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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1996
REGISTRATION NO. 333-11789
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BEVERAGE WORKS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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CALIFORNIA 2000 95-4550937
(STATE OF JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
9800 SOUTH SEPULVEDA BLVD., SUITE 720 2431 WEST COAST HIGHWAY, SUITE 204
LOS ANGELES, CALIFORNIA 90045 NEWPORT BEACH, CALIFORNIA 92663
(310) 642-5643 (ADDRESS OF PRINCIPAL PLACE
(ADDRESS AND TELEPHONE NUMBER OF BUSINESS OR INTENDED
OF PRINCIPAL EXECUTIVE OFFICES) PRINCIPAL PLACE OF BUSINESS)
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LYLE MAUL
9800 SOUTH SEPULVEDA BLVD., SUITE 720
LOS ANGELES, CALIFORNIA 90045
(310) 642-5643
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
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CHARLES J. HECHT, ESQ. MITCHELL LAMPERT, ESQ.
HECHT & STECKMAN, P.C. LAMPERT & LAMPERT
60 EAST 42ND STREET, SUITE 5101 10 EAST 40TH STREET, 44TH FLOOR
NEW YORK, NEW YORK 10165-5101 NEW YORK, NEW YORK 10016
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SECURITY(2) OFFERING PRICE FEE
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Units(3)................................................... 1,150,000 $ 8.00 $ 9,200,000 $ 3,172.41
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Common Stock, no par value(4).............................. 1,150,000 -- -- $ 0.00
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Class A Warrants to purchase Common Stock(5)............... 1,150,000 -- -- $ 0.00
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Common Stock, no par value, underlying Class A Warrants
included in the Units.................................... 1,150,000 $ 8.25 $ 9,487,500 $ 3,271.55
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Common Stock, no par value, offered by Selling
Securityholders.......................................... 520,745 $ 8.00 $ 4,165,960 $ 1,436.54
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Class A Warrants to purchase Common Stock offered by
Selling Securityholders.................................. 3,000,000 $ 8.25 $ 24,750,000 $ 8,534.48
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Common Stock, no par value, underlying Class A Warrants
offered by Selling Securityholders(6).................... 3,000,000 -- -- $ 0.00
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Class B Warrants to purchase Common Stock offered by
Selling Securityholders.................................. 35,000 $ 4.50 $ 157,500 $ 54.31
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Common Stock, no par value, underlying Class B Warrants
offered by Selling Securityholders....................... 35,000 $ 4.75 $ 166,250 $ 57.33
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Representative's Unit Purchase Option...................... 100,000 $12.80 $ 1,280,000 $ 441.38
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Common Stock, no par value, in Representative's Unit
Purchase Option.......................................... 100,000 -- -- $ 0.00
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Representative's Warrants in Representative's Unit Purchase
Option................................................... 100,000 -- -- $ 0.00
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Common Stock, no par value, underlying Class G Warrants in
Representative's Unit Purchase Option.................... 100,000 $ 8.25 $ 825,000 $ 284.48
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Total....................................................................................... $ 50,032,210 $ 17,252.48
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(Continued on following page)
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(1) Pursuant to Rule 416 under the Securities Act of 1933, this Registration
Statement covers such additional indeterminate number of shares of Common
Stock as may be issued by reason of adjustments in the number of shares of
Common Stock pursuant to anti-dilution provisions contained in the
Representative's Unit Purchase Option and the Class A Warrant, Class B
Warrant and Representative's Warrant Agreements.
(2) Estimated for purposes of computing the registration fee in accordance with
Rule 457(c) and Rule 457(g) under the Securities Act of 1933.
(3) Each Unit consists of one share of Common Stock and one Class A Warrant
immediately separable upon commencement of trading. Includes 150,000 Units
pursuant to the Representative's over-allotment option.
(4) Includes 150,000 shares of Common Stock issuable pursuant to the
Representative's over-allotment option. These shares are included in the
Units. No additional registration fee is required.
(5) Includes 150,000 Class A Warrants issuable pursuant to the Representative's
over-allotment option. These Class A Warrants are included in the Units. No
additional registration fee is required.
(6) Fee for Class A Warrants offered by Selling Securityholders determined under
Rule 457(g)(1). No additional fee required.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
CALIFORNIA STATUTES
Section 317 of the California General Corporation Law, as amended, provides
for the indemnification of the Company's officers, directors, employees and
agents under certain circumstances as follows:
(a) For the purposes of this section, "agent" means any person who is
or was a director, officer, employee or other agent of corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, or was a director, officer,
employee or agent of a foreign or domestic corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of the predecessor corporation; "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes without limitation
attorneys' fees and any expenses of establishing a right to indemnification
under subdivision (d) or paragraph (4) of subdivision (e).
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any proceeding (other
than an action by or in the right of the corporation to procure a judgment
in its favor) by reason of the fact that the person is or was an agent of
the corporation, against expenses, judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with the proceeding
if that person acted in good faith and in a manner the person reasonably
believed to be in the best interests of the corporation and, in the case of
a criminal proceeding, had no reasonable cause to believe the conduct of
the person was unlawful. The termination of any proceeding by judgment,
order, settlement, conviction, or upon a please of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed
to be in the best interests of the corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
(c) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending,
or completed action by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was an
agent of the corporation, against expenses actually and reasonably incurred
by that person in connection with the defense or settlement of the action
if the person acted in good faith, in a manner the person believed to be in
the best interests of the corporation and its shareholders.
No indemnification shall be made under this subdivision for any of the
following:
(1) In respect of any claim, issue or matter as to which the person
shall have been adjudged to be liable to the corporation in the
performance of that person's duty to the corporation and its
shareholders, unless and only to the extent that the court in which the
proceeding is or was pending shall determine upon application that, in
view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for expenses and then only to the
extent that the court shall determine.
(2) Of amounts paid in settling or otherwise disposing of a pending
action without court approval.
(3) Of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
(d) To the extent that an agent of a corporation has been successful
on the merits in defense of any proceeding referred to in subdivision (b)
or (c) or in defense of any claim, issue, or matter therein, the
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agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith.
(e) Except as provided in subdivision (d), any indemnification under
this section shall be made by the corporation only if authorized in the
specific case, upon a determination that indemnification of the agent is
proper in the circumstances because the agent has met the applicable
standard of conduct set forth in subdivision (b) or (c), by any of the
following:
(1) A majority vote of a quorum consisting of directors who are not
parties to such proceeding.
(2) If such a quorum of directors is not obtainable, by independent
legal counsel in a written opinion.
(3) Approval of the shareholders (Section 153), with the shares
owned by the person to be indemnified not being entitled to vote
thereon.
(4) The court in which the proceeding is or was pending upon
application made by the corporation or the agent or the attorney or
other person rendering services in connection with the defense, whether
or not the application by the agent, attorney or other person is opposed
by the corporation.
(f) Expenses incurred in defending any proceeding may be advanced by
the corporation prior to the final disposition of the proceeding upon
receipt of an undertaking by or on behalf of the agent to repay that amount
if it shall be determined ultimately that the agent is not entitled to be
indemnified as authorized in this section. The provisions of subdivision
(a) of Section 315 do not apply to advances made pursuant to this
subdivision.
(g) The indemnification authorized by this section shall not be deemed
exclusive of any additional rights to indemnification for breach of duty to
the corporation and its shareholders while acting in the capacity of a
director or officer of the corporation to the extent the additional rights
to indemnification are authorized in an article provision adopted pursuant
to paragraph (11) of subdivision (1) of Section 204. The indemnification
provided by this section for acts, omissions, or transactions while acting
in the capacity of, or while serving as, a director or officer of the
corporation but not involving breach of duty to the corporation and its
shareholders shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any by-law, agreement,
vote of shareholders or disinterested directors, or otherwise, to the
extent the additional rights to indemnification are authorized in the
articles of the corporation. An article provision authorizing
indemnification "in excess of that otherwise permitted by Section 317" or
"to the fullest extent permissible under California law" or the substantial
equivalent thereof shall be construed to be both a provision for additional
indemnification for breach of duty to the corporation and its shareholders
as referred to in, and with the limitations required by, paragraph (11) of
subdivision (a) of Section 204 and a provision for additional
indemnification as referred to in the second sentence of this subdivision.
The rights to indemnity hereunder shall continue as to a person who has
ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of the person. Nothing
contained in this section shall affect any right to indemnification to
which persons other than the directors and officers may be entitled by
contract or otherwise.
(h) No indemnification or advance shall be made under this section,
except as provided in subdivision (d) or paragraph (4) of subdivision (e),
in any circumstance where it appears:
(1) That it would be inconsistent with a provision of the articles,
by-laws, a resolution of the shareholders, or an agreement in effect at
the time of the accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification.
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
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(i) A corporation shall have power to purchase and maintain
insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in that capacity
or arising out of the agent's status as such whether or not the
corporation would have the power to indemnify the agent against that
liability under this section. The fact that a corporation owns all or
a portion of the shares of the company issuing a policy of insurance
shall not render this subdivision inapplicable if either of the
following conditions are satisfied: (1) if the articles authorize
indemnification in excess of that authorized in this section and the
insurance provided by this subdivision is limited as indemnification
is required to be limited by paragraph (11) of subdivision (1) of
Section 204; or (2)(A) the company issuing the insurance policy is
organized, licensed, and operated in a manner that complies with the
insurance laws and regulations applicable to its jurisdiction of
organization, (B) the company issuing the policy provides procedures
for processing claims that do not permit that company to be subject
to the direct control of the corporation that purchased that policy,
and (C) the policy issued provides for some manner of risk sharing
between the issuer and purchaser of the policy, on one hand, and some
unaffiliated person or persons, on the other, such as by providing
for more than one unaffiliated owner of the company issuing the
policy or by providing that a portion of the coverage furnished will
be obtained from some unaffiliated insurer or reinsurer.
(j) This section does not apply to any proceeding against any trustee,
investment manager, or other fiduciary of an employee benefit plan in that
person's capacity as such, even though the person may also be an agent as
defined in subdivision (a) of the employer corporation. A corporation shall
have power to indemnify such a trustee, investment manager, or other
fiduciary to the extent permitted by subdivision (f) of Section 207.
ARTICLES OF INCORPORATION
The Company's Articles of Incorporation provides for the indemnification of
the Company's directors under certain circumstances as follows:
PART IV
LIMITATION OF LIABILITY
The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under
California law.
PART V
INDEMNIFICATION OF AGENTS
This corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the Corporations Code) for breach of duty to
the corporation and its stockholders through bylaw provisions or through
agreements with the agents, or both, in excess of the indemnification
otherwise permitted by Section 317 of the Corporations Code, subject to the
limits on such excess indemnification set forth in Section 204 the
Corporations Code.
BY-LAWS
The Company's By-Laws provide for the indemnification of the Company's
directors, officers, employees, or agents under certain circumstances as
follows:
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ARTICLE VI
INDEMNIFICATION OF
DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
SECTION 1. AGENTS, PROCEEDINGS, AND EXPENSES.
For the purposes of this Article, "agent" means any person who is or
was a director, officer, employee, or other agent of this corporation, or
who is or was serving at the request of this corporation as a director,
officer, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or who was a
director, officer, employee, or agent of a foreign or domestic corporation
that was a predecessor corporation of this corporation or of another
enterprise at the request of such predecessor corporation; "proceeding"
means any threatened, pending, or completed action or proceeding, whether
civil, criminal, administrative, or investigative; and "expenses" includes,
without limitation, attorney fees and any expenses of establishing a right
to indemnification under Section 4 or Section 5(d) of this Article VI.
SECTION 2. ACTIONS OTHER THAN BY THE CORPORATION.
This corporation shall have the power to indemnify any person who was
or is a party, or is threatened to be made a party, to any proceeding
(other than an action by or in the right of this corporation to procure a
judgment in its favor) by reason of the fact that such person is or was an
agent of this corporation, against expenses, judgments, fines, settlements,
and other amounts actually and reasonably incurred in connection with such
proceeding if that person acted in good faith and in a manner that the
person reasonably believed to be in the best interests of this corporation
and, in the case of a criminal proceeding, had no reasonable cause to
believe the conduct of that person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner that
the person reasonably believed to be in the best interests of this
corporation or that the person had reasonable cause to believe that the
person's conduct was not unlawful.
SECTION 3. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.
This corporation shall have the power to indemnify any person who was or is
a party, or is threatened to be made a party, to any threatened, pending, or
completed action by or in the right of this corporation to procure a judgment in
its favor by reason of the fact that such person is or was an agent of this
corporation, against expenses actually and reasonably incurred by such person in
connection with the defense or settlement of that action, if such person acted
in good faith, in a manner such person believed to be in the best interests of
this corporation and its shareholders. No indemnification shall be made under
this Section 3 for the following:
(a) With respect to any claim, issue, or matter on which such
person has been adjudged to be liable to this corporation in the
performance of such person's duty to the corporation and its
shareholders, unless and only to the extent that the court in which such
proceeding is or was pending shall determine on application that, in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for expenses and then only to the
extent that the court shall determine;
(b) Amounts paid in settling or otherwise disposing of a pending
action without court approval; or
(c) Expenses incurred in defending a pending action that is settled
or otherwise disposed of without court approval.
SECTION 4. SUCCESSFUL DEFENSE BY AGENT.
To the extent that an agent of this corporation has been successful on
the merits in defense of any proceeding referred to in Section 2 or 3 of
this Article VI, or in defense of any claim, issue, or matter
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therein, the agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
SECTION 5. REQUIRED APPROVAL.
Except as provided in Section 4 of this Article VI, any indemnification
under this Section shall be made by the corporation only if authorized in the
specific case, after a determination that indemnification of the agent is proper
in the circumstances because the agent has met the applicable standard of
conduct set forth in Section 2 or 3 by one of the following:
(a) A majority vote of a quorum consisting of directors who are not
parties to such proceeding;
(b) Independent legal counsel in a written opinion if a quorum of
directors who are not parties to such a proceeding is not available;
(c) (i) The affirmative vote of a majority of shares of this
corporation entitled to vote represented at a duly held meeting at which
a quorum is present; or
(ii) the written consent of holders of a majority of the
outstanding shares entitled to vote (for purposes of this subsection
5(c), the shares owned by the person to be indemnified shall not be
considered outstanding or entitled to vote thereon); or
(d) The court in which the proceeding is or was pending, on
application made by this corporation or the agent or the attorney or
other person rendering services in connection with the defense, whether
or not such application by the agent, attorney, or other person is
opposed by this corporation.
SECTION 6. ADVANCE OF EXPENSES.
Expenses incurred in defending any proceeding may be advanced by the
corporation before the final disposition of such proceeding on receipt of
an undertaking by or on behalf of the agent to repay such amounts if it
shall be determined ultimately that the agent is not entitled to be
indemnified as authorized in this Article VI.
SECTION 7. OTHER CONTRACTUAL RIGHTS.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in an official capacity and as
to action in another capacity while holding such office, to the extent such
additional rights to indemnification are authorized in the articles of the
corporation. Nothing in this section shall affect any right to
indemnification to which persons other than such directors and officers may
be entitled by contract or otherwise.
SECTION 8. LIMITATIONS.
No indemnification or advance shall be made under this Article VI,
except as provided in Section 4 or Section 5(d), in any circumstance if it
appears:
(a) That it would be inconsistent with a provision of the articles,
bylaws, a resolution of the shareholders, or an agreement in effect at
the time of the accrual of the alleged cause of action asserted in the
proceeding in which expenses were incurred or other amounts were paid,
which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving settlement.
SECTION 9. INSURANCE.
This corporation may purchase and maintain insurance on behalf of any
agent of the corporation insuring against any liability asserted against or
incurred by the agent in that capacity or arising out of the
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agent's status as such, whether or not this corporation would have the
power to indemnify the agent against that liability under the provisions of
this Article VI. Notwithstanding the foregoing, if this corporation owns
all or a portion of the shares of the company issuing the policy of
insurance, the insuring company and/or the policy shall meet the conditions
set forth in section 317(i) of the Corporations Code.
SECTION 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN.
This Article VI does not apply to any proceeding against any trustee,
investment manager, or other fiduciary of an employee benefit plan in that
person's capacity as such, even though that person may also be an agent of
the corporation. The corporation shall have the power to indemnify, and to
purchase and maintain insurance on behalf of any such trustee, investment
manager, or other fiduciary of any benefit plan for any or all of the
directors, officers, and employees of the corporation or any of its
subsidiary or affiliated corporations.
SECTION 11. SURVIVAL OF RIGHTS.
The rights provided by this Article VI shall continue for a person who
has ceased to be an agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
SECTION 12. EFFECT OF AMENDMENT.
Any amendment, repeal, or modification of this Article VI shall not
adversely affect an agent's right or protection existing at the time of
such amendment, repeal, or modification.
SECTION 13. SETTLEMENT OF CLAIMS.
The corporation shall not be liable to indemnify any agent under this
Article VI for (a) any amounts paid in settlement of any action or claim
effected without the corporation's written consent, which consent shall not
be unreasonably withheld, or (b) any judicial award, if the corporation was
not given a reasonable and timely opportunity to participate, at its
expense, in the defense of such action.
SECTION 14. SUBROGATION.
In the event of payment under this Article VI, the corporation shall
be subrogated to the extent of such payment to all of the rights of
recovery of the agent, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the
execution of such documents as may be necessary to enable the corporation
effectively to bring suit to enforce such rights.
SECTION 15. NO DUPLICATION OF PAYMENTS.
The corporation shall not be liable under this Article VI to make any
payment in connection with any claim made against the agent to the extent
the agent has otherwise actually received payment, whether under a policy
of insurance, agreement, vote, or otherwise, of the amounts otherwise
indemnifiable under this Article.
WRITTEN AGREEMENTS
The Company has entered into written agreements with each of its officers
and directors, including Frederik G.M. Rodenhuis and Lyle R. Maul, pursuant to
which the Company is required to indemnify each person under circumstances and
to the extent generally equivalent to those which are permissible under the
Company's By-Laws.
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ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the offering are as follows:
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ITEM AMOUNT*
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Securities and Exchange Commission Registration Fee............... $ 17,252
National Association of Securities Dealers, Inc. and Blue Sky
Registration Fees............................................... 25,000
Accounting Fees and Expenses......................................
Legal Fees and Expenses...........................................
Printing, Design and Advertising..................................
Underwriters' Non-Accountable Expense Allowance...................
Miscellaneous.....................................................
--------
Total........................................................... 569,752
========
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* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Within the last three (3) years, the Company has issued the following
securities which were not registered under the Securities Act of 1933.
On August 2, 1995, the date of incorporation, the Company authorized the
issuance of 245,310 shares of Common Stock to its founders for $0.01 per share.
This sale was made in reliance on the exemption from registration under Section
4(2) of the 1933 Act.
On October 6, 1995, the Company issued 192,400 shares of its common stock
and 190,000 warrants to purchase shares of the Company's Common Stock,
exercisable at $8.25 per share. The gross proceeds realized from the issuance
was $76,756. 2,810,000 warrants to were issued to Imafina, S.A., a Swiss money
management firm. The gross proceeds realized from the sale was $28,000. Imafina,
S.A. sold 100,000 warrants to one of the Company's existing shareholders. These
issuances were made in reliance on the exemption from registration under Section
4(2) of the 1933 Act.
On October 31, 1995, the Company issued 14,000 shares of its Common Stock
and 15,583 warrants to purchase shares of the Company's Common Stock exercisable
at $4.50 per share to Hecht & Steckman, P.C., counsel to the Company. The gross
proceeds realized from the sale was $140.00. This issuance was made in reliance
on the exemption from registration under Section 4(2) of the 1933 Act.
On November 8, 1995, the Company acquired Heritage Brewing Company in a
stock-for-stock exchange. The Company acquired 94.85% of all of the outstanding
voting capital stock of Heritage in exchange for 142,276 shares of the Company's
Common Stock. The Heritage shareholders have an option to call the Heritage
stock if the Company does not close a public offering of the Company's common
stock realizing gross proceeds of at least $5,000,000 by December 31, 1995. The
issuance was made in reliance on the exemption from registration under Section
3(a)(9) of the 1933 Act.
On November 12, 1995, the Company authorized the issuance of 49,015 shares
of its Common Stock to John Stoner and Mark Mericle as consideration for
consulting services provided to the Company. The Company also issued 5,333
shares to Jack Stoner and Edward Hansen to reduce notes owed by Heritage. The
shares were issued in reliance on the exemption from registration under Section
4(2) of the 1933 Act.
On November 15, 1995, the Company authorized the issuance of 16,583 shares
to certain parties for consulting services previously rendered to the Company
and advances made to the Company at its pre-formation stages in the total amount
of $57,034. The issuance was made in reliance on the exemption from registration
under Section 4(2) of the 1933 Act.
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On November 20, 1995, the Company made a nonpublic offer of 400,000 shares
of Common Stock at the price of $4.00 per share. These offers and sales were
conducted by an NASD member firm in consideration for payment of commission of
9%, plus 3% nonaccountable expense allowance, of the gross proceeds. On August
28, 1996, the Company authorized the acceptance of additional subscriptions of
15,000 causing the total number of shares issued in the private placement to be
413,746. The 413,746 shares in the private placement were sold to fourteen (14)
investors realizing gross proceeds, before deducting for commissions and
expenses of $1,654,984. The private placement was made in reliance on the
exemption from registration afforded by Rule 506 of Regulation D promulgated
under the 1933 Act.
On January 22, 1996, the Company authorized the issuance of 6,500 shares of
its Common Stock to C.A. Wittwer & Associates and its designees as part of the
consideration for the license agreements between Heritage Brewing Company, a
subsidiary of the Company, and C.A. Wittwer & Associates. Heritage and the
Company have executed an agreement whereby the Company has the right to assume
the contract upon the close of a public offering by the Company realizing gross
proceeds of at least $5,000,000 on or before December 31, 1995. The sale was
made in reliance on the exemption from registration afforded by Section 4(2) of
the 1933 Act.
On May 20, 1996, the Company issued a $500,000 promissory note, secured by
all equipment, inventory and accounts receivable of the Company, and warrants to
Frederick Friedman. The note, which pays simple interest at 18% per annum,
mature on the earlier of (i) closing of a public offering by the Company with
aggregate gross proceeds of no less than $6,000,000, or (ii) December 31, 1996.
Interest is payable monthly until the principal is paid in full. The purchaser
of the note was also granted 35,000 Class B Warrants, which are registered in
this Offering, to purchase shares of the Company's Common Stock. If the Company
does not close a public offering by December 31, 1996, the purchaser is entitled
to an additional 35,000 warrants on the same terms and conditions. The sale was
made in reliance on the exemption from registration afforded by Section 4(2) of
the 1933 Act.
On August 5, 1996, the Company made a nonpublic offer of 32,500 units, each
unit consisting of two shares of the Corporation's common stock and one Class H
Warrant at the price of $10.00 per unit. These offers and sales were conducted
by an NASD member firm in consideration for payment of commission of 10% of the
gross proceeds. The offer closed after 15,000 units were subscribed by two (2)
investors realizing gross proceeds, before deducting for commissions and
expenses of $150,000. The private placement was made in reliance on the
exemption from registration afforded by Rule 506 of Regulation D promulgated
under the 1933 Act.
On September 10, 1996, the Company entered into a Share Purchase Agreement
with the shareholders of Orange Empire Brewing Company ("OEBC"), the parent of
Riverside Brewing Company. Under the terms of the Share Purchase Agreement, the
Company will issue up to 247,479 shares of its Common Stock for all of the
voting capital stock of OEBC. The Company will also issue 27,618 shares to
shareholders of Orange Empire for assuming certain Orange Empire debts and up to
130,000 shares based on Orange Empire meeting certain production levels. On
September 10, 1996, the Company entered into a Debt Exchange Agreement, which
provides that the Company will issue 24,125 shares of its Common Stock to
certain holders of OEBC's debts in return for extinguishing such debt. On
September 10, 1996, the Company and two individuals, Mike Hagerman and Norman
Kretschmar, two principals of OEBC, entered into the Brewpub Management
Agreement, whereby the two individuals will operate the brewpub. Under the
Brewpub Management Agreement, the Company will also issue 10,000 shares to these
individuals. The Share Purchase Agreement, Debt Exchange Agreement, and Brewpub
Management Agreement each provide that these respective transactions will close
on the closing of a public offering by the Company of the Company's Common Stock
realizing gross proceeds of at least $6,000,000. The issuance of shares of
Common Stock under the Share Purchase Agreement, Debt Exchange Agreement and
Brewpub Management Agreement was made in reliance on the exemption from
registration afforded by Rule 506 of Regulation D promulgated under the 1933
Act.
The Company had reasonable grounds to believe, prior to accepting the
subscription of each purchaser under all offers and sales under this Item 26
based in part on subscription agreements or investment letters
II-8
<PAGE> 11
executed by the purchasers, that the purchasers were purchasing for investment
and not with a view to distribution. Other than in connection with the private
placements of common stock on November 20, 1995 and August 8, 1996, there were
no broker-dealers involved in any of the transactions listed above.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<C> <S>
1.1 [Form of] Underwriting Agreement(2)
1.2 [Form of] Agreement Among Underwriters*
1.3 [Form of] Selected Dealers Agreement*
2.1 Agreement and Plan of Reorganization dated November 8, 1995 between the
Company and Heritage Brewing Company, a California corporation, and
exhibits thereto(1)
2.2 Agreement of Partnership dated September , 1996 between Prost Partners,
L.P., a California limited partnership, and BWI-St. Stan's, Inc., a
California corporation, a wholly-owned subsidiary of the Company, and
exhibits thereto(1)
2.3 Share Purchase Agreement dated September 10, 1996 between Orange Empire
Brewing Company, Inc., a California corporation and the Company and
exhibits thereto(1)
2.4 Debt Exchange Agreement Orange Empire Brewing Company, et al, and the
Company dated September , 1996.*
3.1 Amended and Restated Articles of Incorporation of the Company(1)
3.2 By-Laws of the Company(1)
4.1 Specimen of Common Stock Certificate*
4.2 Class A Warrant Agreement*
4.3 Class B Warrant Agreement(1)
4.4 Class C Warrant Agreement (Counsel Warrants)*
4.5 Class D Warrant Agreement (Riverside Warrants)*
4.6 Representative's Warrant Agreement(2)
4.7 Class H Warrant Agreement*
4.8 Registration Rights Agreement*
4.9 $500,000 Note Agreement and Promissory Note dated May 7, 1996 between the
Company and Frederick Friedman(1)
4.10 Owens Financial Note(1)
5.1 Opinion of Hecht & Steckman, P.C. re: legality of shares*
10.1 $445,000 Small Business Administration Loan dated November 10, 1993
between Heritage and Liberty National Bank*
10.2 Equipment Lease dated , as amended, between Riverside
Brewing Company and Brewery Leasing Company(1)
10.3 Ground Lease Agreement dated June 6, 1988 between Randall and Susan Steele
and Stanislaus Brewing Company, Inc., as amended*
10.4 Riverside Brewing Company Brewery Lease with Hunsaker-Hunter dated April
1, 1995(1)
10.5 Riverside Brewing Company Brewery Lease with Hunsaker-Hunter dated
December 6, 1995(1)
10.6 Riverside Brewing Company Brewpub Lease with Kowashoji USA, Inc. dated
March 31, 1993(1)
10.7 Lease between Heritage Brewing Company and Central Business Park
Investors -- 89 dated November 3, 1993(1)
</TABLE>
II-9
<PAGE> 12
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<C> <S>
10.8 Employment Agreement between the Company and Frederik G.M. Rodenhuis(1)
10.9 Employment Agreement between the Company and Lyle R. Maul(1)
10.10 Employment Agreement between the Company and John Stoner(1)
10.11 Employment Agreement between the Company and Kathy Burke(1)
10.12 Employment Agreement between the Company and Garith Helm(1)
10.13 Distributorship Agreement dated August 20, 1996 between the Company and
Southern Wine and Spirits(1)
10.14 Distributorship Agreement dated June 6, 1995 between Riverside Brewing
Company and Wine Warehouse*
10.15 Distributorship Agreement dated August 1, 1996 between the Company and
Cabo Distributing Company, Inc.(1)
10.16 1996 Nonqualified Stock Option Plan(1)
10.17 1996 Incentive Stock Option Plan(1)
10.18 Incentive Compensation Plan*
10.19 Hussong's License Agreement dated February 3, 1996 between Heritage
Brewing Company and C.A. Wittwer & Associates(1)
10.20 Reciprocal Production and Marketing Agreement dated August 1, 1996 between
the Company and Chicago Brewing Company*
10.21 Management Agreement between Riverside Brewing Company and the Company
dated July 19, 1996(1)
21.1 List of Subsidiaries(1)
23.1 Consent of Hecht & Steckman, P.C.*
23.2 Consent of Corbin & Wertz(1)
23.3 Consent of Corbin & Wertz(1)
23.4 Consent of Corbin & Wertz(1)
27.1 Financial Data Schedule(1)
</TABLE>
- ---------------
* To be filed by amendment.
(1) Filed as part of the original filing of the registration statement on
September 11, 1996.
(2) Filed as part of this Amendment No. 1 to the registration statement on
September 12, 1996.
ITEM 28. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes (a) to file during any
period in which offers or sales of the securities are being made, a
post-effective amendment to this registration statement including any prospectus
required by Section 10(a)(3) of the Securities Act of 1933, reflecting any facts
or events arising after the effective date of the registration statement (or
most recent post-effective amendment) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement, and including any material information with respect to the plan of
distribution not previously disclosed or any material change to such information
set forth in the registration statement. The undersigned registrant further
undertakes that, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof. The undersigned registrant further undertakes to remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
II-10
<PAGE> 13
B. The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
D. For determining any liability under the Securities Act of 1933, the
registrant shall treat the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the small business issuer under Rule 424(b)(1),
or (4) or 497(h) under the Securities Act as part of this registration statement
as of the time the Commission declared it effective. For determining any
liability under the Securities Act of 1933, the registrant shall treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-11
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and has authorized this
Amendment No. 1 to this registration statement to be signed on its behalf by
the undersigned, in the City of Newport Beach, State of California on September
12, 1996.
BEVERAGE WORKS, INC.,
a California corporation
By: /s/ Frederik G.M. Rodenhuis
-------------------------------
Frederik G.M. Rodenhuis
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 1 to this registration statement was signed by the following
persons in the capacities and on the dates stated.
Signature Title Date
- --------- ----- -----
/s/ Frederik G.M. Rodenhuis Chief Executive Officer, September 12, 1996
- ---------------------------- President and Director
Frederik G.M. Rodenhuis
/s/ Lyle R. Maul Chief Financial Officer September 12, 1996
- ---------------------------- and Secretary
Lyle R. Maul
II-12
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<C> <S>
1.1 [Form of] Underwriting Agreement(2)
1.2 [Form of] Agreement Among Underwriters*
1.3 [Form of] Selected Dealers Agreement*
2.1 Agreement and Plan of Reorganization dated November 8, 1995 between the
Company and Heritage Brewing Company, a California corporation, and
exhibits thereto(1)
2.2 Agreement of Partnership dated September , 1996 between Prost Partners,
L.P., a California limited partnership, and BWI-St. Stan's, Inc., a
California corporation, a wholly-owned subsidiary of the Company, and
exhibits thereto(1)
2.3 Share Purchase Agreement dated September 10, 1996 between Orange Empire
Brewing Company, Inc., a California corporation and the Company and
exhibits thereto(1)
2.4 Debt Exchange Agreement Orange Empire Brewing Company, et al, and the
Company dated September , 1996.*
3.1 Amended and Restated Articles of Incorporation of the Company(1)
3.2 By-Laws of the Company(1)
4.1 Specimen of Common Stock Certificate*
4.2 Class A Warrant Agreement*
4.3 Class B Warrant Agreement(1)
4.4 Class C Warrant Agreement (Counsel Warrants)*
4.5 Class D Warrant Agreement (Riverside Warrants)*
4.6 Representative's Warrant Agreement(2)
4.7 Class H Warrant Agreement*
4.8 Registration Rights Agreement*
4.9 $500,000 Note Agreement and Promissory Note dated May 7, 1996 between the
Company and Frederick Friedman(1)
4.10 Owens Financial Note(1)
5.1 Opinion of Hecht & Steckman, P.C. re: legality of shares*
10.1 $445,000 Small Business Administration Loan dated November 10, 1993
between Heritage and Liberty National Bank*
10.2 Equipment Lease dated , as amended, between Riverside
Brewing Company and Brewery Leasing Company*
10.3 Ground Lease Agreement dated June 6, 1988 between Randall and Susan Steele
and Stanislaus Brewing Company, Inc., as amended*
10.4 Riverside Brewing Company Brewery Lease with Hunsaker-Hunter dated April
1, 1995(1)
10.5 Riverside Brewing Company Brewery Lease with Hunsaker-Hunter dated
December 6, 1995(1)
10.6 Riverside Brewing Company Brewpub Lease with Kowashoji USA, Inc. dated
March 31, 1993(1)
10.7 Lease between Heritage Brewing Company and Central Business Park
Investors -- 89 dated November 3, 1993(1)
10.8 Employment Agreement between the Company and Frederik G.M. Rodenhuis(1)
10.9 Employment Agreement between the Company and Lyle R. Maul(1)
10.10 Employment Agreement between the Company and John Stoner(1)
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<C> <S>
10.11 Employment Agreement between the Company and Kathy Burke(1)
10.12 Employment Agreement between the Company and Garith Helm(1)
10.13 Distributorship Agreement dated August 20, 1996 between the Company and
Southern Wine and Spirits(1)
10.14 Distributorship Agreement dated June 6, 1995 between Riverside Brewing
Company and Wine Warehouse*
10.15 Distributorship Agreement dated August 1, 1996 between the Company and
Cabo Distributing Company, Inc.(1)
10.16 1996 Nonqualified Stock Option Plan(1)
10.17 1996 Incentive Stock Option Plan(1)
10.18 Incentive Compensation Plan*
10.19 Hussong's License Agreement dated February 3, 1996 between Heritage
Brewing Company and C.A. Wittwer & Associates(1)
10.20 Reciprocal Production and Marketing Agreement dated August 1, 1996 between
the Company and Chicago Brewing Company*
10.21 Management Agreement between Riverside Brewing Company and the Company
dated July 19, 1996(1)
21.1 List of Subsidiaries(1)
23.1 Consent of Hecht & Steckman, P.C.*
23.2 Consent of Corbin & Wertz(1)
23.3 Consent of Corbin & Wertz(1)
23.4 Consent of Corbin & Wertz(1)
27.1 Financial Data Schedule(1)
</TABLE>
- ---------------
* To be filed by amendment.
(1) Filed as part of the original filing of the registration statement on
September 11, 1996.
(2) Filed as part of this Amendment No. 1 to the registration statement on
September 12, 1996.
<PAGE> 1
EXHIBIT 1.1
DRAFT
[Proposed Form of Underwriting
Agreement -- Subject to
Additional Internal Review]
BEVERAGE WORKS, INC.
1,000,000 Units consisting of 1,000,000 shares
of Common Stock, no par value per share
and 1,000,000 Class A Redeemable
Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
_______, 1996
State Capital Markets Corp.
1 World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Beverage Works, Inc., a California corporation (the "Company"),
confirms its agreement with State Capital Markets Corp. (the "Underwriter"),
with respect to the proposed sale by the Company and the purchase by the
Underwriter, of the respective number of units consisting of shares of the
Company's common stock, no par value per share ("Common Stock") and Class A
Redeemable Common Stock purchase warrants (the "Redeemable Warrants"), each of
which entitles the holder thereof to purchase one share of Common Stock at an
exercise price of $8.25 per share, pursuant to a warrant agreement between the
Company and Continental Stock Transfer & Trust Company, as the warrant agent
(the "Warrant Agreement"), and with respect to the grant by the Company to the
Underwriter of the option described in Section 3(b) hereof to purchase all or
any part of 150,000 units for the purpose of covering over-allotments, if any.
The aforesaid 1,000,000 units (the "Units") sold by the Company (the "Firm
Securities") and all or any part of the Units subject to the option described in
Section 3(b) hereof (the "Option Securities") are hereinafter collectively
referred to as the "Securities." The Company also proposes to issue and sell to
the Underwriter warrants (the "Underwriter's Warrants") pursuant to the
Underwriter's
<PAGE> 2
Warrant Agreement (the "Underwriter's Warrant Agreement") for the purchase of an
aggregate of an additional 100,000 Units. The shares of Common Stock issuable
upon exercise of the Underwriter's Warrants and the Redeemable Warrants
underlying the Underwriter's Warrants are hereinafter sometimes referred to as
the "Warrant Shares." The Units, the Redeemable Warrants, the Underwriter's
Warrants, and the Warrant Shares are more fully described in the Registration
Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Underwriter as of the date
hereof, and as of the Closing Date and the Option Closing Date (as defined in
Subsection 3(c) hereof, if any, as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333- ), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Securities under the Securities Act of 1933, as amended (the "Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations (the "Regulations") of the Commission under the Act. The Company
will promptly file a further amendment to said registration statement in the
form heretofore delivered to the Underwriter and will not, before the
registration statement becomes effective (the "Effective Date"), file any other
amendment thereto unless the Underwriter shall have consented thereto after
having been furnished with a copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein (including, but not limited to those
documents or information incorporated by reference therein under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and all information deemed
to be a part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of
the Regulations), is hereinafter called the "Registration Statement" and the
form of prospectus in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations, is hereinafter called the "Prospectus." For purposes
hereof, "Rules and Regulations" mean the rules and regulations adopted by the
Commission under either the Act or the Exchange Act, as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or part thereof and no
proceedings for a stop order have been instituted or are pending or, to the best
knowledge of the Company, threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed in
all material respects with the requirements of the Act and the Rules and
Regulations, and none of the Preliminary Prospectus the Registration Statement
or Prospectus at the time of filing thereof contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that this representation and
warranty does not apply
2
<PAGE> 3
to statements made in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriter by or on behalf of the
Underwriter expressly for use in such Preliminary Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing Date
(as defined in Subsection 3(c) hereof, if any, and during such longer period as
the Prospectus may be required to be delivered in connection with sales by the
Underwriter or a dealer, the Registration Statement and the Prospectus will
contain all material statements which are required to be stated therein in
compliance with the Act and the Rules and Regulations, and will in all material
respects conform to the requirements of the Act and the Rules and Regulations;
neither the Registration Statement or the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided, however, that this representation and warranty
does not apply to statements made or statements omitted in reliance upon and in
conformity with information supplied to the Company in writing by or on behalf
of any Underwriter expressly for use in the Registration Statement or Prospectus
or any amendment thereof or supplement thereto.
(d) The Company and its subsidiaries are validly existing as
corporations in good standing under the laws of their states of incorporation or
jurisdictions, foreign or domestic, as applicable. The Company and its
subsidiaries are duly qualified and licensed and in good standing as a foreign
corporations in each jurisdiction in which their ownership or leasing of
properties or the character of its operations require such qualification or
licensing. The Company and its subsidiaries have all requisite power and
authority (corporate and other), and have obtained any and all necessary
applications, approvals, orders, licenses, certificates, franchises and permits
of and from all governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over environmental or similar
matters), to own or lease their properties and conduct their business as
described in the Prospectus; the Company and its subsidiaries have been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations; neither the Company nor its subsidiaries
have received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operation of the Company or its subsidiaries. The disclosures in the
Registration Statement concerning the effects of federal, state, local, and
foreign laws, rules and regulations on the Company's and its subsidiaries
businesses as currently conducted and as contemplated are correct in all
respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
3
<PAGE> 4
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization", and will
have the adjusted capitalization set forth therein on the Closing Date based
upon the assumptions set forth therein, and the Company and its subsidiaries are
not a party to or bound by any instrument, agreement or other arrangement
providing for the Company and its subsidiaries to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement and as
described in the Prospectus. The Units, the Underwriters Warrants, and the
Warrant Shares and all other securities issued or issuable by the Company or its
subsidiaries, conform or, when issued and paid for will conform in all respects
to all statements with respect thereto contained in the Registration Statement
and the Prospectus. All issued and outstanding securities of the Company and its
subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or its subsidiaries, or
similar contractual rights granted by the Company or its subsidiaries. The
Units, Underwriter's Warrants and Redeemable Warrants to be issued and sold by
the Company hereunder and the Warrant Shares issuable upon exercise of the
Underwriter's Warrants and Redeemable Warrants and payment therefor; and none of
such securities were issued in violation of the preemptive rights of any holders
of any security of the Company, or similar contractual rights granted by the
Company have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid and
non-assessable and will conform in all respects to the description thereof
contained in the Prospectus; all corporate action required to be taken for the
authorization, issue and sale of the Securities, the Underwriter's Warrants, and
the Warrant Shares has been duly and validly taken; and the certificates
representing the Securities, the Underwriter's Warrants, and the Warrant Shares
will be in due and proper form. Upon the issuance and delivery pursuant to the
terms hereof of the Securities to be sold by the Company hereunder, the
Underwriter will acquire good and marketable title to such Securities free and
clear of any lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever.
(f) The financial statements of the Company and its
subsidiaries, together with the related notes and schedules thereto, included in
the Registration Statement, the Preliminary Prospectus and the Prospectus fairly
present the financial position and the results of operations of the Company and
its subsidiaries 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 and the Rules and Regulations,
consistently applied throughout the periods involved. There has been no material
adverse change or development involving a prospective change in the condition,
financial or otherwise, or in the earnings, business affairs, position,
prospects, value, operation, properties, business, or results of operation of
the Company and its subsidiaries, whether or not arising in the ordinary course
of business, since the dates of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company and
4
<PAGE> 5
its subsidiaries, conforms in all respects to the descriptions thereof contained
in the Registration Statement and in the Prospectus.
(g) The Company and its subsidiaries (i) have paid all
federal, state, local, and foreign taxes for which they are liable, including,
but not limited to, withholding taxes and taxes payable under Chapters 21
through 24 of the Internal Revenue Code of 1986 (the "Code"), (ii) have
furnished all information returns required to furnish pursuant to the Code, and
have established adequate reserves for such taxes which are not due and payable,
and (iii) do not have any tax deficiency or claims outstanding, proposed or
assessed against them.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriter in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriter of the
Securities from the Company or (iii) the consummation by the Company of any of
its obligations under this Agreement.
(i) The Company maintains insurance of the types and in the
amounts which they reasonably believe to be adequate for their businesses, all
of which insurance is in full force and effect.
(j) Except as disclosed in the Prospectus, there is no action,
suit, proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of the Company which (i) questions the validity of the capital stock of
the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or in the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company.
(k) The Company has full legal right, power and authority to
enter into this Agreement, the Underwriter's Warrant Agreement and the
Consulting Agreement (as defined in Section 7(n) hereof) and to consummate the
transactions provided for in such agreements; and this Agreement, the
Underwriter's Warrant Agreement and the Consulting Agreement have each been duly
and properly authorized, executed and delivered by the Company. Each of this
Agreement, the Underwriter's Warrant Agreement and the Consulting Agreement,
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or delivery of
this Agreement, the Underwriter's Warrant
5
<PAGE> 6
Agreement and the Consulting Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
therein, or the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, conflicts
with or will conflict with or results or will result in any breach or violation
of any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (i) the articles of
incorporation or by-laws of the Company, (ii) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement, stockholders agreement, note,
loan or credit agreement or any other agreement or instrument to which the
Company is a party or by which any of them is or may be bound or to which any of
their properties or assets (tangible or intangible) is or may be subject to any
indebtedness, or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of their
respective activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the performance of this Agreement
and the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with the Underwriter's purchase and distribution of the
Securities to be sold by the Company hereunder.
(m) All executed agreements or copies of executed agreements
filed as exhibits to the Registration Statement to which the Company or its
subsidiary are a party or by which any of them may be bound or to which any of
their respective assets, properties or businesses may be subject have been duly
and validly authorized, executed and delivered by the Company and/or its
subsidiary, and constitute the legal, valid and binding agreements of the
Company and/or its subsidiary, as the case may be, enforceable against each of
them in accordance with their respective terms. The descriptions in the
Registration Statement of contracts and other documents are accurate and fairly
present the information required to be shown with respect thereto by Form SB-2
and there are no contracts or other documents which are required by the Act to
be described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
Exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than
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<PAGE> 7
in the ordinary course of business, or (iii) declared or paid any dividend or
made any other distribution on or in respect of its capital stock.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement, or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets (tangible or intangible)
of the Company is subject or affected.
(p) The Company and its subsidiary generally enjoys
satisfactory employer-employee relationships with their employees and both are
in compliance in all material respects with all federal, state, local, and
foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours. There are no pending
investigations involving the Company or any subsidiary, by the U.S. Department
of Labor, or any other governmental or foreign agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company or any
subsidiary, pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company, or any predecessor entity, and none has ever occurred.
No representation question exists respecting the employees of the Company or its
subsidiary, and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company or any subsidiary. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company or of its subsidiary. No labor dispute with
the employees of the Company exists, or, to the best knowledge of the Company,
is imminent; and the Company is not aware (having made no independent
investigation for purposes of this statement) of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, manufacturers or
contractors which might be expected to result in any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company.
(q) Since its inception, the Company has not incurred any
material liability arising under or as a result of the application of the
provisions of the Act.
(r) Neither the Company does not maintain, sponsor or
contribute to any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan" or a "multiemployer plan" as such
terms are defined in Sections 3(2), 3(1) and 3(37) respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans").
The Company does not maintains or contributes, now or at any time previously, to
a defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or
any trust created thereunder) has engaged in a "prohibited transaction" within
the meaning of Section 406 of ERISA
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<PAGE> 8
or Section 4975 of the Code, which could subject the Company to any tax penalty
on prohibited transactions and which has not adequately been corrected. Each
ERISA Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has not ever completely or partially withdrawn from a "multiemployer
plan."
(s) The Company is not (nor the manner in which it conducts
its business or proposes to conduct its business) in violation of any domestic
or foreign laws ordinances or governmental rules or regulations to which it is
subject.
(t) No holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
within eighteen (18) months of the date hereof or to require the Company to file
a registration statement under the Act during such eighteen (18) month period.
(u) None of the Company, nor any of its respective employees,
directors, stockholders or affiliates (within the meaning of the Rules and
Regulations) has taken or will take, directly or indirectly, any action designed
to or which has constituted or which might reasonably be expected to cause or
result in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Securities or otherwise.
(v) None of the patents, patent applications, trademarks,
service marks, trade names, copyrights, know-how, technology or other intangible
asset and licenses and rights to the foregoing presently owned or held by the
Company or any subsidiary, are in dispute so far as known by the Company or are
in any conflict with the right of any other person or entity. To the best of the
Company's knowledge, the Company and its subsidiary (i) own or have the right to
use, free and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever, all patents, trademarks, service marks, trade names and copyrights,
technology and licenses and rights with respect to the foregoing, used in the
conduct of its business as now conducted or proposed to be conducted without
infringing upon or otherwise acting adversely to the right or claimed right of
any person, corporation or other entity under or with respect to any of the
foregoing, and (ii) except as set forth in the Prospectus, is not obligated or
under any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
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<PAGE> 9
(w) The Company and its subsidiary own and have the
unrestricted right to use all trade secrets, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "intellectual
properly") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the Company
or its subsidiary, free and clear of and without violating any right, lien, or
claim of others, including without limitation, former employers of its
employees; provided, however, that the possibility exists that other persons or
entities, completely independently of the Company, as the case may be, or their
respective employees or agents, could have developed trade secrets or items of
technical information similar or identical to those of the Company or its
subsidiary. The Company and its subsidiary are not aware of any such development
of similar or identical trade secrets or technical information by others.
(x) The Company and its subsidiary have taken reasonable
security measures to protect the secrecy, confidentiality and value of all the
intellectual property.
(y) The Company and its subsidiary have good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus, to be owned or leased by it free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
defects, or other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and liens for taxes not yet due and payable.
(z) Corbin & Wertz, independent certified public accounts,
whose report is filed with the Commission as a part of the Registration
Statement, are independent certified public accountants as required by the Act
and the Rules and Regulations.
(aa) On or before the Effective Date of the Registration
Statement, the Company shall cause to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers,
directors and stockholders, or any person or entity deemed to be an affiliate of
the Company pursuant to the Rules and Regulations has agreed not to, directly or
indirectly, offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate or otherwise encumber any of their shares of
Common Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein for a period of not
less than 24 months following such Effective Date without the prior written
consent of the Underwriter. The Company will cause the Transfer Agent, as
defined below, to mark an appropriate legend on the face of stock certificates
representing all of such shares of Common Stock and other securities owned by
such holders.
(bb) There are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or any other arrangements,
agreements, understandings, payments or issuance with respect to the Company or
any of its officers, directors, employees or affiliates that may affect
9
<PAGE> 10
the Underwriter's compensation, as determined by the National Association of
Securities Dealers Inc. ("NASD").
(cc) The Securities have been approved for quotation on the
SmallCap Market of the Nasdaq Stock Market, subject to official notice of
issuance.
(dd) None of the Company, nor any of its respective officers,
employees agents or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which (a) might subject any of Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company,
or (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. Each of the Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any such person or entity or the Company, has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a beneficiary interest in any contract or
agreement to which the Company is a party or by which any of them may be bound
or affected. Except as set forth in the Prospectus under "Certain Relationships
and Related Transactions," there are no existing material agreements,
arrangements, understandings or transactions, or proposed material agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director, or Principal Stockholder of the Company, or any affiliate
or associate of any such person or entity.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriter's counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(gg) The Company has not entered into any employment
agreements, except as described in the Prospectus.
2. Purchase, Sale and Delivery of the Securities and Underwriter's
Warrants.
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<PAGE> 11
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriter and the Underwriter
agrees to purchase from the Company the Firm Securities at the price per Unit as
set forth in subsection (c) below.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase up to an additional 100,000 Units at the price per Unit
set forth in subsection (c) below. The option granted hereby will expire 45 days
after the date of this Agreement, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Firm Securities upon
notice by the Underwriter to the Company setting forth the number of Option
Securities as to which the Underwriter is then exercising the option and the
time and date of payment and delivery for such Option Securities. Any such time
and date of delivery (an "Option Closing Date") shall be determined by the
Underwriter, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to Closing Date, as hereinafter
defined, unless otherwise agreed to between the Underwriter and the Company. In
the event such option is exercised the Underwriter shall purchase the total
number of Option Securities then being purchased. Nothing herein contained shall
obligate the Underwriter to purchase any over-allotments. No Option Securities
shall be delivered unless the Firm Securities shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Underwriter at 1 World Trade Center, New York, New York 10048, or at such other
place as shall be agreed upon by the Underwriter and the Company. Such delivery
and payment shall be made at 10:00 a.m. (New York City time) on ___________,
1996 or at such other time and date as shall be agreed upon by the Underwriter
and the Company but not less than three (3) nor more than thirty (30) business
days after the Effective Date of the Registration Statement (such time and date
of payment and delivery being hereafter called "Closing Date"). In addition, in
the event that any or all of the Option Securities are purchased by the
Underwriter, payment of the purchase price for, and delivery of certificates for
such Option Securities shall be made at the above mentioned office of the
Underwriter or at such other place as shall be agreed upon by the Underwriter
and the Company on each Option Closing Date as specified in the notice from the
Underwriter to the Company. Delivery of the certificates for the Firm Securities
and the Option Securities, if any, shall be made to the Underwriter against
payment of the purchase price for the Firm Securities and the Option Securities,
if any, to the order of the Company, by New York Clearing House funds,
certificates for the shares of Common Stock and Redeemable Warrants underlying
the Firm Securities and the Option Securities, if any, shall be in definitive,
fully registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriter may request in
writing at least two (2) business days prior to Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the shares of
Common Stock and Redeemable Warrants underlying the Firm
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<PAGE> 12
Securities and the Option Securities, if any, shall be made available to the
Underwriter at such office or such other place as the Underwriter may designate
for inspection, checking and packaging no later than 9:30 a.m. on the last
business day prior to Closing Date or the relevant Option Closing Date, as the
case may be.
The purchase price per Unit to be paid by the Underwriter to
the Company for the Securities purchased hereunder will be the same for each
Unit. The Company shall not be obligated to sell any Securities hereunder unless
all Firm Securities to be sold by the Company are purchased hereunder. The
Company agrees to issue and sell 1,000,000 Units to the Underwriter.
(d) On Closing Date, the Company shall issue and sell to the
Underwriter Underwriter's Warrants at a purchase price of $10.00, which warrants
shall entitle the holders thereof to purchase an aggregate of 100,000 Units. The
Underwriter's Warrants shall be exercisable for a period of five (5) years
commencing on the Effective Date of the Registration Statement at an initial
exercise price equal to one hundred twenty percent (160%) of the initial public
offering price of the Securities. The Underwriter's Warrant Agreement and form
of Warrant Certificate shall be substantially in the form filed as Exhibit to
the Registration Statement. Payment for the Underwriter's Warrants shall be made
on the Closing Date.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective as the Underwriter deems advisable, the Underwriter
shall make a public offering of the Securities (other than to residents of or in
any jurisdiction in which qualification of the Securities is required and has
not become effective) at the price and upon the other terms set forth in the
Prospectus. The Underwriter may from time to time increase or decrease the
public offering price after distribution of the Securities has been completed to
such extent as the Underwriter, in its sole discretion deems advisable.
4. Covenants of the Company. The Company covenants and agrees with the
Underwriter as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
Effective Date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act before termination of the offering of the Securities by
the Underwriter of which the Underwriter shall not previously have been advised
and furnished with a copy, or to which the Underwriter shall have objected or
which is not in compliance with the Act, the Exchange Act or the Rules and
Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will
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<PAGE> 13
be relied upon, when the Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the Registration Statement becomes
effective, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening of any proceeding, suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution or proceeding for that purpose, (iii) of the
issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission authority shall enter a
stop order or suspend such qualification at any time, the Company will make
every effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Underwriter pursuant to
Rule 424(b)(4)) not later than the Commission's close of business on the earlier
of (i) the second business day following the execution and delivery of this
Agreement and (ii) the fifth business day after the Effective Date of the
Registration Statement.
(d) The Company will give the Underwriter notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriter in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), will furnish the Underwriter with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the Underwriter
or Lampert & Lampert ("Underwriter's Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Underwriter may reasonably designate, and
shall make such applications, file such documents and furnish such information
as may be required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Underwriter agrees that such action is not at the time necessary or advisable,
use all reasonable efforts to file and make such statements or reports at such
times as are or may reasonably be required by the laws of such jurisdiction to
continue such qualification.
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<PAGE> 14
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriter's Counsel, the Prospectus, as then amended or supplemented, includes
an 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, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Underwriter promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be reasonably satisfactory to
Underwriter's Counsel, and the Company will furnish to the Underwriter a
reasonable number of copies of such amendment or supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriter, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least 12 consecutive months after the Effective Date of
the Registration Statement.
(h) During a period of five years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports (if requester by the Underwriter) of earnings, and
will deliver to the Underwriter:
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and certified by the
Company' s principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports
to its stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations, stockholders'
equity, and cash flows of the Company for such fiscal year, accompanied by a
copy of the certificate thereon of independent public accountants;
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<PAGE> 15
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
(v) every press release and every material news item
or article of interest to the financial community in respect of the Company or
their affairs which is intended for release by the Company; and
(vi) any additional information of a public nature
concerning the Company, and any future subsidiaries or their respective
businesses which the Underwriter may reasonably request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent) for its Common Stock.
(j) The Company will furnish to the Underwriter or on the
Underwriter's order, without charge, at such place as the Underwriter may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the Effective Date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriter may reasonably
request.
(k) Except for the offering contemplated by this Agreement,
for a period of 24 months from the Effective Date of the Registration Statement
none of the Company, its officers or directors, or holders of the Company's
securities, including options, warrants and other like rights, prior to the
Effective Date, or any person or entity deemed to be an affiliate of the Company
pursuant to the Rules and Regulations, will, directly or indirectly, issue,
offer to sell, sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate or otherwise encumber or dispose of any shares of Common Stock or
securities convertible into or exchangeable for or evidencing any right to
purchase or subscribe for any shares of Common Stock (either pursuant to Rule
144 of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein without the prior written consent of the Underwriter (the
"Lock-up"). On or before the Effective Date of the Registration Statement, the
Company shall cause to be duly executed legally binding and enforceable
agreements pursuant to which each of persons enumerated in the preceding
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<PAGE> 16
sentence who are subject to the Lock-up, has agreed to be bound by the Lock-up.
During the 36 month period commencing with the Effective Date of the
Registration Statement, the Company shall issue no shares of capital stock,
except shares issuable upon the exercise of options or warrants referred to in
the Registration Statement, inclusive of up to an aggregate of 1,888,500 shares
pursuant to options which may be granted under the Company's 1996 Nonqualified
Stock Option Plan and 1996 Incentive Stock Option Plan, or in connection with
any acquisition from, or business combination with, an unaffiliated entity or
securities convertible into or exchangeable for shares of Common Stock or,
except in conformity and compliance with the terms of this Agreement, grant any
options or warrants.
(l) None of the Company, nor any of its respective officers or
directors, nor affiliates of any of them (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or which
might in the future reasonably be expected to cause or result in, stabilization
or manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. No portion of the net proceeds will be used
directly or indirectly to acquire any securities issued by the Company.
(n) The Company shall timely file all such reports, forms or
other documents as may be required (including but not limited to a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(o) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in their letters to be
furnished pursuant to Section 7(j) hereof.
(p) The Company shall cause the Securities to be quoted on the
SmallCap Market of the Nasdaq Stock Market.
(q) For a period of three (3) years from the Closing Date, the
Company shall furnish to the Underwriter at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Common Stock; (ii) a list of
holders of Common Stock upon the Underwriter's reasonable requests; and (iii) a
weekly listing of the securities positions of participants in the Depository
Trust Company.
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<PAGE> 17
(r) For a period of three (3) years the Company shall notify
the Underwriter of each meeting of the Board, which meetings shall be held at
least quarterly. An individual selected by the Underwriter shall be permitted to
attend all meetings of the Board and to receive all notices and other
correspondence and communications sent by the Company to members of the Board.
The Company shall reimburse the Underwriter's designee for his or her
out-of-pocket expenses reasonably incurred in connection with his or her
attendance of the Board meetings.
(s) For a period equal to the lesser of (i) seven (7) years
from the date hereof, and (ii) the sale to the public of the Warrant Shares, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Forms S-1 or, if applicable, S-2 and S-3 (or other appropriate
form) for the registration under the Act of the Warrant Shares.
(t) For a period of five (5) years from the date hereof, use
its best efforts to maintain its listing of its Common Stock on the Nasdaq Stock
Market.
(u) Grant to the Underwriter preferential right on the terms
and Subject to the conditions set forth in this paragraph, for a period of four
years from the Effective Date of the Registration Statement, to purchase for its
account, or to sell for the account of the Company or its present or future
affiliates or subsidiaries, any securities of the Company or any of its present
or future affiliates or subsidiaries, not including securities issuable under
the Company's stock option plan or other employee benefit plans, with respect to
which the Company or any of its present or future affiliates or subsidiaries may
seek a public or private sale of such securities. The Company, will consult, and
will cause such present or future affiliates or subsidiaries to consult with the
Underwriter with regard to any such offering or placement and will offer, or
cause any of its present or future affiliates or subsidiaries to offer, to the
Underwriter the opportunity, on terms not more favorable to the Company or such
present or future affiliate or subsidiary than they can secure elsewhere, to
purchase or sell any such securities. If the Underwriter fails to accept in
writing such proposal made by the Company or any of its present or future
affiliates or subsidiaries within ten (10) business days after receipt of a
notice containing such notice, then the Underwriter shall have no further claim
or right with respect to the proposal contained in such notice. If, thereafter,
such proposal is materially modified, the Company shall again consult, and cause
each present or future affiliate or subsidiary to consult, with the Underwriter
in connection with such modification and shall in all respects have the same
obligations and adopt the same procedures with respect to such proposal as are
provided hereinabove with respect to the original proposal.
(v) On or before the Effective Date of the Registration
Statement, retain or make arrangements to retain a financial public relations
firm reasonably satisfactory to the Underwriter which shall be continuously
engaged from such engagement date to a date twenty-four months from Closing
Date.
(w) As soon as practicable, but in no event more than 30
business days from the Effective Date of the Registration Statement, (i) file a
Form 8-A with the Commission providing
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<PAGE> 18
for the registration under the Exchange Act of the Company's securities and (ii)
take all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and Moody's OTC Manual and to continue such inclusion
for a period of not less than five (5) years.
(x) The Company shall furnish to the Underwriter, within
ninety (90) days following the Option Closing Date, three (3) bound volumes of
all papers and documents utilized in the offering.
(y) Following the Effective Date of the Registration
Statement, the Company shall, at its sole cost and expense, prepare and file
such blue sky trading applications with such jurisdictions as the Underwriter
may reasonably request after consultation with the Company.
(z) The Company shall not amend or alter any term of any
written employment agreement, if any, between the Company and any executive
officer or director, during the term thereof, in a manner more favorable to such
employee or director, without the express written consent of the Underwriter.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date
and the Option Closing Date (to the extent not paid at Closing Date) all
expenses and fees (other than fees of counsel to the Underwriter, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation, (i) the fees and
expenses of accountants and counsel for the Company, (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing, filing,
delivery and mailing (including the payment of postage with respect thereto) of
the Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements and related documents, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriter in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of the Securities including any transfer or other taxes payable
thereon, (iv) the qualification of the Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such securities
under legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey," if any, and disbursements and fees of counsel in
connection therewith, (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with the "road show", information
meetings and presentations, bound volumes and prospectus memorabilia, (vi) costs
and expenses in connection with due diligence investigations, including but not
limited to the fees of any independent counsel or consultant retained, (vii)
fees and expenses of the transfer agent, (viii) applications for assignments of
a rating of the Securities by qualified rating agencies, (ix) the fees payable
to the NASD, and
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<PAGE> 19
(x) the fees and expenses incurred in connection with the listing of the
Securities on the Nasdaq Stock Market and any other exchange.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6, Section 12(b) or Section 11, the
Company shall reimburse and indemnify the Underwriter for all of their
out-of-pocket expenses including the fees and disbursements of counsel for the
Underwriter.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriter a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Firm
Securities, $50,000 of which has been paid to date to the Underwriter. The
Company will pay the remainder on the Closing Date by certified or bank
cashier's check or, at the election of the Underwriter, by deduction from the
proceeds of the offering contemplated herein. In the event the Underwriter
elects to exercise the over-allotment option described in Section 2(b) hereof,
the Company further agrees to pay to the Underwriter on the Option Closing Date
(by certified or bank cashier's check or, at the Underwriter's election, by
deduction from the proceeds of the offering) a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received by the Company from
the sale of the Option Securities.
6. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Option Closing Date, if any, as if they had been made on and as of the
Closing Date or each Option Closing Date, as the case may be; the accuracy on
and as of the Closing Date or Option Closing Date, if any, of the statements of
officers of the Company made pursuant to the provisions hereof; and the
performance by each of the Company on and as of the Closing Date and each Option
Closing Date, if any, of each of its or his covenants and obligations hereunder
and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Underwriter, and, at
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriter's Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Underwriter of such timely filing, or
a post-effective amendment providing such information shall have been promptly
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<PAGE> 20
filed and declared effective in accordance with the requirements of Rule 430A of
the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriter's opinion, is material or omits to
state a fact which, in the Underwriter's opinion, is material and is required to
be stated therein or is necessary to make the statements therein not misleading,
or that the Prospectus, or any supplement thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, is material, or omits to state a
fact which, in the Underwriter's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriter shall
have received the favorable opinion of Hecht & Steckman, P.C., counsel to the
Company, addressed to the Underwriter and in form and substance reasonably
satisfactory to the Underwriter's Counsel, to the effect that:
(i) the Company and its subsidiaries (A) have been
duly organized and are validly existing as corporations in good standing under
the laws of their jurisdictions, (B) are duly qualified and licensed and in good
standing as foreign corporations in each jurisdiction in which their ownership
or leasing of any properties or the character of their operations requires such
qualification or licensing, except where the failure to so qualify would not
have a material adverse effect on the Company and/or its subsidiary, and (C)
have all requisite power and authority (corporate and other), and have obtained
any and all necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease their properties and conduct
their business as described in the Prospectus; to the best of such counsel's
knowledge, the Company and its subsidiary have been doing business in compliance
with all such authorizations, approvals, orders, licenses, certificates,
franchises and permits and all federal, state, local and foreign laws, rules and
regulations; and to the best of such counsel's knowledge, neither the Company
nor its subsidiaries have received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singularly or in the aggregate, is the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, of the earnings,
business affairs, position, prospects, value, operation, properties, business or
results of operation of any of the Company or its subsidiary.
The disclosures in the Registration Statement concerning the effects of
federal, state, local, and foreign laws, rules and regulations on each of the
Company's businesses as currently conducted and as contemplated are correct in
all respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
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<PAGE> 21
(ii) except as described in the Prospectus, to the best of
such counsel's knowledge, the Company owns, directly or indirectly no
Subsidiaries;
(iii) except as described in the Prospectus, to the best
knowledge of such counsel, the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity;
(iv) the Company has a duly authorized, issued and outstanding
20,000,000 shares of Common Stock, par value, of which 2,457,863 are issued and
outstanding and 5,000,000 shares of preferred stock, of which none are issued
and outstanding, as set forth in the Prospectus, and any amendment or supplement
thereto, under "Capitalization", and the Company is not a party to or bound by
any instrument, agreement or other arrangement providing for it to issue any
capital stock, rights, warrants, options or other securities, except for this
Agreement and as described in the Prospectus. The Securities, the Underwriter's
Warrants, the Warrant Shares and all other securities issued or issuable by the
Company conform in all respects to all statements with respect thereto contained
in the Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto and are not subject to personal liability by reason of
being such holders, and none of such securities were issued in violation of the
preemptive rights of any insiders of any security of the Company, if any. The
Securities, the Underwriter's Warrants and the Warrant Shares to be sold by the
Company hereunder are not and will not be subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms thereof, are validly issued,
fully paid and non-assessable and conform to the description thereof contained
in the Prospectus; the holders thereof will not be subject to any liability
solely as such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities has been duly and validly taken;
and the certificates representing the Securities and securities underlying the
Securities and the Underwriter's Warrants are in due and proper form. The
Redeemable Warrants and the Underwriter's Warrants constitute valid and binding
obligations of the Company, to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called for thereby.
Upon the issuance and delivery pursuant to the Agreement of the Securities to be
sold by the Company, the Underwriter will acquire good and marketable title to
such securities free and clear of any pledge, lien, charge, claim, encumbrance,
pledge, security interest or other restriction of any kind whatsoever.
(v) the Registration Statement is effective under the Act,
and, if applicable, filing of all pricing information has been timely made in
the appropriate form under Rule 430A, and no stop order suspending the
effectiveness of the Registration Statement has been issued and to the best of
such counsel's knowledge, no proceedings for that purpose have been instituted
or are pending or threatened or contemplated under the Act;
(vi) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements thereto (other
than the financial statements and
21
<PAGE> 22
other financial and statistical data included therein, as to which no opinion
need be rendered) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations. Such counsel shall state
that such counsel has participated in conferences with officers and other
representatives of the Company and representatives of the independent public
accountants for the Company, at which conferences such counsel made inquiries of
such officers, representatives and accountants and discussed the contents of the
Registration Statement, the Prospectus, and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus, on the basis of the foregoing, no facts
have come to the attention of such counsel which lead them to believe that
either the Registration Statement or any amendment thereto, at the time such
Registration Statement or amendment became effective or the Preliminary
Prospectus or Prospectus or amendment or supplement thereto as of the date of
such opinion contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and schedules and
other financial and statistical data included in the Preliminary Prospectus, the
Registration Statement or Prospectus).
(vii) to the best of such counsel's knowledge, (A) there are
no contracts or other documents required to be described in the Registration
Statement and the Prospectus and filed as exhibits to the Registration Statement
other than those described in the Registration Statement (or required to be
filed under the Exchange Act if upon such filing they would be incorporated, in
whole or in part, by reference therein) and the Prospectus and filed as exhibits
thereto, and the exhibits which have been filed are correct copies of the
documents of which they purport to be copies; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company is a party or by
which it is bound, including any document to which the Company is a party or by
which it is bound, incorporated by reference into the Prospectus and any
supplement or amendment thereto, are accurate and fairly represent the
information required to be shown by Form SB-2; (C) there is not pending or
threatened against the Company any action suit, proceeding, inquiry,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of the Company
which (x) is required to be disclosed in the Registration Statement which is not
so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects), (y) questions the validity
of the capital stock of the Company or this Agreement or of any action taken or
to be taken by the Company pursuant to or in connection with this Agreement, or
(z) might materially and adversely affect the condition, financial or otherwise,
or the earnings, business affairs, position, prospects, value, operation,
properties, business or results of operation of the Company; (D) no statute or
regulation or legal or governmental proceeding required to be described in the
Prospectus is not described as required; and (E) there is no action, suit or
proceeding pending, or threatened, against or affecting, the Company before any
court or arbitrator or governmental body, agency
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<PAGE> 23
or official (or any basis thereof known to such counsel) in which there is a
reasonable possibility of an adverse decision which may result in a material
adverse change in the assets, business, operations, financial condition or
prospects of the Company, which could materially, adversely affect the present
or prospective ability of the Company to perform its obligations under this
Agreement or which in any manner draws into question the validity or
enforceability of this Agreement;
(viii) The Company has full legal right, power and authority
to enter into each of this Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement, and the Consulting Agreement, and to consummate the
transactions provided for therein; and each of this Agreement, the Underwriter's
Warrant Agreement, the Warrant Agreement and the Consulting Agreement has been
duly authorized, executed and delivered by the Company. This Agreement, the
Underwriter's Warrant Agreement and the Consulting Agreement, assuming due
authorization, execution and delivery by each other party thereto and further
assuming that they are valid and binding agreements of the Underwriter, so as
the case may be, constitutes legal, valid and binding agreements of the Company
enforceable as against the Company in accordance with their terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law), and none of the Company's
execution or delivery of this Agreement, the Underwriter's Warrant Agreement,
the Warrant Agreement and the Consulting Agreement, its performance hereunder or
thereunder, its consummation of the transactions contemplated herein or therein,
or the conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, to the best knowledge of
such counsel, conflicts with or will conflict with or results or will result in
any breach or violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or imposition of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (A) the articles of
incorporation or by-laws of the Company, (B) any indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which any of them is or may be bound or to which any of their properties
or assets (tangible or intangible) is or may be subject, or any indebtedness, or
(C) any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its respective activities or properties.
(ix) no consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, (other than such as may be required under Blue Sky laws, as
to which no opinion need be rendered) is required in connection with the
issuance of the Securities pursuant to the Prospectus and the Registration
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<PAGE> 24
Statement, the performance of the Agreement, the Underwriter's Warrant, the
Warrant Agreement and the Consulting Agreement, and the transactions
contemplated thereby;
(x) To the best of such counsel's knowledge, the properties
and business of the Company and its subsidiary conform to the description
thereof contained in the Registration Statement and the Prospectus; and the
Company and its subsidiary have good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, in each case free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, defects
or other restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and payable;
(xi) To the best of such counsel's knowledge, neither the
Company nor its subsidiary is in breach of, or in default under, any term or
provision of any indenture, mortgage, installment sale agreement, deed of trust,
lease, voting trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which the Company or its
subsidiary is a party or by which the Company may be bound or to which any of
the property or assets (tangible or intangible) of the Company or its subsidiary
is subject or affected, except such as would not have a material adverse effect
on the Company or its subsidiary; and neither the Company nor its subsidiary is
in violation of any term or provision of their Articles of Incorporation or
By-Laws or in violation of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation;
(xii) the statements in the Prospectus under "BUSINESS,"
"MANAGEMENT," "PRINCIPAL SECURITY HOLDERS," "CERTAIN TRANSACTIONS," "DESCRIPTION
OF SECURITIES" and "SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions, are correct in
all material respects;
(xiii) the Securities have been accepted for quotation on the
SmallCap Market of the Nasdaq Stock Market;
(xiv) except as and to the extent set forth in the Prospectus,
the Company and its subsidiary, own or possess, free and clear of all liens or
encumbrances and rights thereto or therein by third parties, the requisite
licenses or other rights to use all trademarks, service marks, copyrights,
service names, trade names, patents, patent applications and licenses necessary
to conduct their businesses (including, without limitation any such licenses or
rights described in the Prospectus as being owned or possessed by the Company),
and there is no claim or action by any person pertaining to, or proceeding,
pending, or threatened, which challenges the exclusive rights of the Company
and/or its subsidiary with respect to any trademarks, service marks, copyrights,
service names, trade names, patents, patent applications and licenses used in
the conduct of the Company's and/or its subsidiary's businesses (including
without limitations any
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<PAGE> 25
such licenses or rights described in the Prospectus as being owned or possessed
by the Company); the Company's and its subsidiary's current products, services
and processes do not and will not infringe on the patents currently held by
third parties;
(xv) to the best knowledge of such counsel, except as and to
the extent set forth in the Prospectus, neither the Company nor its subsidiary
are under any obligation to pay to any third-party royalties or fees of any kind
whatsoever with respect to any technology or intellectual properties developed,
employed or used;
(xvi) to the best of such counsel's knowledge, the persons
listed under the caption "PRINCIPAL STOCKHOLDERS" in the Prospectus are the
respective "beneficial owners" (as such phrase is defined in regulation 13d-3
under the Exchange Act) of the securities set forth opposite their respective
names thereunder as and to the extent set forth therein;
(xvii) to the best of such counsel's knowledge, except as
described in the Prospectus, no person, corporation, trust, partnership,
association or other entity has the right to include and/or register any
securities of the Company in the Registration Statement, require the Company to
file any registration statement or, if filed, to include any security in such
registration statement for eighteen months from the date hereof;
(xviii) to the best of such counsel's knowledge and except as
described in the Prospectus, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities hereunder or
financial consulting arrangement or any other arrangements, agreements
understandings, payments or issuances that may affect the Underwriter's
compensation, as determined by the NASD;
(xix) to the best of such counsel's knowledge, except as set
forth in the Prospectus under "Certain Transactions," there are no existing
material agreements, arrangements, understandings or transactions, or proposed
material agreements, arrangements, understandings or transactions between or
among the Company, its subsidiary and any officer, director, or Principal
Stockholder of the Company or its subsidiary, or any affiliate or associate of
any such person or entity;
(xx) to the best of such counsel's knowledge, the minute books
of the Company has been made available to Underwriter's Counsel and contain a
complete summary of all meetings and actions of the respective directors and
stockholders of the Company since the time of their respective incorporations
and reflect all transactions referred to in such minutes accurately in all
respects.
(xxi) the organization of the Company has been duly and
validly consummated in accordance and in compliance with applicable law and does
not violate the charter or by-laws or give rise to any claim or entitlement by
or to any stockholder.
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<PAGE> 26
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriter's
Counsel) of other counsel reasonably acceptable to Underwriter's Counsel,
familiar with the applicable laws; (B) as to matters of fact, to the extent they
deem proper, on certificates and written statements of responsible officers of
the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that copies of any
such statements or certificates shall be delivered to Underwriter's Counsel if
requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriter and they are justified in relying thereon.
At each Option Closing Date, if any, the Underwriter shall have
received the favorable opinion of Hecht & Steckman, P.C., counsel to the
Company, dated the Option Closing Date, addressed to the Underwriter and in form
and substance satisfactory to Underwriter's Counsel confirming as of Option
Closing Date the statements made by Hecht & Steckman in their opinion delivered
on the Closing Date.
(d) Intentionally omitted.
(e) On or prior to each of the Closing Date and the Option
Closing Date, Underwriter's Counsel shall have been furnished such documents
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (b)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representation, warranties or conditions herein
contained.
(f) On or prior to each of the Closing Date and the Option
Closing Date, Underwriter's Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company, or herein contained.
(g) Prior to each of Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company does not, shall be in
default under
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<PAGE> 27
any provision of any instrument relating to any outstanding indebtedness; (iv)
no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus; (v)
no action, suit or proceeding, at law or in equity, shall have been pending or
to its knowledge threatened against the Company, or affecting any of their
respective properties or businesses before or by any court or federal, state or
foreign commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus; and (vi) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date,
if any, the Underwriter shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the Closing Date
or the Option Closing Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to such Closing
Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all statements
and information required to be included therein, and none of the Registration
Statement, 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 neither the Preliminary Prospectus or any supplement thereto included 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, in
light of the circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company shall not have incurred up to and including the Closing Date or the
Option Closing Date, as the case may be, other than in the ordinary course of
its business, any material liabilities or obligations, direct or contingent; the
Company shall not have paid or declared any dividends or other distributions on
its capital stock; the Company shall not have entered into any transactions not
in the ordinary course of business;
27
<PAGE> 28
there shall not have been any change in the capital stock or long-term debt or
any increase in the short-term borrowings (other than any increase in the
short-term borrowings in the ordinary course of business) of the Company; the
Company does not have sustained any material loss or damage to its property or
assets, whether or not insured; there shall not be any litigation which is
pending or threatened against the Company which is required to be set forth in
an amended or supplemented Prospectus which has not been set forth; and there
shall not have occurred any event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (g) are to such documents as amended and supplemented at the date of
such certificate.
(i) By the Closing Date, the Underwriter will have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement
(j) At the time this Agreement is executed, the Underwriter
shall have received a letter, dated such date, addressed to the Underwriter in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriter and Underwriter's Counsel, from Corbin & Wertz, independent
certified public accounts:
(i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion, the financial
statements and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations thereunder and
that the Underwriter may rely upon the opinion of Corbin & Wertz, independent
certified public accounts with respect to the financial statements
and-supporting schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
financial statements and supporting schedules of the Company included in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and Regulations
or are not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration
28
<PAGE> 29
Statement, or (B) at a specified date not more than five (5) days prior to the
Effective Date of the Registration Statement, there has been any change in the
capital stock or long-term debt of the Company, or any decrease in the
stockholders' equity or net current assets or net assets of the Company as
compared with amounts shown in the Company's balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease, and (C) during the period from
__________, 199_ to a specified date not more than five (5) days prior to the
Effective Date of the Registration Statement, there was any decrease in net
revenues, net earnings or increase in net earnings per common share of the
Company, in each case as compared with the corresponding period beginning
_________, 199_ other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) setting forth, at a date not later than five (5)
days prior to the date of the Registration Statement, the amount of liabilities
of the Company (including a breakdown of commercial paper and notes payable to
banks);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) stating that they have not during the
immediately preceding five (5) year period brought to the attention of the
Company's management any "weakness", as defined in Statement of Auditing
Standard No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit, " in the Company' s internal controls; and
(vii) Intentionally omitted.
(viii) statements as to such other matters incident
to the transaction contemplated hereby as the Underwriter may reasonably
request.
(k) On the Closing Date, and each Option Closing Date, if any,
the Underwriter shall have received from Corbin & Wertz, independent certified
public accounts a letter, dated as of the Closing Date, and each Option Closing
Date, if any, to the effect that they reaffirm that statements made in the
letter furnished pursuant to Subsection (j) of this Section , except that the
specified date referred to shall be a date not more than five days prior to
Closing Date and each Option Closing Date, if any, and, if the Company has
elected to rely on Rule 430A of the Rules
29
<PAGE> 30
and Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of subsection (i) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriter and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (v).
(l) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Underwriter for the several
Underwriter's accounts the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to subsection (e)
of Section 4 hereof shall have been issued on either the Closing Date or the
Option Closing Date, if any, and no proceedings for that purpose shall have
been instituted or to its knowledge or that of the Company shall be
contemplated.
(n) On or before the Closing Date the Company shall have (i)
executed and delivered to the Underwriter the consulting agreement,
substantially in the form filed as an Exhibit to the Registration Statement (the
"Consulting Agreement") and (ii) paid to the Underwriter $150,000 representing
the two year retainer fee pursuant to the Consulting Agreement.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company, agrees to indemnify and hold harmless the
Underwriter, and each person, if any, who controls the Underwriter ("controlling
person") within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof), whatsoever
(including but not limited to any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which such Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained (i) in any Preliminary Prospectus, (except that the indemnification
contained in this paragraph with respect to any preliminary prospectus shall not
inure to the benefit of the Underwriter or to the benefit of any person
controlling the Underwriter) on account of any loss, claim, damage, liability or
expense arising from the sale of the Units by the Underwriter to any person if a
copy of the Prospectus, as amended or supplemented, shall not have been
delivered or sent to such person within the time required by the Act, and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact contained in such Preliminary Prospectus was
30
<PAGE> 31
corrected in the Prospectus, as amended and supplemented, and such correction
would have eliminated the loss, claim, damage, liability or expense), the
Registration Statement or the Prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included securities of Common
Stock of the Company issued or issuable upon exercise of the Underwriter's
Warrants; or (iii) in any application or other document or written communication
(in this Section 7 collectively called "application") executed by the Company or
based upon written information furnished by the Company in any jurisdiction in
order to qualify the Common Stock under the securities laws thereof or filed
with the Commission, any state securities commission or agency, NASDAQ or any
other securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made), unless such statement or omission was
made in reliance upon and in conformity with written information furnished to
the Company with respect to any Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) The Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering;
provided, further, that the liability of each Underwriter to the Company shall
be limited to the product of the Underwriter's discount or commission and the
number of Shares sold by such Underwriter hereunder. The Company acknowledges
that the statements with respect to the public offering of the Securities set
forth under the heading "Underwriting" and the stabilization legend in the
Prospectus and the statement as to the anticipated date of delivery of the
certificates representing the Units have been furnished by the Underwriters
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters for inclusion in the Prospectus.
31
<PAGE> 32
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with one counsel
reasonably satisfactory to such indemnified party. Notwithstanding the foregoing
the indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnifying party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional counsel shall be borne by
the indemnifying parties. In no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided however, that such consent was not
unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Units or (B) if the allocation provided by
32
<PAGE> 33
clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each of the contributing parties, on the
one hand, and the party to be indemnified on the other hand in connection with
the statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable considerations.
In any case where the Company is a contributing party and the Underwriters are
the indemnified party the relative benefits received by the Company, and the
Underwriters, on the other, shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Units (before deducting expenses)
bear to the total underwriting discounts received by the Underwriters hereunder,
in each case as set forth in the table on the Cover Page of the Prospectus.
Relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, expenses or liabilities (or actions in
respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), the Underwriters shall
not be required to contribute any amount in excess of the underwriting discount
applicable to the Units purchased by the Underwriters hereunder. 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. For purposes of this Section 7, each person,
if any, who controls the Company within the meaning of the Act, each officer of
the Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations. warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, or any controlling person,
33
<PAGE> 34
and shall survive termination of this Agreement or the issuance and delivery of
the Securities to the Underwriter.
9. Effective Date.
(a) This Agreement shall become effective at 10:00
a.m., New York City time. on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter, in its discretion, shall release the Securities
for the sale to the public, provided, however that the provisions of Sections 5,
7 and 10 of this Agreement shall at all times be effective. For purposes of this
Section 9, the Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such shares for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to subsection (d) of this Section 10, the
Underwriter shall have the right to terminate this Agreement, (i) if any
calamitous domestic or international event or act or occurrence has materially
disrupted, or in the Underwriter's opinion will in the immediate future
materially disrupt general securities markets in the United States; or (ii) if
trading on the New York Stock Exchange, the American Stock Exchange, or in the
over-the-counter market shall have been suspended or minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for securities
shall have been required on the over-the-counter market by the NASD or by order
of the Commission or any other government authority having jurisdiction; or
(iii) if the United States shall have become involved in a war or major
hostilities; or (iv) if a banking moratorium has been declared by a New York
State or federal authority; or (v) if a moratorium in foreign exchange trading
has been declared; or (vi) if the Company shall nave sustained a loss material
or substantial to the Company by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act which whether or not such
loss shall have been insured, will, in the Underwriter's opinion, make it
inadvisable to proceed with the delivery of the Securities; or (vii) if there
shall have been such material adverse change in the conditions or prospects of
the Company, or such material adverse general market conditions as in the
Underwriter's judgment would make it inadvisable to proceed with the offering,
sale and/or delivery of the Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
34
<PAGE> 35
11. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriter may
at the Underwriter's option, by notice from the Underwriter to the Company,
terminate the Underwriter's several obligations to purchase Securities from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 5 and Section 7 hereof. No action taken
pursuant to this Section shall relieve the Company or any Seller from liability,
if any, in respect of such default.
12. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at State Capital Markets Corp., 1 World Trade Center, New York, New
York 10048, Attention: Syndicate Department, with a copy to Lampert & Lampert,
10 East 40th Street, New York, New York 10016, Attention: Mitchell Lampert, Esq.
Notices to the Company shall be directed to the Company at 9800 South Sepulveda
Blvd., Suite 720, Los Angeles, California 90045, Attention: Frederik G.M.
Rodenhuis, with a copy to Hecht & Steckman, P.C., 60 East 42nd Street, Suite
5101, New York, New York 10165-5101, attention:
Charles Hecht, Esq.
13. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Section 8 hereof, their legal
representatives and assigns, and their respective heirs and legal
representatives and no other person shall have or be construed to have any legal
or equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained. No purchaser of Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
14. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
35
<PAGE> 36
BEVERAGE WORKS, INC.
By:
-------------------------------
Frederik G.M. Rodenhuis
President
Confirmed and accepted as of the date first above written.
STATE CAPITAL MARKETS CORP.
By:
----------------------------
Name:
Title:
36
<PAGE> 1
EXHIBIT 4.6
- --------------------------------------------------------------------------------
BEVERAGE WORKS, INC.
AND
STATE CAPITAL MARKETS CORP.
-------------
UNDERWRITER'S
WARRANT AGREEMENT
DATED AS OF ______________, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
UNDERWRITER'S WARRANT AGREEMENT dated as of ____________, 1996 among
Beverage Works, Inc., a California corporation (the "Company") and State Capital
Markets Corp., a New York corporation (hereinafter referred to variously as the
"Holder" or the "Underwriter").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue to the Underwriter warrants to
purchase up to an aggregate of 100,000 Units consisting of one share of common
stock, no par value per share, of the Company ("Common Stock") and one Class A
Redeemable Warrant (the "Warrants" or "Redeemable Warrants"), each Warrant
exercisable for one share of Common Stock at $8.25, at any time after exercise
of the Unit Purchase option through the date five years from the date of the
Prospectus, collectively referred to as the "Underwriter's Warrants"; and
WHEREAS, the Underwriter has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Underwriter and the Company and certain selling securityholders, to underwrite
the Company's proposed public offering of 1,000,000 shares of Common Stock and
1,000,000 Class A Redeemable Warrants, at a public offering price of $8.00 per
Unit (the "Public Offering"); and
WHEREAS, the Underwriter's Warrants to be issued pursuant to this
Agreement will be issued on the Closing Date (as such term is
<PAGE> 3
defined in the Underwriting Agreement) by the Company to the Underwriter in
consideration for, and as part of the compensation in connection with the Public
Offering;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of an aggregate of ten dollars ($10.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant. The Holder is hereby granted the right to purchase, at any
time from ___________, 1996 until 5:30 P.M., New York time, on _______________,
2001, up to an aggregate 100,000 Units consisting of one share of Common Stock
and one Class A Redeemable Warrant at an initial exercise price (subject to
adjustment as provided in Section 8 hereof) of $12.80 (160% of the initial
public offering price), subject to the terms and conditions of this Agreement.
Except as set forth herein, the Common Stock and Warrants issuable upon exercise
of the Underwriter's Warrants are in all respects identical to the shares of
Common Stock and Warrants being purchased by the Underwriter for resale to the
public pursuant to the terms and provisions of the Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate
2
<PAGE> 4
insertions, omissions, substitutions, and other variations as required or
permitted by this Agreement.
3. Exercise of Warrant. The Warrants initially are exercisable at an
aggregate initial exercise price (subject to adjustment as provided in Section 8
hereof) as set forth in Section 6 hereof payable by certified or official bank
check in New York Clearing House funds, subject to adjustment as provided in
Section 8 hereof. Upon surrender at the Company's principal offices in
California (presently located at 9800 South Sepulveda Boulevard, Suite 720, Los
Angeles, California 90045), of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Purchase Price
(as hereinafter defined) for the shares of Common Stock and/or Warrants, the
registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the shares of Common Stock
and Warrants so purchased. The purchase rights represented by each Underwriter's
Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Common Stock). In the
case of the purchase of less than all the shares and Warrants purchasable under
any Warrant Certificate, the Company shall cancel the Warrant Certificate upon
the surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the securities purchasable thereunder.
3
<PAGE> 5
4. Issuance of Certificates. Upon the exercise of the Underwriter's
Warrants, the issuance of certificates for the Common Stock and Warrants or
other securities, properties or rights underlying such Underwriter's Warrants,
shall be made forthwith (and in any event within three (3) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Sections 5 and 7 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Underwriter
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Underwriter's Warrant Certificates and the certificates
representing the Common Stock and Warrants issuable upon exercise of the
Underwriter's Warrants shall be executed on behalf of the Company by the manual
or facsimile signature of the then present Chairman or Vice Chairman of the
Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the
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<PAGE> 6
then present Secretary or Assistant Secretary of the Company. Underwriter's
Warrant Certificates shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of the Underwriter's Warrants. The Holder of
a Underwriter's Warrant Certificate, by its acceptance thereof, covenants and
agrees that the Underwriter's Warrants are being acquired as an investment and
not with a view to the distribution thereof; and that the Underwriter's Warrants
may not be sold, transferred, assigned, hypothecated or otherwise disposed of,
in whole or in part, for a period of one (1) year from the date of the Public
Offering, except to officers or partners of the Underwriter or members of the
selling group and/or their officers and partners.
6. Exercise Price.
Section 6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each of the Units
underlying the Underwriter's Warrants shall be $12.80 (160% of the initial
public offering prices). The adjusted exercise price shall be the price which
shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 8 hereof.
Section 6.2 Exercise Price. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price, depending upon the
context.
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<PAGE> 7
7. Registration Rights.
Section 7.1 Registration Under the Securities Act of 1933. The
Underwriter's Warrants, the shares of Common Stock and Warrants issuable upon
exercise of the Underwriter's Warrants have been registered pursuant to a
registration statement on form SB-2 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act").
Section 7.2 Piggyback Registration. If, at any time commencing after
____________, 1996, through and including ____________, 2001 (60 months from the
Effective Date), the Company proposes to register any of its securities under
the Act (other than in connection with a merger or pursuant to Form S-8) it will
give written notice by registered mail, at least thirty (30) days prior to the
filing of each such registration statement, to the Underwriter and to all other
Holders of the Underwriter's Warrants and/or the Common Stock and Warrants
underlying same of its intention to do so. If any of the Underwriter or other
Holders of the Underwriter's Warrants and/or Common Stock and Warrants
underlying same notify the Company within twenty (20) days after receipt of any
such notice of its or their desire to include any such securities in such
proposed registration statement, the Company shall afford each of the
Underwriter and such Holders of the Underwriter's Warrants and/or Common Stock
and Warrants underlying same the opportunity to have any such Common Stock and
Warrants underlying same registered under such registration statement.
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<PAGE> 8
Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
Section 7.3 Demand Registration.
(a) At any time commencing after ______________, 1997 (12 months from
the Effective Date) through and including ______________, 2001 (60 months from
the Effective Date), the Holders of the Underwriter's Warrants and/or Common
Stock and Warrants underlying same representing a "Majority" (as hereinafter
defined) of such securities (assuming the exercise of all of the Underwriter's
Warrants) shall have the right (which right is in addition to the registration
rights under Section 7.2 hereof), exercisable by written notice to the Company,
to have the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for the
Underwriter and Holders, in order to comply with the provisions of the Act, so
as to permit a public offering and sale of their respective Common Stock and
Warrants underlying same for nine (9) consecutive months by such Holders and
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<PAGE> 9
any other Holders of the Underwriter's Warrants and/or Common Stock and Warrants
underlying same who notify the Company within ten (10) days after receiving
notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Underwriter's Warrants and the Common Stock and
Warrants underlying same within ten (10) days from the date of the receipt of
any such registration request.
(c) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing after ______________,
1997 (12 months from the Effective Date) through and including ______________,
2001 (60 months from the Effective Date), any Holder or Holders of a Majority of
Underwriter's Warrants and/or shares of Common Stock and Warrants underlying
same shall have the right, exercisable by written request to the Company, to
have the Company prepare and file, on one occasion, with the Commission a
registration statement so as to permit a public offering and sale for nine (9)
consecutive months by any such Holder or Holders, provided, however, that the
provisions of Section 7.4(b) hereof shall not apply to any such registration
request and registration and all costs incident thereto shall be at the expense
of the Holder or Holders making such request.
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<PAGE> 10
(d) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the shares of Common
Stock, Warrants and shares of Common Stock underlying the Underwriter's Warrants
within the time period specified in Section 7.4(a) hereof pursuant to the
written notice specified in Section 7.3(a) of a Majority of the Holders of the
Underwriter's Warrants and/or shares of Common Stock and Warrants underlying
same, the Company agrees that upon the written notice of election of a Majority
of the Holders of the Underwriter's Warrants and/or Common Stock and Warrants
underlying same it shall repurchase (i) any and all Common Stock and Warrants
underlying the Underwriter's Warrants at the higher of the Market Price per
share of Common Stock on (x) the date of the notice sent pursuant to Section
7.3(a) or (y) the expiration of the period specified in Section 7.4(a) and (ii)
any and all Warrants at such Market Price less the exercise prices of such
Warrant. Such repurchase shall be in immediately available funds and shall close
within two (2) days after the later of (i) the expiration of the period
specified in Section 7.4(a) or (ii) the delivery of the written notice of
election specified in this Section 7.3(d).
Section 7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within thirty (30) days of receipt of any
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<PAGE> 11
demand therefor, shall use its best efforts to have any registration statement
declared effective at the earliest possible time, and shall furnish each Holder
desiring to sell Common Stock and/or Warrants underlying the Underwriter's
Warrants, such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s) counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and expenses.
The Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(c). If the Company shall
fail to comply with the provisions of Section 7.4(a), the Company shall, in
addition to any other equitable or other relief available to the Holder(s), be
liable for any or all incidental, special and consequential damages and damages
due to loss of profit sustained by the Holder(s) requesting registration of
their Warrant Shares.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Common Stock and Warrants underlying the
Underwriter's Warrants included in a registration statement for offering and
sale under the securities or blue sky laws of such states as reasonably are
requested by the Holder(s), provided that the Company shall not be obligated to
execute or file
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<PAGE> 12
any general consent to service of process or to qualify as a foreign corporation
to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Common Stock and
Warrants underlying same to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from such registration
statement but only to the same extent and with the same effect as the provisions
pursuant to which the Company has agreed to indemnify the Underwriter contained
in Section 7 of the Underwriting Agreement.
(e) The Holder(s) of the Common Stock and Warrants underlying the
Underwriter's Warrants to be sold pursuant to a registration statement, and
their successors and assigns, shall severally, and not jointly, indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage or expense or liability (including
all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become
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<PAGE> 13
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 7 of the Underwriting
Agreement pursuant to which the Underwriter has agreed to indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as requiring
the Holder(s) to exercise their Underwriter's Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other
than the Common Stock and Warrants underlying the Underwriter's Warrants to be
included in any registration statement filed pursuant to Section 7.3 hereof, or
permit any other registration statement to be or remain effective during the
effectiveness of a registration statement filed pursuant to Section 7.3 hereof,
without the prior written consent of the Holders of the Underwriter's Warrants
and Common Stock and Warrants underlying same representing a Majority of such
securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an
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underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) a "cold comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months thereafter,
have made "generally available to its security holders" (within the meaning of
Rule 158 under the Act) an earnings statement (which need not be audited)
complying with Section 11(a) of the Act and covering a period of at least 12
consecutive months beginning after the effective date of the registration
statement.
(j) The Company shall deliver promptly to each Holder participating in
the offering requesting the correspondence and
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memoranda described below, and the managing underwriters, copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit each Holder and underwriter to
do such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or rules of the
National Association of Securities Dealers, Inc. ("NASD"). Such investigation
shall include access to books, records and properties and opportunities to
discuss the business of the Company with its officers and independent auditors,
all to such reasonable extent and at such reasonable times and as often as any
such Holder shall reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriters selected for such underwriting by Holders holding a
Majority of the Common Stock and Warrants underlying same requested to be
included in such underwriting. Such agreement shall be satisfactory in form and
substance to the Company, each Holder and such managing underwriters, and shall
contain such representations, warranties and covenants by the Company and such
other terms as are customarily contained in agreements of that type used by the
managing underwriter.
The Holders shall be parties to any underwriting agreement relating to
an underwritten sale of their Common Stock and Warrants
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<PAGE> 16
underlying same and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such Holders.
Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to
such Holders, their intended methods of distribution, and except for matters
related to disclosures with respect to such Holders, contained or required to be
contained, in such registration statement under the Act and the rules and
regulations thereunder.
(1) For purposes of this Agreement, the term "Majority" in reference to
the Holders of Underwriter's Warrants, shall mean in excess of fifty percent
(50%) of the then outstanding Underwriter's Warrants assuming full exercise
thereof, and shares of Common Stock underlying the Warrants, underlying the
Underwriter's Warrants that (i) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or any of their respective
affiliates, members of their families, persons acting as nominees or in
conjunction therewith or (ii) have not been resold to the public pursuant to
Rule 144 under the Act or a registration statement filed with the Commission
under the Act.
8. Adjustments to Exercise Price and Number of Securities.
Section 8.1 Intentionally Omitted.
Section 8.2 Intentionally Omitted.
<PAGE> 17
Section 8.3 Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
Section 8.4 Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 8, the number of
shares of Common Stock underlying the Underwriter's Warrants shall be adjusted
to the nearest full amount by multiplying a number equal to the Exercise Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock underlying same issuable upon exercise of the Underwriter's Warrants
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
Section 8.5 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as amended as
of the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock, consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that the Company shall after the date hereof issue a class
of Common Stock with greater or superior voting rights than the shares of Common
Stock outstanding as of the date hereof, the Holder, at its option, may receive
upon
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exercise of any Warrant either shares of Common Stock or a like number of such
securities with greater or superior voting rights.
Section 8.6 Merger or Consolidation. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
each Holder a supplemental warrant agreement providing that each Holder shall
have the right thereafter (until the expiration of such Warrant) to receive,
upon exercise of such Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger, by a
holder of the number of shares of Common Stock of the Company for which such
Warrant might have been exercised immediately prior to such consolidation or
merger. Such supplemental warrant agreement shall provide for adjustments which
shall be identical to the adjustments provided in Section 8. The above provision
of this subsection shall similarly apply to successive consolidations or
mergers.
Section 8.7 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Underwriter's Warrants or
the shares of Common Stock issuable upon the exercise of (i) the
Underwriter's Warrants, (ii) the Warrants underlying the Underwriter's
Warrants, (iii) the options and
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warrants outstanding on the date hereof and described in the prospectus
relating to the Public Offering or (iv) up to an aggregate of 1,888,500
shares issuable upon the exercise of options granted under the
Company's 1996 Nonqualified Stock Option Plan and the 1996 Incentive
Stock Option Plan; or
(b) If the amount of such adjustment shall be less than two
cents ($.02) per share, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least two cents ($.02) per share.
Section 8.9 Dividends and Other Distributions. In the event that the
Company shall at any time prior to the exercise of all Underwriter's Warrants
declare a dividend (other than a dividend consisting solely of shares of Common
Stock) or otherwise distribute to its stockholders any assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another, or any other thing of value, the
Holders of the unexercised Underwriter's Warrants shall thereafter be entitled,
in addition to the shares of Common Stock or other securities and property
receivable upon the exercise thereof, to receive, upon the exercise of such
Underwriter's Warrants, the same property, assets, rights, evidences of
indebtedness, securities or any other thing of value
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that they would have been entitled to receive at the time of such dividend or
distribution as if the Underwriter's Warrants had been exercised immediately
prior to the record date for such dividend or distribution. At the time of any
such dividend or distribution, the Company shall make appropriate reserves to
ensure the timely performance of the provisions of this subsection 8.9.
Section 8.10 Adjustment of the Redeemable Warrants.
Notwithstanding this Section 8, any adjustment of the exercise price
and/or the number of shares of Common Stock purchasable upon the exercise of the
Redeemable Warrants underlying the Underwriter's Warrants shall be determined
solely by the anti-dilution and other adjustment provisions provided for by the
terms of a certain Warrant Agreement date ___________, 1996 between the Company
and Continental Stock Transfer & Trust Company (the "Warrant Agreement")
provided however, that the term "Warrant Price" as used in said Warrant
Agreement shall be deemed to be $_____ when applied to the Common Stock issued
pursuant to the Warrants hereunder, and not by the provisions of this Section 8,
and notice thereof shall be given as provided in said Warrant Agreement to the
holders of the Warrants.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to
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purchase the same number of shares of Common Stock and Warrants underlying same
in such denominations as shall be designated by the Holder thereof at the time
of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Underwriter's
Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Underwriter's Warrants or Warrants underlying same, nor
shall it be required to issue scrip or pay cash in lieu of fractional interests,
it being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of shares of
Common Stock or other securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Underwriter's
Warrants and Warrants underlying same, such number of shares of Common Stock or
other securities, properties or rights as shall be issuable upon the exercise
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thereof. The Company covenants and agrees that, upon exercise of the
Underwriter's Warrants and Warrants underlying same and payment of the exercise
prices therefor, all shares of Common Stock and other securities issuable upon
such exercise shall be duly and validly issued, fully paid, non-assessable and
not subject to the preemptive rights of any stockholder. As long as the
Underwriter's Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Underwriter's Warrants and Warrants underlying same to be listed (subject to
official notice of issuance) on all securities exchanges on which the Common
Stock issued to the public in connection herewith may then be listed and/or
quoted on NASDAQ.
12. Notices to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Underwriter's Warrants and their exercise, any of
the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the
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accounting treatment of such dividend or distribution on the books of
the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital stock
of the Company, or any option, right or warrant to subscribe therefor;
or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property assets and business as an
entirety shall be proposed; then, in any one or more of such events the
Company shall give written notice of such event at least fifteen (15)
days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable securities
or subscription rights, or entitled to vote on such proposed
dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of any
convertible or exchangeable securities, or subscription
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rights, options or warrants, or any proposed dissolution, liquidation,
winding up or sale.
13. Notices.
All notices requests, consents and other communications hereunder shall
be in writing and shall be deemed to have been duly made when delivered, or
mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Underwriter's Warrants,
to the address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice
to the Holders.
14. Supplements and Amendments. The Company and the Underwriter may
from time to time supplement or amend this Agreement without the approval of any
holders of Warrant Certificates (other than the Underwriter) in order to cure
any ambiguity, to correct or supplement any provision contained herein which may
be defective or inconsistent with any provisions herein or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Underwriter may deem necessary or desirable and which the Company and
the Underwriter deem shall not adversely affect the interests of the Holders of
Warrant Certificates.
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15. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of
business on ___________, 2003. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination until the
close of business on ____________, 2006.
17. Governing Law: Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of such State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Underwriter and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Underwriter and the Holders hereby irrevocably waive
any objection to such exclusive jurisdiction or inconvenient forum. Any such
process or summons to be served upon any of the Company, the Underwriter and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be
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served by transmitting a copy thereof, by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 3 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the party so served in any action, proceeding or claim.
The Company, the Underwriter and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
18. Entire Agreement: Modification. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
19. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
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21. Benefits or this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered Holder(s) of the Warrant Certificates or
Common Stock and Warrants underlying same any legal or equitable right, remedy
or claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Underwriter and any other Holder(s) of
the Warrant Certificates or Warrant Shares.
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL] BEVERAGE WORKS, INC.
By __________________________
Frederik G.M. Rodenhuis
President
Attest:
______________________
Secretary
STATE CAPITAL MARKETS CORP.
By __________________________
Name:
Title:
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<PAGE> 29
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE UNDERWRITER'S WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME __________, 2001
No. W- _______ Underwriter's
Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that ________________ , or
registered assigns, is the registered holder of ______________________
Underwriter's Warrants to purchase initially, at any time from , 1996 until 5:30
p.m. New York time on , 2001 [five years from the effective date
of the Underwriting Agreement] ("Expiration Date"), up to 100,000 fully-paid and
non-assessable Units consisting of one share of common stock, par value no per
share ("Common Stock") and one Class A Redeemable Common Stock purchase warrant
("Warrants") of Beverage Works, Inc., a California corporation (the "Company"),
at the initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $12.80, upon surrender of this Warrant Certificate and
payment of the Exercise Price at an office or agency of the Company, but subject
to the conditions set forth herein and in the Underwriter's warrant agreement
dated as of , 1996 between the Company and State Capital Markets (the
"Underwriter's Warrant
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<PAGE> 30
Agreement"). Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House funds payable to the order of the
Company.
No Underwriter's Warrant may be exercised after 5:30 p.m., New York
time, on the Expiration Date, at which time all Underwriter's Warrants evidenced
hereby, unless exercised prior thereto, hereby shall thereafter be void.
The Underwriter's Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of shares of Common Stock and Warrants pursuant
to the Underwriter's Warrant Agreement, which agreement is hereby incorporated
by reference in and made a part of this instrument and is hereby referred to for
a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the
Underwriter's Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence
of certain events the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Underwriter's
Warrants; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter or otherwise impair, the
rights of the holder as set forth in the Underwriter's Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Underwriter's Warrants shall be issued to the transferee(s) in exchange for
this Warrant Certificate, subject to the limitations provided herein and in the
Underwriter's Warrant Agreement, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Underwriter's Warrants
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Warrant Certificate representing such numbered unexercised
Underwriter's Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon
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<PAGE> 31
made by anyone), for the purpose of any exercise hereof, and of any distribution
to the holder(s) hereof, and for all other purposes, and the Company shall not
be affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in the
Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of _____________ , 1996
BEVERAGE WORKS, INC.
[SEAL] By ___________________________
Name:
Title: President
Attest:
_______________________
Secretary
3
<PAGE> 32
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____________ shares of
Common Stock and _____________ Warrants, underlying the Underwriter's Warrants,
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of BEVERAGE WORKS,
INC. in the amount of $__________ , all in accordance with the terms hereof. The
undersigned requests that a certificates for such securities be registered in
the name of ________________________ whose address is _______________________
and that such Certificate be delivered to ______________________ whose address
is _________________________ .
Dated:
Signature _____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
_______________________________________
Insert Social Security or Other
Identifying Number of Holder)
