of such
jurisdictions as the Representatives may designate and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Shares; provided, however, that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction.
5.5 POST-EFFECTIVE AMENDMENTS. If, at any time when a prospectus
relating to the Shares is required to be delivered under the Act, any event
occurs as a result of which the Prospectus, as then amended or supplemented,
would include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading, in the light of the circumstances under which they were made, or
if for any other reason it is necessary at any time to amend or supplement
the Prospectus to comply with the Act or the Rules or Regulations, the
Company will promptly notify the Representatives thereof and, subject to
Section 3 hereof, will prepare and file with the Commission, at the Company's
expense, an amendment to the Registration Statement or an amendment or
supplement to the Prospectus that corrects such statement or omission or
effects such compliance.
5.6 DELIVERY OF PROSPECTUSES. The Company will, without charge,
provide (a) to the Representatives and to counsel for the Representatives a
signed copy of the Registration Statement originally filed with respect to
the Shares and each amendment thereto (in each case including exhibits
thereto), (b) to each other Underwriter so requesting in writing, a conformed
copy of such Registration Statement and each amendment thereto (in each case
without exhibits thereto) and (c) so long as a prospectus relating to the
Shares is required to be delivered under the Act, as
11
many copies of each Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto as the Representatives may reasonably request.
5.7 SECTION 11(a) FINANCIALS. The Company will, as soon as
practicable but in any event not later than 90 days after the period covered
thereby, make generally available to its security holders and to the
Representatives a consolidated earnings statement of the Company and its
subsidiaries that satisfies the provisions of Section 11(a) of the Act and
Rule 158 thereunder covering a twelve-month period beginning not later than
the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement.
5.8 APPLICATION OF PROCEEDS. The Company will apply the net
proceeds from the sale of the Shares as set forth in the Prospectus and
Registration Statement and will not take any action that would cause it to
become an investment company under the Investment Company Act of 1940, as
amended.
5.9 SALES OR PURCHASES OF SECURITIES. The Company will not,
directly or indirectly, without the prior written consent of the
Representatives, offer, sell, grant any option or warrant to purchase or
otherwise dispose (or announce any offer, sale, grant of any option to
purchase or other disposition) of any shares of Common Stock or any
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock for a period of one year after the date hereof, except (a) to
the Underwriters pursuant to this Agreement and (b) options to any person
pursuant to and in accordance with the Company's 1995 Incentive Stock Option
Plan, as such plan is in effect on the date hereof, and provided that (i)
such options have an exercise price equal to the fair market value of the
Common Stock, and (ii) such person has delivered to the Representatives the
agreement described in Section 7.8 of this Agreement. The Company will not,
directly or indirectly, without the prior written consent of the
Representatives purchase any Common Stock or any securities convertible into,
or exercisable for, shares of Common Stock for a period of one year after the
date hereof.
5.10 APPLICATION TO NASDAQ SMALLCAP MARKET. The Company will cause
the Common Stock and Warrants to be duly included for quotation on the Nasdaq
SmallCap Market prior to the Closing Date. If requested by the
Representatives, the Company will also cause the Common Stock to be duly
included for listing on the Pacific Stock Exchange. The Company will use its
best efforts to ensure that the Common Stock remains included for quotation
on the Nasdaq SmallCap Market and the Pacific Stock Exchange (if applicable)
following the Closing Date for a period of not less than three years.
5.11 REPORTS TO SHAREHOLDERS. So long as any Common Stock is
outstanding until five years after the Closing Date, the Company will furnish
to the Representatives (a) as soon as available a copy of each report of the
Company mailed to shareholders and filed with the Commission and (b) from
time to time such other information concerning the Company as the
Representatives may reasonably request.
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5.12 DELIVERY OF DOCUMENTS. At or prior to the Closing, the
Company will deliver to the Representatives true and correct copies of the
articles of incorporation of the Company and all amendments thereto, all such
copies to be certified by the Secretary of State of the State of California,
a good standing certificate from the Secretary of State of California, dated
no more than five business days prior to the Closing Date; true and correct
copies of the bylaws of the Company, as amended, certified by the Secretary
of the Company and true and correct copies of the minutes of all meetings of
the directors and shareholders of the Company held prior to the Closing Date
which in any way relate to the subject matter of this Agreement.
5.13 UNDERWRITERS' WARRANT. On or prior to the Closing Date, the
Company shall deliver to the Representatives warrants (the "Underwriter's
Warrants"), at an aggregate purchase price of $100, to purchase Shares equal
to 10% of the Firm Shares sold in the Offering, which Underwriter's Warrants
shall be exercisable for a per Share exercise price equal to 120% of the per
Share public offering price of the Firm Shares.
5.14 COOPERATION WITH REPRESENTATIVES' DUE DILIGENCE. At all times
prior to the Closing Date, the Company will cooperate with the
Representatives in such investigation as the Representatives may make or
cause to be made of all the properties, business and operations of the
Company in connection with the purchase and public offering of the Shares and
the Company will make available to the Representatives in connection
therewith such information in its possession as the Representatives may
reasonably request.
5.15 STOCK TRANSFER AGENT. The Company has appointed Corporate
Stock Transfer, Inc. , Denver, Colorado, as Transfer Agent for the Common
Stock. The Company will not change or terminate such appointment for a
period of two years from the effective date without first obtaining the
written consent of the Representatives, which consent shall not be
unreasonably withheld.
5.16 PUBLICITY. Prior to the Firm Closing Date, or the Option
Closing Date, as the case may be, the Company shall not issue any press
release or other communication directly or indirectly and shall hold no press
conference with respect to the Company, its financial condition, results of
operations, business, properties, assets, liabilities and any of them, or
this offering, without the prior written consent of the Representatives. If
at any time during the 90 day period after the Registration Statement becomes
effective, any rumor, publication or event relating to or affecting the
Company shall occur as a result of which in the opinion of the
Representatives the market price of the Common Stock has been or is likely to
be materially affected, regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus, the
Company will, after written notice from the Representatives, evaluate the
propriety of disseminating a press release or other public statement
reasonably acceptable to the Representatives and their counsel, commenting on
such rumor, publication or event.
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5.17 FORECASTS AND PROJECTIONS. For a period of two years from
the effective date of the Registration Statement, the Company shall provide
the Representatives with routine internal forecasts if any such reports are
prepared by the Company for dissemination to the public.
5.18 KEY MAN INSURANCE; DIRECTOR AND OFFICER LIABILITY INSURANCE.
The Company will maintain for a period of at least five (5) years, Key Man
Insurance on ▇▇▇▇▇ ▇▇▇▇ in the amount of $1,000,000. The Company will also
maintain for a period of at least five (5) years, Director and Officer
Liability insurance in the amount of at least $5,000,000. The Representatives
reserve the right to write the above policies at the next renewal date
thereof providing it can do so on terms no less favorable to the Company.
5.19 COMPANY'S BOARD OF DIRECTORS. The Company will maintain a
professional board of directors that will at all times include at least two
outside directors. The Company shall appoint two individuals recommended by
Representatives to the Company's Board of Directors which recommendation
shall be made by Representatives after the Closing Date.
SECTION 6.
Expenses
6.1 OFFERING EXPENSES. The Company will pay upon demand all costs
and expenses incident to the performance of the Company's obligations under
this Agreement, whether or not the transactions contemplated herein are
consummated or this Agreement is terminated pursuant to Section 11 hereof,
including all costs and expenses incident to (a) the printing or other
production of documents with respect to the transactions, including any costs
of printing the Registration Statement originally filed with respect to the
Shares and any amendment thereto, any Preliminary Prospectus and the
Prospectus and any amendment or supplement thereto, this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement, and any blue sky
memoranda, (b) all arrangements relating to the delivery to the Underwriters
of copies of the foregoing documents, (c) the fees and disbursements of
counsel, accountants and any other experts or advisors retained by the
Company, (d) preparation, issuance and delivery to the Underwriters of any
certificates evidencing the Common Stock, including transfer agent's and
registrar's fees, (e) the qualification of the Shares under state securities
and blue sky laws, including filing fees and fees and disbursements of
counsel for the Representatives relating thereto, (f) the filing fees of the
Commission and the National Association of Securities Dealers, Inc. relating
to the Shares, (g) any listing fees for the quotation of the Common Stock on
the Nasdaq SmallCap Market, (h) the entire cost of one "tombstone
advertisement" in a national business newspaper and one-half the cost of
placing any additional "tombstone advertisements" in any publications which
may be selected by the Representatives (provided that any such cost in excess
of $5,000 shall require the consent of both the Company and the
Representatives), (i) all other advertising that has been approved in advance
by the Company relating to the offering of the Shares (other than as shall
have been specifically approved in writing by the Representatives to be paid
for by the Underwriters), and (j) road shows conducted by the Company. In
addition to the foregoing, the Company agrees to pay to the Representatives a
non-accountable expense allowance of 3% of the gross amount to be raised from
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the sale of the Shares hereunder, payable at the Closing(s), of which $50,000
has already been paid by the Company in connection with this offering. If
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 7
(other than Section 7.6) hereof is not satisfied, because this Agreement is
terminated pursuant to Section 11 hereof or because of any failure, refusal
or inability on the part of the Company to perform all obligations and
satisfy all conditions on its part to be performed or satisfied hereunder
other than by reason of a default by any of the Underwriters, the Company
will reimburse the Underwriters severally upon demand for all out-of-pocket
expenses (including counsel fees and disbursements) that shall have been
reasonably incurred by them in connection with the proposed purchase and sale
of the Shares. The Company shall in no event be liable to any of the
Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement.
6.2 INTERIM INDEMNIFICATION. The Company agrees that as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding described in Section 8.1 hereof, it will
reimburse the Underwriters on a monthly basis for all reasonable legal or
other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of the Company's obligation to reimburse the Underwriters
for such expenses and the possibility that such payments might later be held
to have been improper by a court of competent jurisdiction. To the extent
that any such interim reimbursement payment is so held to have been improper,
the Underwriters shall promptly return such payment to the Company together
with interest, compounded daily, determined on the basis of the prime rate
(or other commercial lending rate for borrowers of the highest credit
standing) listed from time to time in THE WALL STREET JOURNAL which
represents the base rate on corporate loans posted by a substantial majority
of the nation's thirty (30) largest banks (the "Prime Rate"). Any such
interim reimbursement payments which are not made to the Underwriters within
thirty (30) days of a request for reimbursement shall bear interest at the
Prime Rate from the date of such request.
The Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8.2 hereof, they will reimburse the
Company on a monthly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Underwriters' obligation to reimburse the Company for such expenses and
the possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company shall
promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such
interim reimbursement payments which are not made to the Company within
thirty (30) days of a request for reimbursement shall bear interest at the
Prime Rate from the date of such request.
15
SECTION 7.
CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS
The obligations of the several Underwriters to purchase and pay for the
Firm Shares shall be subject, unless waived by the Representatives in its
sole discretion, to the accuracy of the representations and warranties of the
Company contained herein as of the date hereof and as of the Firm Closing
Date as if made on and as of the Firm Closing Date, to the accuracy of the
statements of the Company's officers made pursuant to the provisions hereof,
to the performance by the Company of its covenants and agreements hereunder
and to the following additional conditions:
7.1 EFFECTIVENESS OF REGISTRATION STATEMENT. If the Registration
Statement or any amendment thereto filed prior to the Firm Closing Date has
not been declared effective as of the time of execution hereof, the
Registration Statement or such amendment shall have been declared effective
not later than 11 a.m., California time, on the date on which the amendment
to the Registration Statement originally filed with respect to the Shares or
to the Registration Statement, as the case may be, containing information
regarding the initial public offering price of the Shares has been filed with
the Commission, or such later time and date as shall have been consented to
by the Representatives; if required, the Prospectus and any amendment or
supplement thereto shall have been filed with the Commission in the manner
and within the time period required by Rule 424(b) under the Act; no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto shall have been issued, and no proceedings for that purpose
shall have been instituted or threatened or, to the knowledge of the Company
or the Representatives, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus
or otherwise) to the reasonable satisfaction of counsel for the underwriters.
7.2 OPINION OF COUNSEL. The Representatives shall have received
an opinion, dated the Firm Closing Date, of ▇▇▇▇ ▇. Agron, Esq., counsel for
the Company, to the effect that:
(a) the Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
California, and duly qualified to transact business as a foreign corporation
and is in good standing under the laws of all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified
would not have a material adverse effect on the Company;
(b) the Company has the corporate power to own or lease its
properties; to conduct its business as described in the Registration
Statement and the Prospectus; to enter into this Agreement and to carry out
all of the terms and provisions hereof to be carried out by it;
(c) the Company has an authorized capital stock as set
forth under the heading "CAPITALIZATION" in the Prospectus; effective upon
the Closing Date all of the Company's shares have been duly authorized and
validly issued and are fully paid and nonassessable;
16
the shares have been duly authorized by all necessary corporate action of the
Company, and, when issued and delivered to and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable; the shares
have been duly authorized for quotation on the Nasdaq SmallCap Market; no
holders of outstanding shares of capital stock of the Company are entitled as
such to any preemptive or other rights to subscribe for any of the Shares;
and no holders of securities of the Company are entitled to have such
securities registered under the Registration Statement;
(d) the capital stock of the Company conforms, as to legal
matters, to the statements set forth under the heading "DESCRIPTION OF
SECURITIES" in the Prospectus in all material respects;
(e) the execution and delivery of this Agreement have been
duly authorized by all necessary corporate action of the Company and this
Agreement is a valid and binding obligation of the Company except as rights
to indemnity and contribution thereunder may be limited by applicable federal
or state securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforceability of creditors' rights generally and subject to general
principles of equity;
(f) no legal or governmental proceedings are pending to
which the Company is a party or to which the property of the Company is
subject that are required to be described in the Registration Statement or
the Prospectus and are not described therein, and, to the best knowledge of
such counsel, no such proceedings have been threatened against the Company or
with respect to any of its properties that can reasonably be expected to, or,
if determined adversely to the Company, would, in any individual case or in
the aggregate, result in any material adverse change in the business,
financial condition or results of operations of the Company;
(g) no contract or other document is required to be
described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement that is not described therein or
filed as required;
(h) the issuance, offering and sale of the Shares by the
Company pursuant to this Agreement, the compliance by the Company with the
other provisions of this Agreement and the consummation of the other
transactions herein contemplated do not require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained and such as may be required
under state securities or blue sky laws, or conflict with or result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument, known to such counsel, to which the Company is a
party or by which the Company or any of its properties are bound, or the
Articles of Incorporation or Bylaws of the Company, or any statute or any
judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator known to such counsel and applicable
to the Company;
17
(i) the Registration Statement is effective under the Act;
any required filing of the Prospectus pursuant to Rule 424(b) has been made
in the manner and within the time period required by Rule 424(b); and no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto has been issued by the Commission, and no proceedings for
that purpose have been instituted or, to the knowledge of such counsel, are
threatened or contemplated by the Commission;
(j) the Registration Statement and the Prospectus and each
amendment or supplement thereto (in each case, other than the financial
statements and other financial and statistical information contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the Rules
and Regulations;
(k) the Company is not required, and, if the Company uses
the proceeds of the sale of the Firm Shares and the Option Shares solely as
described in the Prospectus, will not be required as a result of the sale of
such Shares to be registered as an investment company within the meaning of
the Investment Company Act of 1940, as amended; and
(l) such counsel shall also state that they have no reason
to believe that the Registration Statement, as of its effective date,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, as of its date or
the date of such opinion, included or includes any untrue statement of a
material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided that in each case such counsel need
not express any opinion as to the financial statements and other financial
and statistical information contained therein.
In rendering any such opinion, such counsel may rely as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials. The foregoing opinion may be
limited to the laws of the United States and the General Corporation Law of
the State of California. References to the Registration Statement and the
Prospectus in this Section 7.2 shall include any amendment or supplement
thereto at the date of such opinion. Such counsel shall permit ▇▇▇▇,
Forward, ▇▇▇▇▇▇▇▇ & Scripps LLP to rely upon such opinion in rendering its
opinion in Section 7.3.
7.3 REVIEW BY AND OPINION OF REPRESENTATIVES' COUNSEL. The
Representatives shall have received an opinion, dated as of the Firm Closing
Date, of ▇▇▇▇, Forward, ▇▇▇▇▇▇▇▇ & Scripps LLP, counsel for the
Representatives, with respect to certain matters as the Representatives may
reasonably require, and the Company shall have furnished to such counsel such
documents and certificates as they may reasonably request for the purpose of
enabling them to opine upon such matters.
18
7.4 ACCOUNTANT'S LETTER. The Representatives shall have received
from ▇▇▇▇▇▇ & ▇▇▇▇▇▇ a letter or letters dated, respectively, the date hereof
and the Closing Date, in form and substance satisfactory to the
Representatives, to the effect that:
(a) they are independent accountants with respect to the
Company within the meaning of the Act and the Rules and Regulations;
(b) in their opinion, the financial statements audited by
them and included in the Registration Statement and the Prospectus comply in
form in all material respects with the applicable accounting requirements of
the Act and the related published rules and regulations;
(c) on the basis of a reading of the audited financial
statements of the Company, for the years ended June 30, 1995 and June 30,
1996, and the unaudited financial statements of the Company for the period
ended December 31, 1996, and the notes thereto, carrying out certain
specified procedures (which do not constitute an audit made in accordance
with generally accepted auditing standards) that would not necessarily reveal
matters of significance with respect to the comments set forth in this
paragraph, a reading of the minute books of the shareholders, the board of
directors and any committees thereof of the Company, and inquiries of certain
officials of the Company who have responsibility for financial and accounting
matters, nothing came to their attention that caused them to believe that:
(i) the unaudited condensed financial statements of
the Company included in the Registration Statement and the Prospectus do not
comply in form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder or are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited financial statements included in the Registration Statement and the
Prospectus; and
(ii) at a specific date not more than five business
days prior to the date of such letter, there were any changes in the capital
stock or long-term debt of the Company or any decreases in net current assets
or stockholders' equity of the Company, in each case compared with amounts
shown on the December 31, 1996 balance sheet included in the Registration
Statement and the Prospectus, or for the period from December 31, 1996 to
such specified date there were any decreases, as compared with the
corresponding period in the preceding year, in net sales, gross profit,
selling, general and administrative expenses, employee plans and bonuses,
income (loss) from operations, interest expenses, income (loss) before income
taxes, provision (benefit) for income taxes, net income (loss) or net income
(loss) per share of the Company, except in all instances for changes,
decreases or increases set forth in such letter; and
(d) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records of
the Company and are included in the Registration Statement and
19
the Prospectus, and have compared such amounts, percentages and financial
information with such records of the Company and with information derived
from such records and have found them to be in agreement, excluding any
questions of legal interpretation.
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Representatives deems such explanation unnecessary, and such changes,
decreases or increases do not, in the sole judgment of the Representatives,
make it impractical or inadvisable to proceed with the purchase and delivery
of the Shares as contemplated by the Registration Statement, as amended as of
the date hereof.
References to the Registration Statement and the Prospectus in this
Section 7.4 with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
7.5 OFFICER'S CERTIFICATE. The Representatives shall have
received a certificate, dated the Firm Closing Date, of the president and the
principal financial or accounting officer of the Company to the effect that:
(a) the representations and warranties of the Company in
this Agreement are true and correct as if made on and as of the Firm Closing
Date; the Registration Statement, as amended as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading, in
light of the circumstances in which they were made and the Prospectus, as
amended or supplemented as of the Firm Closing Date, does not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein not misleading, in the
light of the circumstances under which they were made; and the Company has in
all material respects performed all covenants and agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to the
Firm Closing Date;
(b) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to the
best of their knowledge, are contemplated by the Commission; and
(c) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company has not sustained any material loss or interference with its business
or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or any legal
or governmental proceeding, and there has not been any material adverse
change, or any development involving a prospective material adverse change,
in the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company, except in each case as described in or
contemplated by the Prospectus (exclusive of any amendment or supplement
thereto).
20
7.6 NASD REVIEW. The NASD, upon review of the terms of the public
offering of the Firm Shares and Option Shares, shall not have objected to the
Underwriters' participation in such offering.
7.7 LOCKUPS. The Representatives shall have received from each
officer, director and person who owns more than five percent (5%) of the
Company's Common Stock, or securities convertible into Common Stock, an
agreement to the effect that such person will not, directly or indirectly,
without the prior written consent of the Representatives, offer, sell or
grant any option to purchase or otherwise dispose (or announce any offer,
sale, grant of an option to purchase or other disposition) of any shares of
Common Stock or any securities convertible into, or exchangeable for, shares
of Common Stock for a period of twelve months.
7.8 DUE DILIGENCE EXAMINATION. The counsel to the Representatives
and other persons retained by the Representatives to conduct a due diligence
investigation with respect to the offering, shall be reasonably satisfied
with the results of their respective due diligence investigations.
7.9 BLUE SKY QUALIFICATION. The Shares shall be qualified in such
states as the Representatives may reasonably request pursuant to Section 5.4,
and each such qualification shall be in effect and not subject to any stop
order or other proceeding on the Closing Date or Option Closing Date, as the
case may be.
7.10 OTHER DOCUMENTS. On or before the Firm Closing Date, the
Representatives and counsel for the Representatives shall have received such
further certificates, documents or other information as they may have
reasonably requested from the Company.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives. The
Company shall furnish to the Representatives such conformed copies of such
opinions, certificates, letters and documents in such quantities as the
Representatives and the counsel to the Representatives shall reasonably
request.
The respective obligations of the several Underwriters to purchase and
pay for any Option Shares shall be subject, in the Representatives'
discretion, to each of the foregoing conditions to purchase the Firm Shares,
except that all references to the Firm Shares and the Firm Closing Date shall
be deemed to refer to such Option Shares and the related Option Closing Date,
respectively.
SECTION 8.
INDEMNIFICATION AND CONTRIBUTION
8.1 INDEMNIFICATION BY COMPANY. The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Securities Exchange Act of 1934 (the
21
"Exchange Act") against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon:
(a) any untrue statement or alleged untrue statement made
by the Company in Section 2 of this Agreement;
(b) any untrue statement or alleged untrue statement of any
material fact contained in (i) the Registration Statement or any amendment
thereto or any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or (ii) any application or other document, or any
amendment or supplement thereto, executed by the Company and based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Shares under the securities or blue sky
laws thereof or filed with the Commission or any securities association or
securities exchange (each an "Application"); or
(c) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, or any Application
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which they
are made, and will reimburse, as incurred, each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with
any such loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through the Representatives
specifically for use therein; and provided further, that the Company will not
be liable to any Underwriter or any person controlling such Underwriter with
respect to any such untrue statement or omission made in any Preliminary
Prospectus that is corrected in the Prospectus (or any amendment or
supplement thereto) if the person asserting any such loss, claim, damage or
liability purchased Shares from such Underwriter but was not sent or given a
copy of the Prospectus (as amended or supplemented), other than the documents
incorporated by reference therein at or prior to the written confirmation of
the sale of such Shares to such person in any case where such delivery of the
Prospectus (as amended or supplemented) is required by the Act, unless such
failure to deliver the Prospectus (as amended or supplemented) was a result
of noncompliance by the Company with Section 5.5 of this Agreement. This
indemnity agreement will be in addition to any liability which the Company
may otherwise have. The Company will not, without the prior written consent
of each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter
22
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter and each such controlling person from all liability arising out
of such claim, action, suit or proceeding.
8.2 INDEMNIFICATION BY UNDERWRITERS. Each Underwriter will
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act against any losses, claims, damages or liabilities to
which the Company, any such director or officer of the Company or any such
controlling person of the Company may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(a) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application or (b) the omission or the alleged omission to
state therein a material fact required to be stated in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application or
necessary to make the statements therein not misleading in light of the
circumstances in which they are made, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein; and, subject to the limitation
set forth immediately preceding this clause, will reimburse, as incurred, any
legal or other expenses reasonably incurred by the Company or any director,
officer or controlling person of the Company in connection with investigation
or defending against or appearing as a third-party witness in connection with
any such loss, claim, damage, liability or any action in respect thereof.
This indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have. No Underwriter will, without the prior
written consent of the Company, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder
(whether or not the Company, any of its directors, any of its officers who
signed the Registration Statement or any person who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of the
Company and each such director, officer and controlling person from all
liability arising out of such claim, action, suit or proceeding.
8.3 NOTICE OF DEFENSE. Promptly after receipt by an indemnified
party under this Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section 8, notify the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 8. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to
23
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party and the indemnified party shall have reasonably
concluded that there may be one or more legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right
to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof and
approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
(which may not be unreasonably withheld or delayed) under this Section 8 for
any legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the
defense thereof, unless (a) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that in connection with such action
the indemnifying party shall not be liable for the expenses of more than one
separate counsel at any one time in any one action or separate but
substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Representatives
in the case of Section 8.1, representing the indemnified parties under such
Section 8.1 who are parties to such action or actions) or (b) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such
notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the
consent of the indemnifying party, unless such indemnified party waived its
rights under this Section 8 in which case the indemnified party may effect
such a settlement without such consent.
8.4 CONTRIBUTION. In circumstances in which the indemnity
agreement provided for in the preceding paragraphs of this Section 8 is
unavailable or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages or liability (or actions in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to
reflect (a) the relative benefits received by the indemnifying party or
parties on the one hand and the indemnified party on the other from the
offering of the Shares or (b) if the allocation provided by the foregoing
clause (a) is not permitted by applicable law, not only such relative
benefits but also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection with the
statements or omissions or alleged statements or omissions that resulted in
such losses, claims, damages or liability (or action in respect thereof).
The relative benefits received by the Company on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (after deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by
the Underwriters. The relative fault of the parties 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 the
Underwriters, the parties' relative
24
intents, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances. The Company and the Underwriters agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take into account the equitable consideration
referred to in the first sentence of this Section 8.4. Notwithstanding any
other provision of this Section 8.4, no Underwriter shall be obligated to
make contributions hereunder that in the aggregate exceed the underwriter
discount on the Shares purchased by such Underwriter under this Agreement,
less the aggregate amount of any damages that such Underwriter has otherwise
been required to pay in respect of the same or any substantially similar
claim, and no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute hereunder are several in proportion
to their respective underwriting obligations and not joint, and contributions
among Underwriters shall be governed by the provisions of the Agreement Among
Underwriters. For purposes of this Section 8.4, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
such Underwriter, and each director of the Company, each officer of the
Company who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, shall have the same right to contribution as the
Company as the case may be.
SECTION 9.
DEFAULT OF UNDERWRITERS
If one or more Underwriters default in their obligations to purchase
Firm Shares, or Option Shares hereunder and the aggregate number of such
Shares that such defaulting Underwriter or Underwriters agreed but failed to
purchase is ten percent or less of the aggregate number of Firm Shares or
Option Shares to be purchased by all of the Underwriters at such time
hereunder, the other Underwriters may make arrangements satisfactory to the
Representatives for the purchase of such Shares by other persons (who may
include one or more of the non-defaulting Underwriters, including the
Representatives), but if no such arrangements are made by the Firm Closing
Date or the related Option Closing Date, as the case may be, the other
Underwriters shall be obligated severally in proportion to their respective
commitments hereunder to purchase the Firm Shares, or Option Shares that such
defaulting Underwriter or Underwriters agreed but failed to purchase. In the
event of any default by one or more Underwriters as described in this Section
9, the Representatives shall have the right to postpone the Firm Closing Date
or the Option Closing Date, as the case may be, established as provided in
Section 3 hereof for not more than seven business days in order that any
necessary changes may be made in the arrangements or documents for the
purpose and delivery of the Firm Shares or Option Shares, as the case may be.
As used in this Agreement, the term "Underwriter" includes any persons
substituted for an Underwriter under this Section 9. Nothing herein shall
relieve any defaulting Underwriter from liability for its default.
25
SECTION 10.
SURVIVAL
The respective representations, warranties, agreements, covenants,
indemnities and other statements of the Company, its officers and directors
and the several Underwriters set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (a) any investigation made by or on behalf of
the Company, any of its officers or directors, any Underwriter or any
controlling person referred to in Section 8 hereof and (b) delivery of and
payment for the Shares. The respective agreements, covenants, indemnities
and other statements set forth in Sections 5 and 8 hereof shall remain in
full force and effect, regardless of any termination or cancellation this
Agreement.
SECTION 11.
TERMINATION
11.1 BY REPRESENTATIVES. This Agreement may be terminated with
respect to the Firm Shares or any Option Shares in the sole discretion of the
Representatives by notice to the Company given prior to the Firm Closing Date
or the related Option Closing Date, respectively, in the event that 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
at or prior thereto or, if at or prior to the Firm Closing date or such
Option Closing Date, respectively:
(a) the Company shall have sustained any material loss or
interference with its business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or any legal or governmental proceeding or there shall have
been any material adverse change, or any development involving a prospective
material adverse change (including financial or otherwise), in the business
prospects, net worth or results of operations of the Company, except in each
case as described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto);
(b) trading in the Common Stock shall have been suspended
by the Commission or the National Association of Securities Dealers Automated
Quotation SmallCap Market or trading in securities generally on the New York
Stock Exchange or the American Stock Exchange shall have been suspended or
minimum or maximum prices shall have been established on any such exchange or
market system;
(c) a banking moratorium shall have been declared by New
York, California, or United States authorities; or
(d) there shall have been (i) an outbreak or escalation of
hostilities between the United States and any foreign power, (ii) an outbreak
or escalation of any other insurrection or armed conflict involving the
United States or (iii) any other calamity or crisis having an effect on the
financial markets that, in the reasonable judgment of the Representatives,
makes it
26
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares as contemplated by the Registration Statement, as
amended as of the date hereof.
11.2 EFFECT OF TERMINATION HEREUNDER. Termination of this
Agreement pursuant to this Section 11 shall be without liability of any party
to any other party, except as provided in Section 10 hereof.
SECTION 12.
INFORMATION SUPPLIED BY UNDERWRITERS
The statements set forth in the last paragraph on the front cover page
and under the heading "Underwriting" in any Preliminary Prospectus or the
Prospectus, to the extent such statements relate to the Underwriters
constitute the only information furnished by any Underwriter through the
Representatives to the Company for the purposes of Section 8 and 10 hereof.
The Underwriters represent and warrant to the Company that such statements,
to such extent, are correct as of the date hereof and at each Closing Date.
SECTION 13.
NOTICES
All communications hereunder shall be in writing and, if sent to any of
the Underwriters, shall be mailed (certified or registered mail, postage
prepaid, return receipt requested) or delivered or sent by facsimile
transmission and confirmed in writing to Spelman & Co., Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇
(with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇, Forward, ▇▇▇▇▇▇▇▇ & Scripps
LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ 92101), if sent to the
Company, shall be mailed (certified or registered mail, postage prepaid,
return receipt requested), delivered or sent by facsimile transmission and
confirmed in writing to the Company at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇▇▇▇, CEO, (with a copy to ▇▇▇▇ ▇. Agron,
Esq., Law Offices of ▇▇▇▇ ▇. Agron, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇). Notices shall be effective if mailed, 48 hours after
deposit in the mail properly addressed, sent by facsimile, upon receipt and
in any other instance, when delivered.
SECTION 14.
SUCCESSORS
This Agreement shall inure to the benefit of and shall be binding upon
the several Underwriters, the Company and their respective successors and
legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that
(a) the indemnities of the Company contained in Section 8 of this Agreement
shall also be for
27
the benefit of any person or persons who control any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act and (b)
the indemnities of the Underwriters contained in Section 8 of this Agreement
shall also be for the benefit of the directors of the Company, the officers
of the Company who have signed the Registration Statement and any person or
persons who control the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act. No purchaser of Shares from any
Underwriter shall be deemed a successor because of such purchase.
SECTION 15.
APPLICABLE LAW
The validity and interpretation of this Agreement, and the terms and
conditions set forth herein, shall be governed by and construed in accordance
with the laws of the State of California without giving effect to any
provisions relating to conflicts of laws.
SECTION 16.
COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company, and
each of the several Underwriters.
Very truly yours,
ORGANIC FOOD PRODUCTS
By:
------------------------------
▇▇▇▇▇ ▇▇▇▇
Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Sentra Securities Corporation
Spelman & Co., Inc.
(As Representatives of the several
Underwriters named in Schedule 1 hereto)
By:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
28
SCHEDULE 1
UNDERWRITERS
Number of Firm Shares
Underwriter to be purchased
----------- ---------------------
Sentra Securities Corporation
Spelman & Co., Inc.
Total
---------------------