Superior Supplements, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
UNDERWRITING AGREEMENT
VTR Capital Inc. __________, 1997
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
Superior Supplements, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to VTR Capital Inc. ("VTR" or the "Representative")
and to each of the other underwriters named in Schedule I hereto (the
"Underwriters"), for each of whom you are acting as Representative, an aggregate
of 250,000 Units (the "Units"), each Unit consisting of two shares of Common
Stock, par value $.0001 ("Common Stock"), and one Redeemable Class A Common
Stock Purchase Warrant (the "Warrants") of the Company at a public offering
price of $10.00 per Unit. Each Warrant shall entitle the holder to purchase one
share of Common Stock for a four year period commencing one year from the
Effective Date (hereinafter defined) at a price of $5.25 per share. The Unit
Warrants will be immediately detachable from the Common Stock on the Effective
Date. The Warrants may be called by the Company commencing one year from the
Effective Date upon at least thirty days prior written notice at a price of $.05
per Warrant at any time provided the closing bid for the Common Stock is at
least $10.00 during each day of the twenty (20) trading day period ending on the
fifth day preceding the date of the written notice. The Warrant Agreement will
provide that no such notice will be given until there is a current Registration
Statement and Prospectus on file with the Securities and Exchange Commission
(the "Commission") at the time such notice is given to Warrant Holders and that
the notice may not be mailed to Warrant Holders during the aforesaid one-year
period from the Effective Date. The Units are sometimes hereinafter sometimes
referred to as the "Firm Units." Upon the request of the Representative, and as
provided in Section 3 hereof, the Company will also issue and sell to the
Underwriters up to a maximum of an additional 37,500 Units for the purpose of
covering over-allotments. Such additional Units are hereinafter sometimes
referred to as the "Optional Units." Both the Firm Units and the Optional Units
are sometimes collectively referred to herein as the "Units." All of the
securities which are the subject of this Agreement are more fully described in
the Prospectus of the Company described below. In the event that the
Representative does not form an underwriting group but decides to act as the
sole Underwriter, then all references to VTR herein as Representative shall be
deemed to be to it as such sole Underwriter and Section 14 hereof shall be
deemed deleted in its entirety.
In an alternate Prospectus, the Registration Statement also covers
certain additional securities for sale by Selling Security Holders. Such
reoffering by Selling Security Holders is not the subject of this Underwriting
Agreement, except for the restrictions against resale until the exercise or
termination of the Optional Units.
1
The Company understands that the Underwriters propose to make a public
offering of the Units as soon as the Representative deems advisable after the
Registration Statement hereinafter referred to becomes effective. The Company
hereby confirms its agreement with the Representative and the other Underwriters
as follows:
SECTION 1. Description of Securities. The Company's authorized and
outstanding capitalization when the public offering of securities contemplated
hereby is permitted to commence, under the Securities Act of 1933, as amended
(the "Act"), and at the Closing Date (hereinafter defined) and the terms of the
Warrants and other securities will be as set forth in the Prospectus
(hereinafter defined).
SECTION 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to, and agrees with, the Underwriters as follows:
(a) A Registration Statement on Form SB-2 and amendments
thereto (No. 333-9761 with respect to the Units, including a form of prospectus
relating thereto, copies of which have been previously delivered to you, have
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations (the "Rules and Regulations") of the Commission
thereunder, and has been filed with the Commission under the Act. The Company,
subject to the provisions of Section 6(a) hereof, may file one or more
amendments to such Registration Statement and Prospectus. The Underwriters will
receive copies of each such amendment.
The date on which such Registration Statement is declared
effective under is therefore authorized to commence, is herein called the
"Effective Date." The Registration Statement and Prospectus, as finally
amended and revised immediately prior to the Effective Date, are herein called
respectively the "Registration Statement" and the "Prospectus." If, however,
a prospectus is filed by the Company pursuant to Rule 424(b) of the Rules and
Regulations which differs from the Prospectus, the term "Prospectus" shall
also include the prospectus filed pursuant to Rule 424(b).
(b) The Registration Statement (and Prospectus), at the time
it becomes effective under the Act, (as thereafter amended or as supplemented if
the Company shall have filed with the Commission an amendment or supplement),
and, with respect to all such documents, on the Closing Date (hereinafter
defined), will in all material respects comply with the provisions of the Act
and the Rules and Regulations, and will not contain an untrue statement of a
material fact and will not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties contained in this subsection (b)
shall extend to the Underwriters in respect of any statements in or omissions
from the Registration Statement and/or the Prospectus, based upon information
furnished in writing to the Company by the Underwriters specifically for use in
connection with the preparation thereof.
(c) The Company has been duly incorporated and is now, and on
the Closing Date will be, validly existing as a corporation in good standing
under the laws of the State of
2
Delaware, having all required corporate power and authority to own its
properties and conduct its business as described in the Prospectus. The Company
is now, and on the Closing Date will be, duly qualified to do business as a
foreign corporation in good standing in all of the jurisdictions in which it
conducts its business or the character or location of its properties requires
such qualifications except where the failure to so qualify would not materially
adversely affect the Company's business, properties or financial condition. The
Company has no subsidiaries, except as are set forth in the Prospectus.
(d) The financial statements of the Company (audited and
unaudited) included in the Registration Statement and Prospectus present fairly
the financial position and results of operations and changes in financial
condition of the Company at the respective dates and for the respective periods
to which they apply; and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved, and are in accordance with the books and
records of the Company.
(e) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Co. LLP, independent auditors, who have
given their report on certain financial statements which are included as a part
of the Registration Statement and the Prospectus are independent public
accountants as required under the Act and the Rules and Regulations.
(f) Subsequent to the respective dates as of which information
is given in the Prospectus and prior to the Closing Date and, except as set
forth in or contemplated in the Prospectus, (i) the Company has not incurred,
nor will it incur, any material liabilities or obligations, direct or
contingent, nor has it, nor will it have entered into any material transactions,
in each case not in the ordinary course of business; (ii) there has not been,
and will not have been, any material change in the Company's Certificate of
Incorporation or in its capital stock or funded debt; and (iii) there has not
been, and will not have been, any material adverse change in the business, net
worth or properties or condition (financial or otherwise) of the Company whether
or not arising from transactions in the ordinary course of business.
(g) Except as otherwise set forth in the Prospectus, the real
and personal properties of the Company as shown in the Prospectus and
Registration Statement to be owned by the Company are owned by the Company by
good and marketable title free and clear of all liens and encumbrances, except
those specifically referred to in the Prospectus, and except those which do not
materially adversely affect the use or value of such assets and except the lien
for current taxes not now due, or are held by the Company by valid leases, none
of which is in default. Except as disclosed in the Prospectus and Registration
Statement, the Company in all material respects has full right and licenses,
permits and governmental authorizations required to maintain and operate its
business and properties as the same are now operated and, to its best knowledge,
none of the activities or business of the Company is in material violation of,
or causes the Company to violate any laws, ordinances and regulations applicable
thereto, the violation of which would have a material adverse impact on the
condition (financial or otherwise), business, properties or net worth of the
Company.
(h) The Company has no material contingent obligations, nor
are its properties or business subject to any material risks, which may be
reasonably anticipated, which are not disclosed in the Prospectus.
3
(i) Except as disclosed in the Prospectus and Registration
Statement, there are no material actions, suits or proceedings at law or in
equity of a material nature pending, or to the Company's knowledge, threatened
against the Company which are not adequately covered by insurance, which might
result in a material adverse change in the condition (financial or otherwise),
properties or net worth of the Company, and there are no proceedings pending or,
to the knowledge of the Company, threatened against the Company before or by any
Federal or State Commission, regulatory body, or administrative agency or other
governmental body, wherein an unfavorable ruling, decision or finding would
materially adversely affect the business, properties or net worth or financial
condition or income of the Company, which are not disclosed in the Prospectus.
(j) All of the outstanding shares of Common Stock and
preferred stock are duly authorized and validly issued and outstanding, fully
paid, non-assessable, and do not have any and were not issued in violation of
any preemptive rights. All of the Common Stock as described in the Prospectus
when paid for shall be duly authorized and validly issued and outstanding, fully
paid, non-assessable, and will not have any and will not be issued in violation
of any preemptive rights. The Common Stock issuable upon exercise of the
Warrants when issued and paid for in accordance with the Warrant Agreement shall
be duly authorized and validly issued and outstanding, fully paid,
non-assessable, and will not have any and will not be issued in violation of any
preemptive rights. The Common Stock and Warrants will be delivered in accordance
with this Agreement and the Warrant Agreement between the Company and American
Stock Transfer & Trust Company. The Underwriters will receive good and
marketable title to the Units purchased by them from the Company, free and clear
of all liens, encumbrances, claims, security interests, restrictions,
stockholders' agreements and voting trusts whatsoever. Except as set forth in
the Prospectus, there are no outstanding options, warrants, or other rights,
providing for the issuance of, and no commitments, plans or arrangements to
issue, any shares of any class of capital stock of the Company, or any security
convertible into, or exchangeable for, any shares of any class of capital stock
of the Company. All of the Units of the Company to which this Agreement relates
conform to the statements relating to them that are contained in the
Registration Statement and Prospectus.
(k) The certificate or certificates required to be furnished
to the Underwriters pursuant to the provisions of Section 11 hereof will be true
and correct.
(l) The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and it is a
valid and binding obligation of the Company, enforceable against it in
accordance with its terms except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws pertaining to
creditors rights generally.
(m) Except as disclosed in the Prospectus, no default exists,
and no event has occurred which, with notice or lapse of time, or both, would
constitute a default in the due performance and observance of any material term,
covenant or condition by the Company or any other party, of any material
indenture, mortgage, deed of trust, note or any other material agreement or
instrument to which the Company is a party or by which it or its business or its
properties may be bound or affected, except (i) as disclosed in the Prospectus,
(ii) such defaults as have been waived by all parties who would otherwise have a
remedy or right with respect thereto or (iii) such defaults which will not cause
any material adverse change in the
4
business, net worth, properties or conditions (financial or otherwise), of the
Company. The Company has full power and lawful authority to authorize, issue and
sell the Units to be sold by it hereunder on the terms and conditions set forth
herein and in the Registration Statement and in the Prospectus. No consent,
approval, authorization or other order of any regulatory authority is required
for such authorization, issue or sale, except as may be required under the Act
or State securities laws. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, and compliance with the
terms hereof will not conflict with, or constitute a default under any
indenture, mortgage, deed of trust, note or any other agreement or instrument to
which the Company is now a party or by which it or its business or its
properties may be bound or affected; the Certificate of Incorporation and any
amendments thereto; the by-laws of the Company, as amended; or any law, order,
rule or regulation, writ, injunction or decree of any government, governmental
instrumentality, or court, domestic or foreign, having jurisdiction over the
Company or its business or properties.
(n) No officer or director of the Company has taken, and each
officer and director has agreed that he will not take, directly or indirectly,
any action designed to stabilize or manipulate the price of the Units, the
Common Stock or the Warrants in the open market following the Closing Date or
any other type of action designed to, or that may reasonably be expected to
cause or result in such stabilization or manipulation, or that may reasonably be
expected to facilitate the initial sale, or resale, of any of the securities
which are the subject of this Agreement.
(o) The Warrants to be issued to the Representative (the
"Underwriters' Warrants") hereunder will be, when issued, duly and validly
authorized and executed by the Company and will constitute valid and binding
obligations of the Company, legally enforceable in accordance with their terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws pertaining to creditors rights
generally), and the Company will have duly authorized, reserved and set aside
the shares of its Common Stock issuable upon exercise of the Underwriters'
Warrants, and such stock, when issued and paid for upon exercise of the
Underwriters' Warrants in accordance with the provisions thereof, will be duly
authorized and validly issued, fully-paid and non-assessable.
(p) All of the aforesaid representations, agreements, and
warranties shall survive delivery of, and payment for, the Units.
SECTION 3. Issuance, Sale and Delivery of the Firm Units, the Optional
Units and the Underwriters' Warrants.
(a) Upon the basis of the representations, warranties,
covenants and agreements of the Company herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue to the
several Underwriters, and the Underwriters, severally and not jointly, agree to
purchase from the Company, the number of the Firm Units set forth opposite the
respective names of the Underwriters in Schedule I hereto, plus any additional
Units which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 14 hereof.
5
The purchase price of the Units to be paid by the several
Underwriters shall be $9.00 per Unit ($10.00 per Unit less a ten percent
discount equal to $1.00 per Unit).
In addition, and upon the same basis, and subject to the same
terms and conditions, the Company hereby grants an option to you to purchase,
but only for the purpose of covering over-allotments, upon not less than two
days' notice from the Representative, the Optional Units, or any portion
thereof, at the same price per Unit as that set forth in the preceding
sentence; and each Underwriter agrees, severally and not jointly, to purchase
Optional Units in the same proportion in which it has agreed to purchase
Firm Units. Notwithstanding anything contained herein to the contrary, you
individually and not as Representative may provide in the Agreement Among
Underwriters for the Representative to purchase all or any part of the
Optional Units and are not obligated to offer the Optional Units to the other
Underwriters. The Optional Units may be exercised at any time, and from time
to time, thereafter within a period of 30 calendar days following the
Effective Date. The time(s) and date(s) (if any) so designated for delivery
and payment for the Optional Units shall be set forth in the notice to the
Company. Such dates are herein defined as the Additional Closing Date(s).
(b) Payment for the Company Firm Units shall be made by
certified or official bank checks in New York Clearing House funds, payable to
the order of the Company at the offices of the Representative, or its clearing
agent, or at such other place as shall be agreed upon by the Representative and
the Company, upon delivery of the Firm Units to the Representative for the
respective accounts of the Underwriters. In making payment to the Company with
respect to the Company Units, the Representative may first deduct all sums due
to it for the balance of the non-accountable expense allowance and under the
Financial Consulting Agreement (as hereinafter defined). Such delivery and
payment shall be made at 9:30 A.M., New York City Time on the third business day
after the Effective Date which may be extended by the Representative to not
later than the fifth business day, following the Effective Date (unless
postponed in accordance with the provisions of Section 14 hereof) or at such
other time as shall be agreed upon by the Representative and the Company. The
time and date of such delivery and payment are hereby defined as the Closing
Date. It is understood that each Underwriter has authorized the Representative,
for the account of such Underwriter, to accept delivery of, receipt for, and
make payment of the purchase price for, the Firm Units which it has agreed to
purchase. You, individually, and not as Representative may (but shall not be
obligated to) make payment of the purchase price for the Firm Units to be
purchased by any Underwriter whose check shall not have been received by the
Closing Date, for the account of such Underwriter, but any such payment shall
not relieve such Underwriter from its obligations hereunder.
(c) Payment for the Optional Units shall be made at the
offices of the Representative, or its clearing agent or at such other place as
shall be agreed upon by the Representative and the Company, in accordance with
the notice delivered pursuant to Section 3(a) which shall be no later than seven
business days from the expiration of the 30-day option period.
(d) Certificates for the Firm Units and for the Optional Units
shall be registered in such name or names and in such authorized denominations
as the Representative may request in writing at least two business days prior to
the Closing Date, and the Additional Closing Date(s) (if any). The Company shall
permit the Representative to examine and
6
package said certificates for delivery at least one full business day prior to
the Closing Date and prior to the Additional Closing Date(s). The Company shall
not be obligated to sell or deliver any of the Firm Units except upon tender of
payment by the Underwriters for all of the Firm Units agreed to be purchased by
them hereunder. The Representative, however, shall have the sole discretion to
determine the number of Optional Units, if any, to be purchased.
(e) At the time of making payment for the Firm Units, the
Company also hereby agrees to sell to the Representative, Warrants to purchase
25,000 Units for an aggregate purchase price of $25 (hereinafter referred to as
the "Underwriters' Warrants"). The 25,000 Units underlying the Underwriters'
Warrants shall be identical to the Units sold to the public. Each Underwriters'
Warrant shall entitle the owner thereof to purchase one Unit of the Company at
an exercise price of $16.50 per Unit. Such Underwriters' Warrants are to become
exercisable one year from the Effective Date, and shall remain exercisable for a
period of four years thereafter. From the Effective Date and until one (1) year
thereafter, such warrants may be transferred only to officers or partners of the
Underwriters and selling group members and their officers or partners.
The Underwriters' Warrants shall contain customary clauses
protecting the holders thereof in the event the Company pays stock dividends,
effects stock splits, or effects a sale of assets, merger or consolidation.
(f) On and subject to the Closing Date, the Company will give
irrevocable instructions to its transfer agent and Depository Trust Company to
deliver to the Representative (at the Company's expense) for a period of five
years from the Closing Date, daily transfer sheets showing any transfers of the
Units, Common Stock and Warrants and in the case of the transfer agent, from
time to time during the aforesaid period a complete stockholders' list will be
promptly furnished by the Company when requested by the Representative on not
more than two occasions per year.
SECTION 4. Public Offering. The several Underwriters agree, subject to
the terms and provisions of this Agreement, to offer the Units to the public as
soon as practicable after the Effective Date, at the initial offering price of
$10.00 per Unit and upon the terms described in the Prospectus. The
Representative may, from time to time, decrease the public offering price, after
the initial public offering, to such extent as the Representative may determine,
however, such decreases will not affect the price payable to the Company
hereunder.
SECTION 5. Registration Statement and Prospectus. The Company will
furnish the Representative, without charge, two signed copies of the
Registration Statement and of each amendment thereto, including all exhibits
thereto and such amount of conformed copies of the Registration Statement and
Amendments as may be reasonably requested by the Representative for distribution
to each of the Underwriters and Selected Dealers.
The Company will furnish, at its expense, as many printed
copies of a Preliminary Prospectus and of the Prospectus as the Representative
may request for the purposes contemplated by this Agreement. If, while the
Prospectus is required to be delivered under the Act or the Rules and
Regulations, any event known to the Company relating to or affecting the
Company shall occur which should be set forth in a supplement to or an
7
amendment of the Prospectus in order to comply with the Act (or other applicable
law) or with the Rules and Regulations, the Company will forthwith prepare,
furnish and deliver to the Representative and to each of the other Underwriters
and to others whose names and addresses are designated by the Representative, in
each case at the Company's expense, a reasonable number of copies of such
supplement or supplements to or amendment or amendments of, the Prospectus.
The Company authorizes the Underwriters and the selected
dealers, if any, in connection with the distribution of the Units and all
dealers to whom any of the Units may be sold by the Underwriters, or by any
Selected Dealer, to use the Prospectus, as from time to time amended or
supplemented, in connection with the offering and sale of the Units and in
accordance with the applicable provisions of the Act and the applicable Rules
and Regulations and applicable State Securities Laws.
SECTION 6. Covenants of the Company. The Company covenants and agrees
with each Underwriter that:
(a) After the date hereof, the Company will not at any time,
whether before or after the Effective Date, file any amendment to the
Registration Statement or the Prospectus, or any supplement to the Prospectus,
of which the Representative shall not previously have been advised and furnished
with a copy, or to which the Representative or the Underwriters' counsel shall
have reasonably objected in writing on the ground that it is not in compliance
with the Act or the Rules and Regulations.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective (provided, however, the Company shall
not cause the Registration Statement to become effective without the written
consent of VTR) and will advise the Representative, (i) when the Registration
Statement shall have become effective and when any amendment thereto shall have
become effective, and when any amendment of or supplement to the Prospectus
shall be filed with the Commission, (ii) when the Commission shall make request
or suggestion for any amendment to the Registration Statement or the Prospectus
or for additional information and the nature and substance thereof, and (iii) of
the issuance by the Commission of an order suspending the effectiveness of the
Registration Statement or of the initiation of any proceedings for that purpose,
and will use its best efforts to prevent the issuance of such an order, or if
such an order shall be issued, to obtain the withdrawal thereof at the earliest
possible moment.
(c) The Company will prepare and file with the Commission,
promptly upon the request of the Representative, such amendments, or supplements
to the Registration Statement or Prospectus, in form and substance satisfactory
to counsel to the Company, as in the reasonable opinion of ▇▇▇▇▇▇ ▇▇▇▇▇ P.C., as
counsel to the Underwriters, may be necessary or advisable in connection with
the offering or distribution of the Units, and will diligently use its best
efforts to cause the same to become effective.
(d) The Company will, at its expense, when and as requested by
the Representative, supply all necessary documents, exhibits and information,
and execute all such applications, instruments and papers as may be required, in
the opinion of the Underwriters'
8
counsel, to qualify the Units or such part thereof as the Representative may
determine, for sale under the so-called "Blue Sky" Laws of such states as the
Representative shall designate, and to continue such qualification in effect so
long as required for the purposes of the distribution of the Units, provided,
however, that the Company shall not be required to qualify as a foreign
corporation or dealer in securities or to file a consent to service of process
in any state in any action other than one arising out of the offering or sale of
the Units.
(e) The Company will, at its own expense, file and provide,
and continue to file and provide, such reports, financial statements and other
information as may be required by the Commission, or the proper public bodies of
the States in which the Units may be qualified for sale, for so long as required
by applicable law, rule or regulation and will provide the Representative with
copies of all such registrations, filings and reports on a timely basis.
(f) During the period of five years from the Effective Date,
the Company will deliver to the Underwriter a copy of each annual report of the
Company, and will deliver to the Underwriter (i) within 50 days after the end of
each of the Company's first three quarter-yearly fiscal periods, a balance sheet
of the Company as at the end of such quarter-yearly period, together with a
statement of its income and a statement of changes in its cash flow for such
period (Form 10-Q or 10-QSB), all in reasonable detail, signed by its principal
financial or accounting officer, (ii) within 105 days after the end of each
fiscal year, a balance sheet of the Company as at the end of such fiscal year,
together with a statement of its income and statement of cash flow for such
fiscal year (Form 10-K or 10-KSB), such balance sheet and statement of cash flow
for such fiscal year to be in reasonable detail and to be accompanied by a
certificate or report of independent public accountants, (who may be the regular
accountants for the Company), (iii) as soon as available a copy of every other
report (financial or other) mailed to the stockholders, and (iv) as soon as
available a copy of every non- confidential report and financial statement
furnished to or filed with the Commission or with any securities exchange
pursuant to requirements by or agreement with such exchange or the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), or
any regulations of the Commission thereunder. If and for so long as the Company
has one or more active subsidiaries, the financial statements required by (i)
and (ii) above shall be furnished on a consolidated basis in respect of the
Company and all of the Company's subsidiaries. The financial statements referred
to in (ii) shall also be furnished to all of the stockholders of the Company as
soon as practicable after the 105 days referred to therein.
(g) The Company represents that with respect to the Units, it
will prepare and file a Registration Statement with the Commission pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended, prior to the
Effective Date with a request that such Registration Statement will become
effective on the first day following the Effective Date. The Company understands
that, to register, it must prepare and file with the Commission a General Form
of Registration of Common Stock (Form 8-A or Form 10). In addition, upon the
request of the Underwriter, the Company agrees to qualify its publicly traded
securities for listing on the NASDAQ System Small-Cap Issues on the Effective
Date and will take all necessary and appropriate action so that the such
securities continue to be listed for trading in the NASDAQ System Small-Cap
Issues for at least ten years from the Effective Date provided the Company
otherwise complies with the prevailing maintenance requirements of NASDAQ System
Small-Cap. In addition, at such time as the Company qualifies for listing its
publicly traded securities
9
on the National Market System of NASDAQ, the Company will take all steps
necessary to have the Company's publicly traded securities listed on the
National Market System of NASDAQ in lieu of listing as Small-Cap Issues. The
Company shall comply with all periodic reporting and proxy solicitation
requirements imposed by the Commission pursuant to the 1934 Act, and shall
promptly furnish you with copies of all material filed with the Commission
pursuant to the 1934 Act or otherwise furnished to shareholders of the Company.
(h) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than 15 months after the
Effective Date, an earnings statement of the Company (which need not be audited)
in reasonable detail, covering a period of at least twelve months beginning
after the Effective Date, which earnings statement shall satisfy the provisions
of Section 11(a) of the Act.
(i) The Company will, on or about the Effective Date, apply
for listing in Standard and Poor's Corporation Records and Standard & Poor's
Monthly Stock Guide and shall use its best efforts to have the Company listed in
such reports for a period of not less than ten (10) years from the Closing Date.
The Company will request accelerated treatment in the Daily News Supplement of
Standard and Poor's Corporation Records.
(j) The Company shall employ the services of an auditing firm
acceptable to the Representative in connection with the preparation of the
financial statements required to be included in the Registration Statement and
shall continue to appoint such auditors or such other auditors as are reasonably
acceptable to the Representative for a period of five (5) years following the
Effective Date of the Registration Statement. Said financial statements shall be
prepared in accordance with Regulation S-X under the General Rules and
Regulations of the 1933 Act. The firm of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Co., LLP are deemed
acceptable to the Underwriter. The Company shall appoint Continental Stock
Transfer & Trust Company transfer agent for the Common Stock and as Warrant
Agent for the Warrants.
(k) Until such time as the Company's Common Stock is listed on
the New York Stock Exchange, the American Stock Exchange, or the NASDAQ/NMS; the
Company shall cause its legal counsel or an independent firm acceptable to the
Representative to provide the Representative with a survey, to be updated at
least semi-annually, of those states in which the securities of the Company may
be traded in non-issuer transactions under the Blue Sky laws of the states and
the basis for such authority. The first such survey shall be delivered by
Company's counsel at closing; the second such survey shall be delivered by
Company's counsel within five business days of publication of the Company in
Standard & Poor's Corporation Records and, thereafter, on a semi-annual basis on
April 30 and October 31 of each year.
(l) As soon as practicable after the Closing Date, the Company
will deliver to the Representative and its counsel a total of two bound volumes
of copies of all documents relating to the public offering which is the subject
of this Agreement.
(m) The Company, for a period of at least three years
following the public offering, shall retain the services of a financial public
relations firm(s) satisfactory to the
10
Representative, said agreement(s) to commence no later than 30 days after the
Closing of the public offering.
(n) For a period of two years after the Effective Date, the
Company will not increase the number of authorized shares under its existing
Stock Option Plan as described in the Prospectus or establish any other plans
pursuant to which stock options or securities will be issued without the prior
written consent of the Representative. Further, for a period of two years after
the Effective Date, the Company will not issue or agree to issue any securities
of the Company without the prior written consent of the Representative. The
foregoing restriction does not apply to the Company's obligations to issue
securities as described in the Prospectus. The foregoing shall not prevent the
Company from seeking bank financing on commercially reasonable terms so long as
no capital stock, options to purchase capital stock or securities convertible
into capital stock are granted.
SECTION 7. Expenses of the Company.
(a) The Company shall be responsible for and shall bear all
expenses directly and necessarily incurred in connection with the proposed
financing, including: (i) the preparation, printing and filing of the
Registration Statement and amendments thereto, including NASD and SEC filing
fees, preliminary and final Prospectus and the printing of the Underwriting
Agreement, the Agreement Among the Underwriters and the Selected Dealers'
Agreement, a Blue Sky Memorandum and material to be circulated to the
Underwriters by us; (ii) the issuance and delivery of certificates representing
the Common Stock and Warrants including original issue and transfer taxes, if
any; (iii) the qualifications of the Company's Units (covered by the "firm
commitment" offering) under State Securities or Blue Sky Laws, including
counsel fees of ▇▇▇▇▇▇ ▇▇▇▇▇ P.C. relating thereto in the sum of Thirty
($30,000) Dollars ($_________ of which has been paid, together with
appropriate state filing fees) plus disbursements relating to, but not limited
to, long-distance telephone calls, photocopying, messengers, excess postage,
overnight mail and courier services; (iv) the fees and disbursements of
counsel for the Company and the accountants for the Company; and (v) post
closing tombstone advertisements not to exceed $10,000. Upon the commencement
of the necessary state Blue Sky filings by our counsel, the Company shall
supply him at his request, all necessary state filing fees.
(b) In addition, the Company shall bear each of the following
costs: (i) investigative reports (such as ▇▇▇▇▇▇'▇ Reports) of the Company's
executive officers, directors and principal shareholders, not to exceed $5,000
in the aggregate; and (ii) otherwise unreimbursed postage, including mailing of
preliminary and final prospectuses incurred by or on behalf of the
Representative and the Underwriters in preparation for, or in connection with
the offering and sale and distribution of the Units on an accountable basis.
SECTION 8. Payment of Underwriters' Expenses.
On the Closing Date and Additional Closing Date(s) (if any) the
Company will pay to you an expense allowance equal to three (3%) percent of the
total gross proceeds derived from the public offering contemplated by this
Agreement for the fees and
11
disbursements of counsel to the Underwriters and for costs of otherwise
unreimbursed advertising, traveling, postage, telephone and telegraph expenses
and other miscellaneous expenses incurred by or on behalf of the Representative
and the Underwriters in preparation for, or in connection with the offering and
sale and distribution of the Units; and you shall not be obligated to account to
the Company for such disbursements and expenses. Further, in the event that this
Agreement is terminated pursuant to Section 12 hereof, the Company will be
obligated to reimburse the Representative on an accountable basis for its
reasonable out-of-pocket expenses incurred in connection hereunder.
SECTION 9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters, and each person who controls each of the Underwriters within
the meaning of Section 15 of the Act, from and against any and all losses,
claims, damages, expenses, or liabilities, joint or several, to which they or
any of them may become subject under the Act or any other statute or at common
law or otherwise, and to reimburse persons indemnified as above for any
reasonable legal or other expense (including the cost of any investigation and
preparation) incurred by them (as incurred), or any of them, in connection with
investigating, defending against or appearing as a third party witness in
connection with any claim or litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, liabilities, expenses or
litigation arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented, if amended or supplemented), or in any
"Blue Sky" application, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading; provided, however, that
the indemnity agreement contained in this subsection (a) shall not apply to
amounts paid in settlement of any such claims or litigation if such settlement
is effected without the consent of the Company, nor shall it apply to the
Underwriters or any person controlling the Underwriters in respect of any such
losses, claims, damages, expenses, liabilities or litigation arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished in writing to the
Company by such Underwriter, or on its behalf, specifically for use in
connection with the preparation of the Registration Statement or the Prospectus
or any such amendment thereof or supplement thereto or any such blue sky
application.
(b) Each of the Underwriters severally agrees, in the same
manner and to the same extent as set forth in subsection (a) above, to indemnify
and hold harmless the Company, each of the directors and officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act, with respect to any
statement in or omission from the Registration Statement, or the Prospectus (as
amended or as supplemented, if amended or supplemented), or in any "Blue Sky"
application, if such statement or omission was made in reliance upon and in
conformity with written information furnished in writing to the Company by such
Underwriter, or on its behalf, specifically for use in connection with the
preparation of the Registration Statement or the
12
Prospectus or any such amendment thereof or supplement thereto, or any such
application. An Underwriter shall not be liable for amounts paid in settlement
of any such claim or litigation if such settlement was effected without its
consent.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any claim asserted against it and of any action commenced
against it in respect of which indemnity may be sought hereunder. The omission
to so notify an indemnifying party shall relieve such party of its obligation to
indemnify pursuant to this Agreement, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. 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 participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, subject to the provisions
herein stated, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 9 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that the fees and expenses of such counsel shall
be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the defendants in any such action include both the indemnified and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of such indemnified party or parties), it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the indemnified party which firm shall be
designated in writing by the indemnified party.
(d) The respective indemnity agreements between the
Underwriters and the Company contained in subsections (a) and (b) above, and the
representations and warranties of the Company set forth in Section 2 hereof or
elsewhere in this Agreement, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of the Underwriters
or by or on behalf of any controlling person of the Underwriters or the Company
or any such officer or director or any controlling person of the Company, and
shall survive the delivery of the Units. Any successor of the Company, or of the
Underwriters, or of any controlling person of the Underwriters or the Company,
as the case may be, shall be entitled to the benefit of such respective
indemnity agreements.
13
(e) In order to provide for just and equitable contribution
under the Act in any case in which (i) any person entitled to indemnification
under this Section 9 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 9 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 9, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, claims, damages, expenses or liabilities to
which they may be subject (after any contribution from others) in such
proportions so that the Underwriters are responsible in the aggregate for the
proportion of such losses, claims, damages or liabilities represented by the
percentage that the underwriting discounts and commissions appearing on the
cover page of the Prospectus bears to the public offering price appearing
thereon, and the Company is responsible for the remaining portion; provided,
that, in any such case, no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Within twenty days after receipt by any party to this Agreement
(or its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "contributing party"), notify the
contributing party, in writing, of the commencement thereof, but the omission
so to notify the contributing party will not relieve it from any liability
which it may have to any other party other than for contribution hereunder. In
case any such action, suit or proceeding is brought against any party, and
such party so notifies a contributing party or his or its representative of the
commencement thereof within the aforesaid twenty days, the contributing party
will be entitled to participate therein with the notifying party and any other
contributing party similarly notified. Any such contributing party shall not be
liable to any party seeking contribution on account of any settlement of any
claim, action or proceeding effected by such party seeking contribution without
the written consent of such contributing party. The contribution provisions
contained in this Section 9 are in addition to any other rights or remedies
which either party hereto may have with respect to the other or hereunder.
SECTION 10. Effectiveness of Agreement. This Agreement shall become
effective (i) at 10:00 A.M., New York Time, on the first full business day after
the Effective Date, or (ii) at the time of the initial public offering by the
Underwriters of the Units, whichever shall first occur. The time of the initial
public offering by the Underwriters of the Units for the purposes of this
Section 10, shall mean the time, after the Registration Statement becomes
effective, of the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the Units,
or the time, after the Registration Statement becomes effective, when the Units
are first released by the Representative for offering by the Underwriters or
dealers by letter or telegram, whichever shall first occur. The Representative
agrees to notify the Company immediately after it shall have taken any action,
by release or otherwise, whereby this Agreement shall have become effective.
This Agreement shall, nevertheless, become effective at such time earlier than
the time specified above, after the Effective Date, as the Representative may
determine by notice to the Company.
14
SECTION 11. Conditions of the Underwriters' Obligations. The
obligations of the several Underwriters to purchase and pay for the Units which
the Underwriters have agreed to purchase hereunder are subject to: the accuracy,
as of the date hereof and as of the Closing Dates, of all of the representations
and warranties of the Company contained in this Agreement; the Company's
compliance with, or performance of, all of its covenants, undertakings and
agreements contained in this Agreement that are required to be complied with or
performed on or prior to each of the Closing Dates and to the following
additional conditions:
(a) On or prior to the Closing Date, no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or be pending or, to the
knowledge of the Company, shall be threatened by the Commission; any request for
additional information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of the Commission; and neither the Registration
Statement nor any amendment thereto shall have been filed to which counsel to
the Underwriters shall have reasonably objected, in writing.
(b) The Representative shall not have disclosed in writing to
the Company that the Registration Statement or Prospectus or any amendment or
supplement thereto contained, as of the date thereof, an untrue statement of a
fact which, in the opinion of counsel to the Underwriters, is material, or omits
to state a fact which, in the opinion of such counsel, is material and is
required to be stated therein, or is necessary to make the statements therein
not materially misleading.
(c) Between the date hereof and the Closing Date, the Company
shall not have sustained any loss on account of fire, explosion, flood,
accident, calamity or other cause, of such character as materially adversely
affects its business or property, whether or not such loss is covered by
insurance.
(d) Between the date hereof and the Closing Date, there shall
be no litigation instituted or threatened against the Company, and there shall
be no proceeding instituted or threatened against the Company before or by any
federal or state commission, regulatory body or administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding would materially adversely affect the business, licenses, permits,
operations or financial condition or income of the Company.
(e) Except as contemplated herein or as set forth in the
Registration Statement and Prospectus, during the period subsequent to the
Effective Date and prior to the Closing Date, (A) the Company shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the filing of the initial Registration Statement and
(B) except in the ordinary course of its business, the Company shall not have
incurred any material liabilities or obligations (direct or contingent), or
disposed of any of its assets, or entered into any material transaction, and (C)
the Company shall not have suffered or experienced any material adverse change
in its business, affairs or in its condition, financial or otherwise. On the
Closing Date, the capital stock and surplus accounts of the Company shall
15
be substantially as great as at its last financial report without considering
the proceeds from the sale of the Units except to the extent that any decrease
is disclosed in or contemplated by the Prospectus.
(f) The authorization of the Units, the Common Stock and the
Warrants, the Registration Statement, the Prospectus and all corporate
proceedings and other legal matters incident thereto and to this Agreement,
shall be reasonably satisfactory in all respects to counsel to the Underwriters.
(g) The Company shall have furnished to the Representative the
opinions, dated the Closing Date, and Additional Closing Date(s), addressed to
you, of its counsel that:
(i) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the State of Delaware
with full corporate power and authority to own and operate its properties and
to carry on its business as set forth in the Registration Statement and
Prospectus; it has authorized and outstanding capital as set forth in the
Registration Statement and Prospectus; and the Company is duly licensed or
qualified as a foreign corporation in all jurisdictions in which by reason of
maintaining an office in such jurisdiction or by owning or leasing real
property in such jurisdiction it is required to be so licensed or qualified
except where failure to be so qualified or licensed would have no material
adverse effect.
(ii) All of the outstanding shares of Common Stock and
Preferred Stock are duly and validly issued and outstanding, fully paid, and
non-assessable, and do not have any, and were not issued in violation of any,
preemptive rights. The Company will have duly authorized, reserved and set
aside shares of Common Stock issuable upon exercise of the Warrants and any
other outstanding options or warrants and when issued in accordance with such
terms contained in the Prospectus, will be duly and validly authorized and
issued, fully paid and non-assessable.
(iii) All of the Units of the Company to which this
Agreement relates conform to the statements relating to them that are contained
in the Registration Statement and Prospectus (excluding financial statements).
(iv) The Underwriters against payment therefor, will
receive good and marketable title to the Units purchased by them from the
Company in accordance with the terms and provisions of this Agreement.
(v) To the best of the knowledge of such counsel, except
as set forth in the Prospectus, there are no outstanding options, warrants, or
other rights, providing for the issuance of, and, no commitments, plans or
arrangements to issue, any shares of any class of capital stock of the Company,
or any security convertible into, or exchangeable for, any shares of any class
of capital stock of the Company.
(vi) To the best of such counsel's knowledge, no consents,
approvals, authorizations or orders of agencies, officers or other regulatory
authorities are necessary for
16
the valid authorization, issue or sale of the Units hereunder, except such as
may be required under the Act or state securities or Blue Sky Laws.
(vii) The Registration Statement has become effective under
the Act and, to the best of the knowledge of such counsel, no order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and the Registration Statement and Prospectus,
and each amendment thereof and supplement thereto, comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations (except that no opinion need be expressed as to financial
statements and financial data contained in the Registration Statement or
Prospectus), and in the course of the preparation of the Registration
Statement, nothing has come to the attention of said counsel to cause them
to believe that either the Registration Statement or the Prospectus or any
such amendment or supplement contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and such counsel is
familiar with all contracts referred to in the Registration Statement or in the
Prospectus and such contracts are sufficiently summarized or disclosed therein,
or filed as exhibits thereto, as required, and such counsel does not know of any
other contracts required to be summarized or disclosed or filed; and such
counsel does not know of any legal or governmental proceedings pending or
threatened to which the Company is a party, or in which property of the Company
is the subject, of a character required to be disclosed in the Registration
Statement or the Prospectus which are not disclosed and properly described
therein.
(viii) The Underwriter's Warrants to be issued to the
Representative hereunder will be, when issued against payment therefor duly
and validly authorized and executed by the Company and will constitute valid
and binding obligations of the Company, legally enforceable in accordance with
their terms (except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally), and the Company will have
duly authorized, reserved and set aside the shares of its Common Stock issuable
upon exercise of the Underwriter's Warrants and Underlying Warrants, and such
stock, when issued and paid for upon exercise of the Underwriter's Warrants and
Underlying Warrants in accordance with the provisions thereof, will be duly and
validly authorized and issued, fully-paid and non-assessable.
(ix) The Company holds by valid lease, its properties as
shown in the Prospectus, and is in all material respects complying with all
laws, ordinances and regulations applicable thereto.
(x) This Agreement has been duly authorized and executed
by the Company and is a valid and binding agreement of the Company.
(xi) To the best of the knowledge of such counsel, no
default exists, and no event has occurred which, with notice or lapse of time,
or both, would constitute a default in the due performance and observance of
any material term, covenant or condition by the Company or any other party, of
any indenture, mortgage, deed of trust, note or any other
17
agreement or instrument known to counsel to which the Company is a party or by
which it or its business or its properties may be bound or affected, except as
disclosed in the Prospectus. The Company has full power and lawful authority to
authorize, issue and sell the Units on the terms and conditions set forth herein
and in the Registration Statement and in the Prospectus. No consent, approval,
authorization or other order of any regulatory authority is required for such
authorization, issue or sale, except as may be required under the Act or State
securities laws. The execution and delivery of this Agreement, the consummation
of the transactions herein contemplated, and compliance with the terms hereof
will not conflict with, or constitute a default under any indenture, mortgage,
deed or trust, note or any other agreement or instrument known to counsel to
which the Company is now a party or by which it or its business or its
properties may be bound or affected; the Articles of Incorporation and any
amendments thereto; the by-laws of the Company; or any law, order, rule or
regulation, writ, injunction or decree of any government, governmental
instrumentality, or court, domestic or foreign, having jurisdiction over the
Company or its business or properties known to counsel.
(xii) To the best of the knowledge of such counsel, there
are no material actions, suits or proceedings at law or in equity of a material
nature pending or to such counsel's knowledge threatened against the Company
which are not adequately covered by insurance and there are no proceedings
pending, or to the knowledge of such counsel threatened, against the Company
before or by any Federal or State Commission, regulatory body, or
administrative agency or other governmental body, wherein an unfavorable
ruling, decision or finding would materially adversely affect the business,
business prospects, franchise, licenses, permits, operation or financial
condition or income of the Company, which are not disclosed in the Prospectus.
(xiii) The description of any statutes, regulations and
laws, applicable to the Company's business contained in the Registration
Statements, is in all respects true and correct.
Such opinion shall also cover such other matters incident to
the transactions contemplated by this Agreement as the Representative shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact.
(h) The Company shall have furnished to the Representative
certificates of the President and a Vice-President of the Company, dated as of
the Closing Date, and Additional Closing Date(s), to the effect that:
(i) Each of the representations and warranties of the
Company contained in Section 2 hereof is true and correct in all material
respects at and as of such Closing Date, and the Company has performed or
complied with all of its agreements, covenants and undertakings contained in
this Agreement and has performed or satisfied all the conditions contained in
this Agreement on its part to be performed or satisfied at the Closing Date;
18
(ii) The Registration Statement has become effective and
no order suspending the effectiveness of the Registration Statement has been
issued, and, to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission;
(iii) The respective signers have each carefully examined
the Registration Statement and the Prospectus and any amendments and
supplements thereto, and to the best of their knowledge the Registration
Statement and the Prospectus and any amendments and supplements thereto and
all statements contained therein are true and correct in all material respects,
and neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and, since the effective date of the
Registration Statement, there has occurred no event required to be set forth
in an amended or supplemented Prospectus which has not been so set forth
except changes which the Registration Statement and Prospectus indicate might
occur.
(iv) Except as set forth or contemplated in the
Registration Statement and Prospectus, since the respective dates as of which,
or periods for which, information is given in the Registration Statement and
Prospectus and prior to the date of such certificate (A) there has not been
any material adverse change, financial or otherwise, in the business, business
prospects, earnings, general affairs or condition (financial or otherwise), of
the Company (in each case whether or not arising in the ordinary course of
business), and (B) the Company has not incurred any material liabilities,
direct or contingent, or entered into any material transactions, otherwise
than in the ordinary course of business other than as referred to in the
Registration Statement or Prospectus and except changes which the Registration
Statement and Prospectus indicate might occur.
(i) The Company shall have furnished to the Representative
on the Closing Date, such other certificates of executive officers of the
Company additional to those specifically mentioned herein, as the
Representative may have reasonably requested, as to: the accuracy and
completeness of any statement in the Registration Statement or the Prospectus,
or in any amendment or supplement thereto; the representations and warranties
of the Company herein; the performance by the Company of its obligations
hereunder; or the fulfillment of the conditions concurrent and precedent to
the obligations of the Underwriters hereunder, which are required to be
performed or fulfilled on or prior to the Closing Date.
(j) At the time this Agreement is executed, and on each
Closing Date you shall have received a letter from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Co., LLP,
addressed to the Representative, as Representative of the Underwriters, and
dated, respectively, as of the date of this Agreement and as of each Closing
Date in form and substance reasonably satisfactory to the Representative, to the
effect that:
(i) They are independent public accountants within the
meaning of the Act and the applicable published Rules and Regulations of the
Commission;
19
(ii) In their opinion, the financial statements and
related schedules of the Company included in the Registration Statement and
Prospectus and covered by their reports comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published Rules and Regulations of the Commission issued thereunder;
(iii) On the basis of limited procedures in accordance with
standards established by the American Institute of Certified Public
Accountants, including (1) a reading of the latest available financial
statements of the Company (a copy of which shall be attached to such letter),
(2) a reading of the latest available minutes of the meetings of the
stockholders and the Board of Directors of the Company as set forth in the
minute books of the Company, officials of the Company having advised you and
them that the minutes of all such meetings through that date were set forth
therein, (3) consultations with officials of the Company responsible for
financial and accounting matters of the Company, which procedures do not
constitute an examination in accordance with generally accepted accounting
standards, and would not necessarily reveal material adverse changes in the
financial position or results of operations or inconsistencies in the
application of generally accepted accounting principles, nothing has come to
their attention which in their judgment would lead them to believe that (a) the
unaudited financial statements and related schedules of the Company included in
the Registration Statement and Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Rules and Regulations of the Commission issued thereunder, or were not
prepared in accordance with generally accepted accounting principles and
practices consistent in all material respects with those followed in the
preparation of the comparable financial statements and schedules covered by
their reports included in the Registration Statement and Prospectus, or would
require any material adjustments for a fair presentation of the information
purported to be shown thereby or (b) during the period from the date of the
Capitalization table included in the Prospectus to a specified date not more
than four business days prior to the date of such letter, there has been any
material change in the capital stock or debt of the Company, or (c) during the
period from the date of the latest balance sheet and related statements of
operations, changes in stockholders' equity and changes in financial position
included in the Prospectus and covered by their reports contained therein to the
date of the letter, there has been any material adverse change in the financial
condition, or results of operations, of the Company; and
(iv) In addition to the examination referred to in their
reports included in the Registration Statement and the Prospectus and the
limited procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information which are derived from
the general accounting records of the Company which appear in the Prospectus
under the captions "Capitalization", "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Executive Compensation",
"Certain Transactions", "Selected Financial Data," "Dilution," and "Risk
Factors," as well as such other financial information as may be specified by the
Representative, and that they have compared such amounts, percentages and
financial information with the accounting records of the Company and have found
them to be in agreement.
20
All the opinions, letters, certificates and evidence mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel to the Underwriters, whose approval shall not be
unreasonably withheld, conditioned or delayed.
If any of the conditions specified in this Section shall not
have been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and all obligations of the Underwriters hereunder may be terminated
and canceled by the Representative by notifying the Company of such termination
and cancellation in writing or by telegram at any time prior to, or on, the
Closing Date and any such termination and cancellation shall be without
liability of any party hereto to any other party, except with respect to the
provisions of Sections 7 and 8 hereof. The Representative may, of course, waive,
in writing, any conditions which have not been fulfilled or extend the time for
their fulfillment.
21
SECTION 12. Termination.
(a) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company at any time before it becomes
effective pursuant to Section 10.
(b) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company, at any time after it becomes
effective, in the event that the Company, after notice from the Representative
and an opportunity to cure, shall have failed or been unable to comply with any
of the terms, conditions or provisions of this Agreement on the part of the
Company to be performed, complied with or fulfilled within the respective times
herein provided for, including without limitation Section 6(g) hereof, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Representative in writing. This Agreement may also be
terminated if (i) qualifications are received or provided by the Company's
independent public accountants or attorneys to the effect of either inabilities
in furnishing certifications as to material items including, without limitation,
information contained within the footnotes to the financial statements, or as
affecting matters incident to the issuance and sale of the securities
contemplated or as to corporate proceedings or other matters or (ii) there is
any action, suit or proceeding, threatened or pending, at law or equity against
the Company, or by any Federal, State or other commission, board or agency
wherein any unfavorable result or decision could materially adversely affect the
business, property, or financial condition of the Company which was not
disclosed in the Prospectus.
(c) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company at any time after it becomes
effective, if the offering of, or the sale of, or the payment for, or the
delivery of, the Units is rendered impracticable or inadvisable because (i)
additional material governmental restriction, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New York
Stock Exchange or trading in securities generally on such exchange shall have
been suspended or a general banking moratorium shall have been established by
Federal or New York State authorities or (ii) a war or other national calamity
shall have occurred involving the United States or (iii) the condition of the
market for securities in general shall have materially and adversely changed, or
(iv) the condition of any matter materially affecting the Company or its
business or business prospects, is such that it would be undesirable,
impractical or inadvisable to proceed with, or consummate, this Agreement or the
public offering of the Units.
(d) Any termination of this Agreement pursuant to this Section
12 shall be without liability of any character (including, but not limited to,
loss of anticipated profits or consequential damages) on the part of any party
hereto, except that the Company shall remain obligated to pay the costs and
expenses provided to be paid by it specified in Sections 6, 7 and 8, to the
extent therein provided. In addition, the Underwriter shall account to the
Company for any advance and shall reimburse the Company for any portion of the
advance not expended for actual out-of-pocket expenses. In the event that the
Representative terminates this
22
agreement pursuant to the provisions of Section 12(b), the Representative shall
be entitled to reimbursement of expenses on an accountable basis.
SECTION 13. Finder. The Company and the Underwriters mutually represent
that they know of no person who rendered any service in connection with the
introduction of the Company to the Underwriters and that they know of no claim
by anyone for a "finder's fee" or similar type of fee, in connection with the
public offering which is the subject of this Agreement. Each party hereby
indemnifies the other against any such claims by any person known to it, and not
known to the other party hereto, who shall claim to have rendered services in
connection with the introduction of the Company to the Underwriters and/or to
have such a claim.
SECTION 14. Substitution of Underwriters.
(a) If one or more Underwriters default in its or their
obligations to purchase and pay for Units hereunder and if the aggregate amount
of such Units which all Underwriters so defaulting have agreed to purchase does
not exceed 10% of the aggregate number of Units constituting the Units, the
non-defaulting Underwriters shall have the right and shall be obligated
severally to purchase and pay for (in addition to the Units set forth opposite
their names in Schedule I) the full amount of the Units agreed to be purchased
by all such defaulting Underwriters and not so purchased, in proportion to their
respective commitments hereunder. In such event the Representative, for the
accounts of the several non-defaulting Underwriters, may take up and pay for all
or any part of such additional Units to be purchased by each such Underwriter
under this subsection (a), and may postpone the Closing Date to a time not
exceeding seven full business days; or
(b) If one or more Underwriters (other than the
Representative) default in its or their obligations to purchase and pay for the
Units hereunder and if the aggregate amount of such Units which all Underwriters
so defaulting shall have agreed to purchase shall exceed 10% of the aggregate
number of Units, or if one or more Underwriters for any reason permitted
hereunder cancel its or their obligations to purchase and pay for Units
hereunder, the non-canceling and non-defaulting Underwriters (hereinafter
called the "Remaining Underwriters") shall have the right, but shall not be
obligated to purchase such Units in such proportion as may be agreed among them,
at the Closing Date. If the Remaining Underwriters do not purchase and pay for
such Units at such Closing Date, the Closing Date shall be postponed for one
business day and the remaining Underwriters shall have the right to purchase
such Units, or to substitute another person or persons to purchase the same or
both, at such postponed Closing Date. If purchasers shall not have been found
for such Units by such postponed Closing Date, the Closing Date shall be
postponed for a further two business days and the Company shall have the right
to substitute another person or persons, satisfactory to you to purchase such
Units at such second postponed Closing Date. If the Company shall not have found
such purchasers for such Units by such second postponed Closing Date, then this
Agreement shall automatically terminate and neither the Company nor the
remaining Underwriters (including the Representative) shall be under any
obligation under this Agreement (except that the Company shall remain liable to
the extent provided in Paragraph 7 hereof). As used in this Agreement, the term
"Underwriter" includes any person substituted for an
23
Underwriter under this Section 14. Nothing in this subparagraph (b) will relieve
a defaulting Underwriter from its liability, if any, to the other Underwriters
for damages occasioned by its default hereunder (and such damages shall be
deemed to include, without limitation, all expenses reasonably incurred by each
Underwriter in connection with the proposed purchase and sale of the Units) or
obligate any Underwriter to purchase or find purchasers for any Units in excess
of those agreed to be purchased by such Underwriter under the terms of Sections
3 and 14 hereof.
SECTION 15. Registration of the Warrants and/or securities
underlying the Underwriters' Warrants. The Company agrees that it will, upon
request by the Representative or the holders of a majority of the Underwriters'
Warrants and Underlying Securities within the period commencing one year after
the Effective Date, and for a period of five years from the Effective Date, on
one occasion only at the Company's sole expense, cause the Underwriters'
Warrants and/or the Underlying Securities issuable upon exercise of the
Underwriters' Warrants, to be the subject of a post-effective amendment, a new
Registration Statement, if appropriate (hereinafter referred to as the "demand
Registration Statement"), so as to enable the Representative and/or its assigns
to offer publicly the Underwriters' Warrants and/or the underlying securities.
The Company agrees to register such securities expeditiously and, where
possible, within forty-five (45) business days after receipt of such requests.
The Company agrees to use its "best efforts" to cause the post-effective
amendment, new Registration Statement to become effective and for a period of
nine (9) months thereafter to reflect in the post-effective amendment, new
Registration Statement, financial statements which are prepared in accordance
with Section 10(a)(3) of the Act and any facts or events arising which,
individually or in the aggregate, represent a fundamental and/or material change
in the information set forth in such post-effective amendment or new
Registration Statement. The holders of the Underwriters' Warrants may demand
registration without exercising such Warrants and, in fact, are never required
to exercise same.
The Company understands and will agree that if, at any time
within the period commencing one year after the Effective Date and ending seven
years after the Effective Date of the Company's Registration Statement, it
should file a Registration Statement with the Commission pursuant to the
Securities Act, regardless of whether some of the holders of the Underwriters'
Warrants and Underlying Securities shall have theretofore availed themselves
of the right provided above, the Company, at its own expense, will offer to
said holders the opportunity to register the Underwriters' Warrants and
Underlying Securities. This paragraph is not applicable to a Registration
Statement filed by the Company with the SEC on Form S-8 or any other
inappropriate form.
In addition to the rights above provided, the Company will
cooperate with the then holders of the Underwriters' Warrants and Underlying
Securities in preparing and signing a Registration Statement, on one occasion
only in addition to the Registration Statements discussed above, required in
order to sell or transfer the aforesaid Underwriters' Warrants and underlying
securities and will supply all information required therefor, but such
additional Registration Statement shall be at the then holders' cost and
expense unless the Company elects to register additional shares of the
Company's Common Stock in which case the cost and expense of such Registration
Statement will be prorated between the Company
24
and the holders of the Underwriters' Warrants and underlying securities
according to the aggregate sales price of the securities being issued. The
holders of the Underwriters' Warrants may include such Warrants in any such
filing without exercising the Underwriters' Warrants, and in fact, are never
required to exercise same. The Company can, at any time for any reason, withdraw
any such registration except in connection with a Registration Statement filed
pursuant to the Company's demand Registration Statement.
SECTION 16. Other Agreements.
(a) On the Effective Date, the Company will enter into an
agreement retaining the Representative as a financial consultant pursuant to
which the Representative shall receive a consulting fee in an amount equal to
$72,000 for services for one (1) year from the Effective Date, payable in full
in advance on the Closing Date, which shall include, but not be limited to,
advising the Company in connection with possible acquisition opportunities,
advising the Company regarding shareholder relations including the preparation
of the annual report and other releases, assisting in long-term financial
planning, advice in connection with corporate re-organizations and expansion and
capital structure, and other financial assistance.
(b) The Company agrees to file with the NASD all
post-effective amendments or prospectus supplements disclosing actual price and
selling terms by the selling security holders at the same time they are filed
with the SEC and in the event a portion of the securities being registered on
behalf of selling security holders become underwritten, that prior to
commencement of the distribution (i) copies of all underwriting documents
proposed for use will be submitted to the NASD for review and (ii) the maximum
compensation to be paid will be approved by the Department. The Company also
agrees to notify the NASD and the Representative if subsequent to the filing of
this offering any 5% or greater shareholder of the Company is or becomes an
affiliate or associated person of an NASD member participating in the
distribution in this offering.
(c) If the Company shall within five (5) years from the
Effective Date, enter into any agreement or understanding with any person or
entity introduced by the Representative involving (i) the sale of all or
substantially all of the assets and properties of the Company, (ii) the merger
or consolidation of the Company (other than a merger or consolidation effected
for the purpose of changing the Company's domicile) or (iii) the acquisition by
the Company of the assets or stock of another business entity, which agreement
or understanding is thereafter consummated, whether or not during such five (5)
year period, the Company, upon such consummation, shall pay to the
Representative an amount equal to the following percentages of the consideration
paid by the Company in connection with such transaction:
5% of the first $4,000,000 or portion thereof, of such
consideration;
4% of the next $1,000,000 or portion thereof, of such
consideration;
3% of the next $1,000,00 or portion thereof, of such
consideration; and
2% of such consideration in excess of the first $1,000,000
of such consideration.
25
The fee payable to the Representative will be in the same form of
consideration as that paid by or to the Company, as the case may be, in any such
transactions.
(d) Commencing twelve months after the Effective Date, the
Company will pay the Representative as its Warrant solicitation agent an amount
equal to four percent (4%) of the aggregate exercise price of each Warrant
exercised of which a portion may be allowed to the dealer who solicited the
exercise (which may also be the Representative); provided: (1) the market price
of the Common Stock on the date the Warrant was exercised was greater than the
Warrant exercise price on that date; (2) exercise of the Warrant was solicited
by a member of the NASD and the NASD member is designated in writing by the
Warrant holder; (3) the Warrant was not held in a discretionary account; (4)
disclosure of compensation arrangements was made both at the time of the
offering and at the time of exercise of the Warrant; and (5) the solicitation of
the exercise of the Warrant was not in violation of Rule 10b-6 promulgated under
the Securities Exchange Act of 1934. The Company agrees to pay over to the
Representative any fees due it within five business days after receipt by the
Company of Warrant proceeds. Within ten (10) days of the last day of each month
commencing one year from the Effective Date, the Company will instruct the
Warrant Agent to notify the Representative of each Warrant certificate which has
been properly completed and delivered for exercise by holders of Warrants during
each such month. The Company will instruct the Transfer Agent that the
Representative may at any time during business hours, at its expense, examine
the records of the Company and the Warrant Agent which relate to the exercise of
the Warrants. It is understood that this agreement is on an exclusive basis to
solicit the exercise of the Warrants and that the Company may not engage other
broker-dealers to solicit the exercise of Warrants without the consent of VTR.
It is understood that no solicitation fee will be paid where the Warrant
exercise was not solicited by VTR or another member of the NASD.
(e) For a period of two years from the Effective Date, the
Company will not file a Form S-8 or other Registration Statement for the benefit
of officers, directors, consultants and employees without the prior written
consent of the Representative.
SECTION 17. Notice. Except as otherwise expressly provided in
this Agreement, (A) whenever notice is required by the provisions hereof to be
given to the Company, such notice shall be given in writing, by certified mail,
return receipt requested, addressed to the Company at the address set forth
herein on the first page, copy to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; and (B) whenever notice
is required by the provisions hereof to be given to the Underwriters, such
notice shall be in writing addressed to the Representative at VTR, at the
address set forth herein on the first page copy to ▇▇▇▇▇▇ ▇▇▇▇▇, Esq., ▇▇▇▇▇▇
▇▇▇▇▇ P.C., Suite 420, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇. Any party may
change the address for notices to be sent by giving written notice to the other
persons.
SECTION 18. Representations and Agreements to Survive
Delivery. Except as the context otherwise requires, all representations,
warranties, covenants, and agreements contained in this Agreement shall be
deemed to be representations, warranties, covenants, and agreements as at the
date hereof and as at the Closing Date and the Additional Closing Date(s), and
all representations, warranties, covenants, and agreements of the several
Underwriters and the Company, shall remain operative and in full force and
effect regardless
26
of any investigation made by or on behalf of any of the Underwriters or any of
their controlling persons, and shall survive any termination of this Agreement
(whensoever made) and/or delivery of the Units to the several Underwriters.
SECTION 19. Miscellaneous. This Agreement is made solely for the
benefit of the Underwriters and the Company and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successor" or the term "successors and assigns" as
used in this Agreement shall not include any purchaser, as such, of any of the
Shares. This Agreement shall not be assignable by any party without the other
party's prior written consent. This Agreement shall be binding upon, and shall
inure to the benefit of, our respective successors and permitted assigns. The
foregoing represents the sole and entire agreement between us with respect to
the subject matter hereof and supersedes any prior agreements between us with
respect thereto. This Agreement may not be modified, amended or waived except by
a written instrument signed by the party to be charged. The validity,
interpretation and construction of this Agreement, and of each part hereof,
shall be governed by the internal laws of the State of New York, without giving
effect to the conflict of laws provisions thereof.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall be
deemed to be one and the same instrument. If a party signs this Agreement and
transmits an electronic facsimile of the signature page to the other party,
the party who receives the transmission may rely upon the electronic facsimile
as a signed original of this Agreement.
27
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding agreement
between the Company and the Underwriters in accordance with its terms.
Very truly yours,
SUPERIOR SUPPLEMENTS, INC.
By: ___________________________________________
(authorized officer)
CONFIRMED AND ACCEPTED, as of the
date first above written:
VTR CAPITAL, INC.
By: ____________________________________
For itself and as the Representative
of the other Underwriters named in
Schedule I hereto.
28
SCHEDULE I
Underwriters Number of Units to be
Purchased
------------ ---------------------
VTR Capital Inc.
_________
Total 250,000
29